Multi~Asset：EM Equity Strategy Compass

Investment Rating - The report has downgraded Emerging Market (EM) equities to Underweight in a global context due to growing macro headwinds and increased risks associated with the potential re-election of Trump [4][6]. Core Insights - The MSCI EM index is currently about 10% off its highs, with a projected upside of approximately 8% to a target of 1130 by mid-2025, based on an expected 8% EPS growth and flat valuations [4][7]. - The report emphasizes a tilt towards quality in EM country strategy, favoring India and Taiwan while being Underweight on Brazil and downgrading Korea to Neutral [4][10]. - The political landscape in the US, particularly the potential for a Trump 2.0 scenario, poses significant risks for EM equities, especially for countries like China and Brazil, which are more exposed to US trade policies [9][20]. Summary by Sections EM Equity Strategy - The report summarizes top-down views and insights from various strategists, indicating that recent market corrections have led to a more realistic pricing of EPS outcomes in EM [4][5]. - The report suggests that while the worst may be behind, volatility is expected to persist as market positioning has not fully unwound [4][5]. Key Theme: Trump 2.0 - The US political backdrop is fluid, with prediction markets assigning a roughly 50% chance of a Trump win, which could lead to heightened trade policy uncertainty and negatively impact EM equities [9][22]. - The report highlights that approximately 13% of MSCI EM revenues come from the US, with significant exposure in Asia Tech, making markets like India and Mexico appear less vulnerable to Trump-related risks [9][37]. EM Allocation Model - The allocation model reflects a preference for quality and defensiveness, with Overweight positions in the US and specific EM countries, while downgrading others based on macroeconomic conditions and election-related risks [6][10]. - The report indicates a shift towards sectors and regions with strong EPS momentum, particularly in India and Taiwan, while downgrading Korea and Brazil [10][14]. Quantitative Strategy - The report notes that despite the recent sell-off, the MSCI EM is trading at a forward PE of 12x, near its long-term average, suggesting that EM equities remain relatively cheap compared to developed markets [7][46]. - EPS growth forecasts for 2024 are stronger in EM compared to developed markets, with a focus on sectors like technology and basic materials [43][51]. EM Countries: Insights from Local Strategists - Country preferences are adjusted based on EPS momentum and exposure to US economic conditions, with upgrades for Poland and downgrades for China and Brazil [10][14]. - The report emphasizes that while Korea shows EPS recovery, its cyclical characteristics and exposure to Trump risks warrant a Neutral rating [14][69].