Emerging Markets Equity Portfolio's Q2 2025 Analysis by Lazard
In the second quarter of 2025, the Emerging Markets Equity Portfolio demonstrated a robust performance, with a 12.0% gain overall. This growth can be attributed to easing geopolitical tensions, a weaker US dollar, and specific sector strengths in technology and regions outside China.
The top-performing sectors within the portfolio were technology, particularly semiconductors, in South Korea and Taiwan. Companies such as Taiwan Semiconductor and SK Hynix led this surge due to strong global demand for semiconductors and AI infrastructure. Meanwhile, Latin American markets, particularly Mexico, also performed well, likely boosted by trade optimism and currency strength.
On the flip side, China was the bottom-performing sector and country, lagging considerably despite the broad market rally. China’s market rose only about 2% amid trade tensions, tariffs, factory shutdowns, and export sector weakness, dampening growth and investor sentiment compared to other emerging markets.
Other notable performances include the communication services sector, where stock selection boosted relative performance. Traders bid up shares of Taiwan Semiconductor Manufacturing Company on expectations of renewed investor interest in companies linked to artificial intelligence.
The MSCI Emerging Markets Index also surged 12.0% in the second quarter. Latin America was the best-performing region, with a 15.2% increase, while Emerging Asia followed closely with a 12.4% rise. Mexico's stock market benefited from a 90-day pause in the implementation of tariffs announced by the US.
However, not all stocks in the portfolio fared equally well. Shares of Banco do Brasil fell after pulling parts of its 2025 guidance and reporting rising delinquencies in its agri-loan portfolio. Higher-than-benchmark exposures to the industrials sector and to Mexico and Korea contributed to relative performance, but stock selection in the industrials sector undercut it.
In contrast, stock selection in the consumer discretionary sector was beneficial to relative performance. Shares of Wiwynn appreciated after reporting strong first-quarter results, and NetEase advanced on enthusiasm about its product pipeline following strong second-quarter results.
Korea's stock market also benefited from positive sentiment about the potential enactment of an amendment to the Corporation Act. Shares of KB Financial traded higher after reporting strong first-quarter earnings, and SK Hynix gained due to rising DRAM prices and ongoing demand for high-bandwidth memory chips.
In conclusion, the second quarter of 2025 saw a strong performance from the Emerging Markets Equity Portfolio, led by technology and Latin American markets. While China struggled due to trade tensions and economic slowdown, other regions and sectors, such as South Korea, Taiwan, and Mexico, thrived. As we move forward, it will be interesting to see how these trends continue to unfold.
| Performance | Sector/Region | Key Drivers | |-------------------|---------------------------------|-----------------------------------------------------| | Top Performing | Technology (Semiconductors) | Strong global demand for AI chips, Taiwan & S. Korea| | | Latin America (Mexico) | Trade negotiations optimism, currency strength | | Bottom Performing | China (Various sectors) | US tariffs, export weakness, economic slowdown | | Others | Communication Services | Renewed interest in AI-linked companies | | | Korea | Corporation Act amendment | | | Consumer Discretionary (NetEase) | Strong product pipeline | | | Korea (TSM) | AI trade recovery | | | Korea (KB Financial) | Strong Q1 earnings | | | China (SK Hynix) | Rising DRAM prices, high-bandwidth memory demand | | | Mexico (Stock Market) | Tariff pause | | | Emerging Asia | Market rally | | | Industrials (Banco do Brasil) | Agri-loan delinquencies, weak performance |
- The technology sector, particularly semiconductors in South Korea and Taiwan, showed remarkable growth in the Emerging Markets Equity Portfolio thanks to strong global demand for AI infrastructure and chips.
- The communication services sector's stock selection also boosted relative performance, as traders bid up shares of Taiwan Semiconductor Manufacturing Company due to expectations of renewed investor interest in companies linked to artificial intelligence.
- On the other hand, the consumer discretionary sector benefited from strong first-quarter results of companies like Wiwynn and NetEase's enthusiasm about its product pipeline following strong second-quarter results.
