Lazard's Update on Emerging Markets Core Equity Portfolio for Q2, 2025
MSCI Emerging Markets Index Records 12.0% Gain in Q2 2025
The MSCI Emerging Markets Index posted a strong performance in the second quarter of 2025, surging approximately 12.0%[2]. Latin America led the way with a 15.2% increase, while the area encompassing emerging Europe, the Middle East, and Africa (EMEA) was the worst-performing region, gaining 7.6%[1].
The technology sector, particularly semiconductor-related stocks in Taiwan and South Korea, saw robust gains due to strong global demand for AI chips and increased foreign inflows[1][5]. Taiwan and South Korea returned 26.1% and 32.7% respectively, boosting overall emerging market returns[1][5]. China’s consumer-facing small caps, such as 361 Degrees and TravelSky, also performed well, rising about 20-25%, while enterprise IT names like Inspur Digital climbed 39%[5].
However, China’s export sector was pressured by tariffs and trade tensions, dampening manufacturing and services growth early in the quarter[1]. Globally, the Energy, Healthcare, and Real Estate sectors posted negative returns, which might correspond to some emerging markets exposure as well[2][4].
The strong performance of Information Technology (especially semiconductors), consumer discretionary small caps in China, and industrial sectors were key contributors to the positive MSCI Emerging Markets Index returns in Q2 2025[1][2][4][5]. Taiwan, South Korea, and Mexico were notable contributors to the index's gains[1].
Mexico rose strongly (+20.5%) benefiting from trade positivity and market volatility elsewhere, implying potential strength in sectors related to trade and manufacturing[1]. Brazil also performed well despite concerns about domestic fiscal issues and US tariffs[1].
Sector allocation, specifically in the financials and health care sectors, boosted relative performance, while stock selection in the industrials and communication services sectors undercut relative performance[1]. Information technology, industrials, and communication services were the best-performing sectors in the second quarter[1].
Notable stocks that performed well included Shinhan Financial (SHG), which saw its shares climb due to a jump in net profits[1]. Shares of Taiwan Semiconductor Manufacturing Company (TSM) gained due to renewed investor interest in AI-linked companies[1]. Shares of SK Hynix (OTCPK:HXSCF) also rose due to rising DRAM prices and ongoing demand for high-bandwidth memory chips[1].
However, some stocks faced challenges. Fast food chain operator Yum China saw its stock price fall due to ongoing consumer demand challenges in the Chinese market[1]. Shares of PDD traded lower due to disappointing quarterly results[1]. Alibaba (BABA) also faced concerns about its earnings outlook, causing its shares to fall[1].
(Index returns are measured net of taxes and in US dollar terms.)
In conclusion, the MSCI Emerging Markets Index's strong Q2 performance was driven by technology, consumer discretionary, and industrial sectors, with notable contributions from Taiwan, South Korea, and Mexico. China's modest gains and sector pressures moderated overall performance.
[1] MSCI [2] Bloomberg [3] Reuters [4] Financial Times [5] CNBC
- The technology sector, particularly semiconductor-related stocks in Taiwan and South Korea, saw robust gains in Q2 2025, boosting the MSCI Emerging Markets Index returns.
- The strong performance of the financial sector, specifically in some financial stocks like Shinhan Financial (SHG), also contributed to the positive MSCI Emerging Markets Index returns in Q2 2025.
- Investment in the real estate sector had negative returns in Q2 2025, which might have corresponded to some emerging markets exposure as well.
- Increased foreign inflows, along with strong global demand for AI chips, played a significant role in the technology sector's gains, significantly impacting the MSCI Emerging Markets Index's performance in Q2 2025.
