Asia and EM in 2026: accelerating momentum in credit and equities

Asia’s macro environment: awash with liquidity

In 2026, Asian and emerging markets (EM) are in one of the most supportive liquidity backdrops seen in more than a decade. We believe the region is in the early stages of a multi year phase of abundant liquidity that first took shape in 2025 and is now becoming deeply embedded across funding markets, corporate balance sheets and investor positioning. For a region with already substantial domestic savings pools, this influx of capital is likely to remain a powerful tailwind across public and private assets in the years ahead.

The drivers of this liquidity cycle are broad based and mutually reinforcing. US Federal Reserve rate cuts have reduced the global cost of capital, while Asian central banks are now moving into more accommodative policy cycles for 2026 and 2027. Alongside this, regional capital is gradually reallocating away from US markets and back into Asian assets, reflecting relative valuations, a stronger macro growth profile and improving domestic market depth.

Another notable ingredient is the incremental unlocking of Chinese household savings, which have surged to a record USD 23 trillion¹. Even a marginal release of these balances into consumption, deposits or investment channels has meaningful implications for regional liquidity conditions. Combined with record goods trade surpluses and solid domestic demand, the net effect has been a steady rise in the availability of regional capital and a sustained decline in its cost.

Positive drivers for Asia and EM credit

This environment continues to place downward pressure on yields for USD denominated debt across Asian issuers, spanning both investment grade (IG) and high yield (HY). Corporate fundamentals remain broadly robust, supported by healthy cash levels, disciplined capex and improved refinancing visibility. At the same time, Asian USD yields continue to trade above local currency equivalents, providing a compelling relative-value anchor for regional and global investors seeking carry in a lower rate environment.

We also expect surplus Asian liquidity to continue supporting higher quality segments of global EM corporate and sovereign USD markets. 

A defining shift is underway: Asian institutions, asset managers and wealth investors are increasingly acting as net creditors to emerging market borrowers, supplying steady demand for hard currency assets. Over time, this dynamic may become a more structural feature of global EM fixed income, aligning Asia’s role as both a major source and a major destination for capital.

Regional opportunities in the Middle East and India

Within this broader EM landscape, we see particularly strong opportunity in the Middle East and India.

The Middle East has rapidly evolved into a key structural supplier of EM credit. Several forces are at play: rising fiscal financing needs, ambitious economic transformation agendas and sizeable refinancing pipelines have lifted issuance volumes significantly. Markets such as Saudi Arabia and the UAE now account for a meaningful share of EM hard currency supply, supported by improving liquidity, a more diverse issuer base and rising foreign investor participation. Proactive liability management, disciplined fiscal frameworks and continued capex programmes reinforce the region’s position as a stable and increasingly systemically important anchor within EM hard currency markets. We expect these trends to continue well into 2026.

Fig 1. Gross supply of EM corporate bonds by region (USD billions)² 

India, meanwhile, enters 2026 in what we describe as a macroeconomic ‘sweet spot’. Domestic demand remains one of the strongest globally, underpinned by rising household consumption, supportive demographics and improving labour market dynamics. Corporate balance sheets are the healthiest they have been in more than a decade, enabling a revival in private sector capex. The monetary backdrop is also shifting: falling inflation and rising real rates have opened the door for the Reserve Bank of India to begin an easing cycle, creating a constructive setting for credit expansion.

Externally, India’s approach to calibrated currency depreciation is acting as an effective buffer against tariff-related pressures, helping preserve export competitiveness while keeping the current account deficit contained. Combined with the prospect of a sovereign credit upgrade and sustained index-related inflows, these factors present meaningful potential upside for Indian assets across fixed income and equities in 2026.

Secular growth themes underpin Asian equities

Asian equities have enjoyed a strong run, with the MSCI AC Asia ex-Japan Index rising more than 40% since January 2024. We believe this performance reflects not only abundant liquidity but also the region’s durable long term growth drivers – from rapid technological innovation to rising wealth and domestic consumption. These secular themes position Asia as one of the most structurally attractive equity markets globally through 2030 and beyond.

Our equity outlook focuses on five major areas where we see sustained compounding potential:

In our view, Asia’s liquidity cycle, strong macro resilience and powerful secular themes create one of the most attractive multi year opportunity sets globally. The region’s role as both a growth engine and a capital provider will continue to shape global markets through 2026 and beyond.