The broader backdrop was mixed. A weaker US dollar and firmer commodity prices supported parts of the EM universe, while renewed conflict in the Middle East drove considerable volatility in energy markets. Brent crude briefly rose above USD100 per barrel before easing later in the month, creating a headwind for oil importers while supporting selected commodity exporters.

Korea saw pronounced volatility in July following strong year-to-date gains, with weakness concentrated in semiconductor and memory stocks. Selling pressure increased as investors reassessed the pace and sustainability of hyperscaler AI capital expenditure, alongside growing competition from Chinese semiconductor producers and the unwinding of leveraged AI-related positions. Taiwan experienced similar weakness across technology and semiconductor names, with elevated valuations and concentrated positioning contributing to the market reaction.

China led major EM markets in July, benefiting from a rotation away from Korea and Taiwan into banks, internet companies and other domestically oriented sectors. Sentiment was further supported by growing interest in China’s AI capabilities despite a challenging macroeconomic backdrop. The MSCI China Index gained 9.0%, while the MSCI China H Index rose 12.1% over the month. On the policy front, the latest Politburo meeting reinforced expectations for further support, while policymakers highlighted the need to manage trade tensions and deepen international cooperation.

India, Brazil and the broader Latin American region also benefited from the rotation away from AI-related equities. India drew support from resilient domestic demand, infrastructure spending and confidence in its longer-term growth trajectory, although elevated oil prices and currency weakness remained headwinds. Latin America benefited more directly from the commodity cycle, with higher copper prices supporting resource-heavy markets. Brazil gained from firmer commodity prices, a favourable inflation outcome and expectations of a more supportive monetary-policy backdrop. Colombia was among the region’s strongest performers, on upward earnings revisions and favourable political developments, while Mexico presented a more mixed picture, as resilient domestic conditions were offset by lingering questions over external demand and trade.

Elsewhere in EM, Vietnam continued to benefit from manufacturing expansion, supply-chain diversification and export-oriented investment. Singapore’s position as a key financial and trade centre in the region continued to underpin its performance, while Thailand faced a more mixed outlook amid questions around domestic growth and tourism.  Middle Eastern markets showed little overall movement as investors navigated a mix of renewed geopolitical tensions and fluctuating oil prices. Gulf economies, meanwhile, continued to draw support from strong fiscal positions and their push to diversify into sectors such as infrastructure, financial services, technology and tourism, with Saudi Arabia and Qatar outperforming the broader EM index, albeit with negative absolute returns.