Emerging market securities had their best year since 2009 in 2025, and they’re poised to keep their momentum in 2026. Not only are EM stocks outperforming their US peers, but the gap between emerging markets’ bond yields and US treasuries is currently at its smallest in 11 years, Bloomberg reports. Plus: The MSCI Emerging Markets Index is up 28.2% for the year.

The name of the game for investors this year was diversifying from the US amid concerns around the unpredictability of US policy, a weakened USD, and an improvement in the debt profiles of EMs, diverting more capital than has been seen in decades towards EMs. Bank of America’s head of emerging fixed income David Hauner put it best: “EM bears have gone extinct.”

Forecasts for next year are rosy: JPMorgan expects USD 50 bn in inflows into EM debt funds next year, while Citigroup sees emerging bonds delivering a 5% return.

Investors remain underexposed to EMs, especially after the past few years saw massive outflows resulting from rising interest rates, post-covid headwinds, and geopolitical conflicts, which could be a big part of what’s driving the shift now.

Yes, but: A potentially stronger USD next year could lead to smaller EM gains, especially if the US Federal Reserve delivers fewer interest rate cuts than expected. Still, most analysts are recommending that investors diversify their portfolio and invest in local-currency-denominated EM debt.

Plus: Concerns of an AI bubble are leading to intense volatility in the US. This is causing a shift to investments in Chinese AI and tech stocks as one alternative to the US, as investors look to plow funds into AI-backed securities, but want to steer away from fears of the “circular” AI investment ecosystem in the US.

ADX

10,032

-0.1% (YTD: +6.5%)

DFM

6,142

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Nasdaq Dubai UAE20

4,919

-0.4% (YTD: +18.1%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

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TASI

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EGX30

41,253

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FTSE 100

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Euro Stoxx 50

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Brent crude

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Gold

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Chimera JP Morgan UAE Bond UCITS ETF

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151.62

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VIX (Volatility Index)

13.47

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THE CLOSING BELL-

The ADX fell 0.1% yesterday on turnover of AED 721.9 mn. The index is up 6.5% YTD.

In the green: Al Wathba National Ins. (+8%), National Bank of Fujairah (+2.6%) and Rakbank (+2.6%).

In the red: Oman & Emirates Investment Holding (-3.1%), Sharjah Cement and Industrial Development (-3.1%) and United Arab Bank (-3%).

Over on the DFM, the index fell 0.4% on turnover of AED 224.3 mn. Nasdaq Dubai was down 0.4%.

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