Insider Monkey·2026-02-20 15:01Core Viewpoint - Emerging market stocks are experiencing a significant rally, driven by optimism surrounding artificial intelligence and increased investment in developing economies [1][2]. Group 1: Market Performance - The iShares MSCI Emerging Markets ETF has risen over 10% year to date, outperforming the S&P 500, which remains flat [2]. - Emerging market stocks rallied approximately 30% in dollar terms in 2025, with strong performance noted in Asian markets such as Taiwan and South Korea due to high demand for AI-related hardware [2][3]. - Goldman Sachs projects the MSCI Emerging Markets index to return nearly 30% in 2026, supported by strong earnings, a weakening US dollar, and favorable macroeconomic trends [3]. Group 2: Future Expectations - Analysts expect some of the favorable conditions from 2025 to continue into 2026, leading to good returns in emerging markets [4]. - The resilience of Chinese exports and the economic benefits from falling commodity prices are anticipated to support the ongoing rally [3]. Group 3: Stock Selection Methodology - The selection of the 10 best emerging market stocks was based on the iShares MSCI Emerging Markets ETF and Yahoo Finance stock screeners, focusing on companies with positive upside potential as of February 17 [6]. - Stocks were ranked according to the number of hedge fund holders, as research indicates that imitating top hedge fund picks can lead to market outperformance [7]. Group 4: Featured Stocks - ZTO Express (NYSE:ZTO) has an upside potential of 6.65% and is supported by a recent upgrade from Macquarie, citing preliminary fourth-quarter volume growth of 9% [9][10]. - Credicorp Ltd. (NYSE:BAP) shows an upside potential of 6.88%, with a fourth-quarter net profit of $468.8 million and a focus on loan growth driven by strong retail momentum [14][16].