Citi’s 2026 emerging-market equity strategy favors AI-linked markets

Citi’s 2026 emerging-market equity view is best understood as a selective, AI-aware overweight rather than a blanket call to buy every EM market. Citi Research says it remains constructive on global EM equities, citing approximately 13% upside for the MSCI EM Index to a year-end target of 1,540, with consensus forecasting about 17% EPS growth in 2026 and expected Fed rate cuts as key supports . Citi’s published China-and-India equity takeaways also frame global EM equities as a strategic focus, helped by solid fundamentals, Fed cuts, and attractive AI-stock valuations .

The short answer

Citi’s top EM equity strategy for 2026 is to stay constructive on emerging-market equities, but concentrate the exposure in markets tied to AI growth and semiconductor demand. Market reports citing Citi strategists point to China and South Korea as the favored EM markets, while India is described as neutral because much of its growth story is already reflected in valuations and currency concerns remain .

That makes the practical read: favor AI-linked EM earnings growth, avoid chasing expensive markets, and keep the focus on whether earnings can keep up with valuations.

Why Citi is constructive on emerging markets

Citi’s EM case rests on three main pillars.

First, the earnings setup looks stronger than in other major regions. In Citi Research’s view, EM is expected to deliver the strongest earnings growth of any major region in 2026, with consensus EPS growth around 17% .

Second, the macro backdrop could help. Citi cites expected Fed rate cuts and a global soft-landing backdrop as supportive for EM equities, a combination that has historically been favorable for the asset class . Citi’s broader 2026 macro commentary also describes a constructive environment in which corporate profitability and global growth are supported by favorable monetary and fiscal policy .

Third, AI is now part of the EM equity story. Citi’s official key takeaways for China and India equities specifically list attractive AI-stock valuations as one driver of the constructive global EM outlook . Citi Wealth also highlights technology as a core long-term holding and points to opportunities in AI infrastructure .

Where the country tilt appears strongest

Market	Citi-related read for 2026	Why it matters
Global EM	Constructive, with about 13% upside to a 1,540 MSCI EM target and around 17% expected EPS growth	The broad EM case is earnings-led, not just valuation-led.
China	Citi says China equities may benefit from the 15th Five-Year Plan’s emphasis on tech self-reliance and export growth, while noting property-market and aging-population challenges	China is a direct way to express the policy-and-technology side of the EM AI theme.
South Korea	Market reports citing Citi strategists describe South Korea, alongside China, as a preferred EM exposure driven by AI growth and reasonable valuations	The Korea leg is best read as a reported Citi strategist tilt; the public Citi pages cited here provide more detail on China and India than on Korea.
India	Reports describe Citi as neutral because India’s growth narrative is already priced in and currency concerns remain	Neutral is not bearish: Citi’s own material still points to a possible FY27 earnings recovery supported by domestic flows and policy, while flagging risks .

How AI and semiconductors fit the strategy

The AI link matters because EM technology exposure has already shown meaningful sensitivity to the theme. Citi’s EM Equity Strategy Compass noted that EM Tech had risen about 50% since President Trump’s initial tariff pause, helped by relatively benign tariff outcomes and renewed confidence in AI . Citi also observed that the AI theme had reasserted itself through sharp outperformance in global technology stocks .

Semiconductors sit at the center of that equity story. Third-party coverage of Citi’s 2026 playbook describes semiconductors as a preferred growth sector, supported by AI infrastructure demand and positive earnings revisions . Separate Citi-linked semiconductor coverage says the bank expected the AI supercycle to continue through 2026, while warning that the risk-reward balance was becoming less favorable . Citi’s Asia commentary also highlights Taiwan’s central role in the AI revolution because it manufactures critical components for the technology .

For EM investors, the implication is straightforward: the AI trade is not only a U.S. mega-cap story. It also flows through Asian technology hardware, semiconductor supply chains, and country-level earnings revisions.

The main risks to watch

The biggest risk is that valuation gains outrun earnings. Citi’s Global Equity Quarterly says its main worry is that stretched valuations could cap future upside if EPS fails to deliver . That warning is especially relevant for AI-linked markets, where expectations are high and volatility can rise quickly.

Country-specific risks also matter. Citi flags China’s property-market outlook and aging population as challenges even as policy support for tech self-reliance and exports remains a potential tailwind . For India, the neutral stance reported by market sources reflects concern that the growth story is already priced in, along with currency risks .

Bottom line

Citi’s 2026 EM equity play is a selective overweight built around earnings growth, expected Fed easing, and AI-linked technology exposure. The cleanest reported expression is China and South Korea, while India is treated more cautiously. The strategy works if EM EPS growth materializes and AI semiconductor demand keeps supporting earnings revisions; it becomes more vulnerable if valuations stretch further or earnings disappoint .