Selective bargain‑hunting in emerging markets as de‑dollarization and Fed pivot hopes align

Across emerging markets, investors are increasingly engaging in selective bargain‑hunting, backed by expectations that US monetary policy is nearing a turning point and by a gradual shift away from heavy reliance on the US dollar. In its latest Global Investment Outlook, RBC Global Asset Management argues that emerging‑market equities still trade at attractive valuations, while several countries stand to benefit structurally from themes such as AI‑driven investment, infrastructure upgrades, and robust commodity demand.

The International Monetary Fund’s April 2026 Global Financial Stability Report adds another layer to this narrative. It notes that portfolio flows into emerging markets remain sensitive to US interest rates and dollar strength, but also highlights that many countries have built deeper local‑currency bond markets and stronger policy frameworks. These developments make them more resilient to external shocks than in past episodes like the currency crises of the 1990s, when sudden stops in capital flows were common.

Still, the opportunity set is far from uniform. Countries facing acute political uncertainty or fiscal stress continue to see capital outflows, and broad‑brush exposure via generic EM indices may mask large divergences in quality. For Japanese investors looking at emerging‑market stocks, bonds, or mutual funds, this argues for a more nuanced approach – favoring economies with relatively solid fiscal positions and governance, and companies tied to long‑term themes such as AI, infrastructure, and resources – rather than treating “EM” as a single, homogeneous asset class.