The global investment landscape has shifted dramatically since 2024. In this episode, Pooja Malik, CFA - Founding Partner and CIO at Nipun Capital - returns to Financial Perspectives to discuss the surprising trends of 2025 and 2026 in Emerging Markets, including the "junk rally" in AI-linked stocks and the impact of US tariffs on local policy.

With over 20 years of experience managing $100B+ portfolios at firms like BlackRock, Pooja provides a masterclass on alpha extraction in modern Asian markets. In this follow-up to her 2024 appearance, Pooja discusses how the AI theme has moved beyond the "obvious winners" to impact the entire power supply chain. She also shares her quantitative perspective on why the volatility of Indian and Chinese equities is trending downward, creating a new paradigm for global allocators.

In this episode, we cover:

• The AI Bubble in Asia: Why retail investors are buying anything remotely linked to power and data centers.
• Risk Reversal: Why US debt and political uncertainty are shifting risk perceptions toward developed markets.
• Sovereign Powerhouses: A look at the distinct economic visions of India, China, and Saudi Arabia.
• The Benchmarking Gap: Why EM drives 60% of global GDP but only 10% of equity benchmarks.

Lindsey Helman: Hello and welcome to Financial Perspectives, a CFA Society San

Lindsey Helman: Francisco podcast where we interview and discuss trends

Lindsey Helman: with leaders from across the investment and finance industry.

Lindsey Helman: This month, our host, Tanya Suba-Tang, Programming and

Lindsey Helman: Membership Director with CFA Society San Francisco, had the

Lindsey Helman: pleasure of welcoming back Pooja Malik, founding partner and CIO

Lindsey Helman: of Nipun Capital.

Lindsey Helman: Listen in as they discuss the shifting risk dynamics between

Lindsey Helman: the US and emerging markets.

Tanya Suba-Tang: Pooja, Just so great to see you again.

Tanya Suba-Tang: How are you?

Pooja Malik, CFA: I'm doing well.

Pooja Malik, CFA: Thank you for having me, Tanya.

Tanya Suba-Tang: I'm always excited to have you on our podcast.

Tanya Suba-Tang: This is the second time you're

Tanya Suba-Tang: with us, and I'm very excited

Tanya Suba-Tang: about our conversation because a

Tanya Suba-Tang: lot has happened in the emerging

Tanya Suba-Tang: markets.

Tanya Suba-Tang: And so, you know, I'm going to jump right in here.

Tanya Suba-Tang: And for our listeners, you know, the last time I spoke to Pooja

Tanya Suba-Tang: was back in twenty twenty four.

Tanya Suba-Tang: Can you believe it?

Tanya Suba-Tang: I still feel like it's twenty twenty four.

Tanya Suba-Tang: I don't know where the years went, but I'd love for you to

Tanya Suba-Tang: share with our listeners what has changed in the market since

Tanya Suba-Tang: then, and I'd love to know what has surprised you.

Pooja Malik, CFA: It's a good question.

Pooja Malik, CFA: A lot has changed, even though it's only been two years or

Pooja Malik, CFA: maybe even eighteen months since we last spoke.

Pooja Malik, CFA: And let me try to recap broadly.

Pooja Malik, CFA: I would say three main changes.

Pooja Malik, CFA: The first is investor sentiment around emerging markets has

Pooja Malik, CFA: changed a lot.

Pooja Malik, CFA: And to me that is the most important thing.

Pooja Malik, CFA: When we spoke in twenty twenty

Pooja Malik, CFA: four, emerging markets had been

Pooja Malik, CFA: underperforming developed

Pooja Malik, CFA: markets.

Pooja Malik, CFA: US equities had been on a decade long bull run.

Pooja Malik, CFA: And it was an era of US exceptionalism.

Pooja Malik, CFA: You remember that phrase.

Pooja Malik, CFA: and what's changed is today US equities appear to be overpriced

Pooja Malik, CFA: or at least priced for perfection, where most stocks in

Pooja Malik, CFA: the US appear to be what's called glamour stocks.

Pooja Malik, CFA: And at some point when these stocks miss earnings

Pooja Malik, CFA: expectations which are very hyped, that's when we are likely

Pooja Malik, CFA: to get a correction in the US.

Pooja Malik, CFA: Now the fact that US equities appear overpriced combined with

Pooja Malik, CFA: dollar weakness has strengthened the appetite for em.

Pooja Malik, CFA: The dollar weakness is coming, of course, from the Federal

Pooja Malik, CFA: Reserve decision to cut rates, but also from political

Pooja Malik, CFA: uncertainty in the US.

Pooja Malik, CFA: So the backdrop of the US equity market has led more investors to

Pooja Malik, CFA: look at em.

Pooja Malik, CFA: And I think that's been one big change around foreign investor

Pooja Malik, CFA: sentiment being more positive for em than before.

Pooja Malik, CFA: Now, another thing that has

Pooja Malik, CFA: changed is that policy support

Pooja Malik, CFA: from the local governments in Em

Pooja Malik, CFA: has become stronger, and the

Pooja Malik, CFA: impetus for that was when the US

Pooja Malik, CFA: announced tariffs in twenty

Pooja Malik, CFA: twenty five.

Pooja Malik, CFA: Many of the local governments felt compelled to provide policy

Pooja Malik, CFA: incentives and other measures to support local markets.

Pooja Malik, CFA: Some local governments even

Pooja Malik, CFA: encouraged domestic institutions

Pooja Malik, CFA: and banks to buy stocks to

Pooja Malik, CFA: support their local equity

Pooja Malik, CFA: markets.

