Emerging Markets enter ‘new cycle’ after a lost decade, says Aberdeen Investments, as spending boom set to intensify – and it’s not all about AI

• By 2050, almost seven in ten working-age people globally will live in emerging Asia or Africa, Aberdeen Investment’s research suggests
   
• Expected $42 trillion infrastructure investment requirement by 2050 in Emerging Markets  – just to keep the lights on
   
• Emerging Market dividends have grown significantly faster than those in Developed Markets over the past two decades – and many are off the radar of passives

After more than a decade in which investors focused on a narrow group of Developed Market (DM) technology winners, Aberdeen Investments (“Aberdeen”) believes there are now more compelling opportunities across a growing number of emerging economies.  

Emerging Market (“EM”) performance has always tended to move in cycles, and those cycles have often coincided with periods of rising global capital expenditure.

That’s why the current environment is so interesting. The firm anticipates that EMs, including China, need to invest $42 trillion by 2050  – just to keep the lights on and the wheels of industry turning, from manufacturing and technology through to domestic consumption.

At the same time, investors are being paid to wait through faster dividend growth in EMs than in DMs. A large universe of under-researched companies also continues to provide fertile ground for active stock pickers.

Resilience despite the risks

Tettey Addy, Emerging Markets Economic Analyst, Aberdeen Investments, said: “EMs have proven remarkably resilient amid a series of global shocks, while their long-term outlook remains favourable. Ageing populations in advanced economies and China contrast with the centre of gravity of the global workforce shifting toward emerging Asia and Africa, which together will account for close to 70% of the world’s workers in 2050 .

Rising urbanisation, developing technology supply chains, and rising electricity demand – especially in China despite its demographics - are set to drive a new investment cycle. We estimate EMs will require more than $40 trillion in infrastructure spending between 2025 and 2050, creating significant opportunities for growth, productivity and investment.”

The Emerging Markets cycle: from lost decade to potential turning point

During the 2000s, China's rapid industrialisation helped drive a surge in infrastructure spending, manufacturing investment and commodity demand, creating one of the strongest periods of EM outperformance.

But the decade following the Global Financial Crisis was characterised by weaker capital investment and a growing focus on asset-light business models, buybacks and a narrow group of DM technology winners, contributing to a prolonged period of EM underperformance.

Today, the backdrop is beginning to look different. Investment linked to AI, electrification, energy systems, infrastructure and manufacturing capacity is accelerating

Nick Robinson, Head of Global Emerging Market Equity at Aberdeen Investments, said: “Much of the initial investment in the AI theme flowed into US and DM companies, particularly the largest technology stocks. More recently, however, EM companies have begun to participate more meaningfully.

This is increasingly visible in corporate earnings, with Korean and Taiwanese technology companies continuing to experience strong demand for their products. The opportunity is also broadening beyond the largest semiconductor businesses into infrastructure, commodities and other parts of the supply chain.”

Income is an underappreciated driver of Emerging Market returns

EMs are often associated primarily with faster economic and corporate growth. However, dividends now represented around half of total EM equity returns and EM dividends recorded an annual compound growth rate of 11.8% between 2003 and 2025, compared with 7.4% in DMs .  There are now more companies paying dividends in EMs than in DMs.

As EM companies have matured, stronger cash generation and improving corporate governance have encouraged more businesses to return capital to shareholders.

Nick Robinson added: “Dividends are a powerful signal of capital discipline and a company’s willingness to return cash to shareholders. By combining higher-yielding companies with businesses capable of growing their dividends, investors can access both value and growth opportunities while managing some of the factor and country risks associated with EMs.

Income also gives investors something tangible while they wait for the longer-term investment case to develop. In a more uncertain market environment, that combination of cash returns, growth potential and capital discipline can be particularly valuable.”

Smaller companies can broaden diversification

Market concentration has become one of the defining themes of investing. In DMs, the US now accounts for around 70% of the MSCI World Index .

In EMs, the concentration can also be pronounced. The 10 largest stocks account for around 37% of the MSCI Emerging Markets Index, while Taiwan represents close to 30% of the benchmark. In Asia, the 10 largest stocks accounting for around 43% of the MSCI AC Asia ex Japan Index.

That’s where smaller companies can come into their own, Aberdeen believes – and allow managers to hunt for returns off the beaten track.

Gabriel Sacks, Lead Manager of Aberdeen Asia Focus Investment Trust and Investment Director of Asian and Emerging Market Equity at Aberdeen Investments, said: "Data centres and robotics are important parts of today’s investment landscape, but we need more than that to keep the world turning. Economies need many other sectors to support activity and long-term growth.

One of the biggest misconceptions is that moving down the market-cap spectrum necessarily means taking more risk. Looking back over almost 30 years of data, investors who blended EM small caps with traditional large-cap exposure would have historically achieved higher returns with lower volatility . That is because smaller companies give investors access to a much broader range of businesses, sectors and economic drivers than those represented in headline indices."

Ends

Media enquiries

Yoosof Farah
Campaigns and Media Relations Manager, Aberdeen
yoosof.farah@aberdeenplc.com  
07345 441 771

Notes to editors

About Aberdeen Investments:
 

Aberdeen Investments is a specialist asset manager that focuses on areas where we have both strength and scale across public and private markets, including credit, specialist equities and real assets. 
 

Our teams collaborate across regions, asset classes and specialisms, connecting diverse perspectives and working with clients to identify investment opportunities that suit their needs.
 

As at 30 June 2026, Aberdeen Investments managed c.£397.5bn on behalf of clients, including insurance companies, sovereign wealth funds, independent wealth managers, pension funds, platforms, banks and family offices.
 

www.aberdeeninvestments.com
 

About Aberdeen Group
 

Aberdeen is a leading Wealth & Investments group, working to help millions of customers and clients turn their financial goals into reality. As at 30 June 2026, Aberdeen managed and administered c.£579.4bn of client and customer assets across its three core business, interactive investor, Adviser and Investments.
 

www.aberdeenplc.com 
 

The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested. Past performance is not a guide to future results. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. We recommend that you seek financial advice prior to making an investment decision.
 

The details contained here are for information purposes only and should not be considered as an offer, investment recommendation, or solicitation to deal in any investments or funds and does not constitute investment research, investment recommendation or investment advice in any jurisdiction. Any research or analysis used to derive, or in relation to, the above information has been procured by us for our own use, without taking into account the investment objectives, financial situation or particular needs of any specific investor, and may have been acted on for own purpose. No warranty is given as to the accuracy, adequacy or completeness of the information contained in this communication and no liability for errors or omissions in such information. Readers must make assessments to the relevance, accuracy and adequacies of the information contained in this communication and make independent investigations, as they may consider necessary or appropriate for the purpose of such assessments. Any opinion or estimate contained in this communication, are made on a general basis.   No information contained herein constitutes investment, tax, legal or any other advice, or an invitation to apply for securities in any jurisdiction where such an offer or invitation is unlawful, or in which the person making such an offer is not qualified to do so.
 

Issued by abrdn Investments Limited, registered in Scotland (SC108419) at 1 George Street, Edinburgh EH2 2LL. Authorised and regulated by the Financial Conduct Authority in the United Kingdom.