Pooja Malik, CFA: We saw this in China, we saw this in Taiwan, and we saw this

Pooja Malik, CFA: in many of the smaller markets.

Pooja Malik, CFA: So as a result, all of this attracted domestic buyers of

Pooja Malik, CFA: stocks into the markets as well.

Pooja Malik, CFA: And since twenty twenty four,

Pooja Malik, CFA: especially looking back at

Pooja Malik, CFA: twenty five we saw domestic

Pooja Malik, CFA: institutions becoming net

Pooja Malik, CFA: buyers.

Pooja Malik, CFA: So in essence now you had multiple sources of demand for

Pooja Malik, CFA: equities foreign investors as well as domestic investors.

Pooja Malik, CFA: And then to top off all of this, the icing on the cake has been

Pooja Malik, CFA: the sentiment around AI.

Pooja Malik, CFA: And I see you smiling there.

Pooja Malik, CFA: Right?

Pooja Malik, CFA: that's been a hot topic across equity markets.

Pooja Malik, CFA: There was positive sentiment around AI in twenty twenty four

Pooja Malik, CFA: in the US of course.

Pooja Malik, CFA: And for many years in the US.

Pooja Malik, CFA: And then last year in twenty twenty five we saw it impact

Pooja Malik, CFA: Asia more broadly, and the largest impact was in Korea,

Pooja Malik, CFA: where stocks like Samsung were up over one hundred percent.

Pooja Malik, CFA: SK Hynix that is the largest

Pooja Malik, CFA: manufacturer of Dram chips,

Pooja Malik, CFA: right.

Pooja Malik, CFA: that stock returned over three hundred percent last year.

Pooja Malik, CFA: So, you know, you're asking me what has been surprising?

Pooja Malik, CFA: The fact that AI became a theme

Pooja Malik, CFA: in Asia and EM is not

Pooja Malik, CFA: surprising.

Pooja Malik, CFA: I think what has been surprising is how strongly retail investors

Pooja Malik, CFA: latched on to that theme.

Pooja Malik, CFA: And they bought not just the

Pooja Malik, CFA: obvious winners like TSMC,

Pooja Malik, CFA: Samsung and SK Hynix, but they

Pooja Malik, CFA: bought anything that had

Pooja Malik, CFA: anything to do with AI even

Pooja Malik, CFA: remotely.

Pooja Malik, CFA: So now there's this thing that,

Pooja Malik, CFA: you know, with AI needing more

Pooja Malik, CFA: servers, servers needing more

Pooja Malik, CFA: data centers.

Pooja Malik, CFA: The world is going to run out of power.

Pooja Malik, CFA: And so companies far down the supply chain, even companies

Pooja Malik, CFA: that are involved in power construction, whether it's

Pooja Malik, CFA: nuclear power, electric, thermal, hydro, all those stocks

Pooja Malik, CFA: had a big rally because retail investors bought anything

Pooja Malik, CFA: remotely linked to AI.

Pooja Malik, CFA: So we saw junk stocks, loss making stocks.

Pooja Malik, CFA: All kinds of stocks rally

Pooja Malik, CFA: because retail investors were

Pooja Malik, CFA: buying them.

Pooja Malik, CFA: And that is the thing that's been the biggest surprise to me.

Pooja Malik, CFA: I also think that, you know, I

Pooja Malik, CFA: think there's room for

Pooja Malik, CFA: correction here because while

Pooja Malik, CFA: it's true that the AI theme is

Pooja Malik, CFA: structural and will require more

Pooja Malik, CFA: resources, including power, it's

Pooja Malik, CFA: not clear that all of those

Pooja Malik, CFA: companies will be able to

Pooja Malik, CFA: execute on that demand

Pooja Malik, CFA: opportunity.

Pooja Malik, CFA: But each of those stocks is

Pooja Malik, CFA: being priced like earnings are

Pooja Malik, CFA: going to go up five times,

Pooja Malik, CFA: right.

Pooja Malik, CFA: So I think what I've been

Pooja Malik, CFA: surprised by is the junk rally

Pooja Malik, CFA: in Em.

Pooja Malik, CFA: And I think that that will be

Pooja Malik, CFA: due for a correction at some

Pooja Malik, CFA: point.

Pooja Malik, CFA: So to recap quickly, the three

Pooja Malik, CFA: things that have changed since

Pooja Malik, CFA: twenty four has been foreign

Pooja Malik, CFA: investor sentiment around Em

Pooja Malik, CFA: domestic policy, support from

Pooja Malik, CFA: local governments.

Pooja Malik, CFA: And lastly, the retail optimism

Pooja Malik, CFA: around AI, which has led to a

Pooja Malik, CFA: strong junk rally in emerging

Pooja Malik, CFA: markets.

Tanya Suba-Tang: So based on all those, you know, surprising changes that you just

Tanya Suba-Tang: shared is the very term emerging markets becoming obsolete.

Tanya Suba-Tang: And should we instead be viewing these nations as individual

Tanya Suba-Tang: sovereign powerhouses rather than a monolithic asset class?

Pooja Malik, CFA: There's some of that already happening.

Pooja Malik, CFA: Tanya.

Pooja Malik, CFA: And you remember when we spoke

Pooja Malik, CFA: last time, we touched a little

Pooja Malik, CFA: bit on this issue that emerging

Pooja Malik, CFA: markets is not really an asset

Pooja Malik, CFA: class.

Pooja Malik, CFA: It's a bunch of countries put

Pooja Malik, CFA: together because there was no

Pooja Malik, CFA: other place where there fit

Pooja Malik, CFA: cleanly.

Pooja Malik, CFA: And you can see the discrepancy in how major classifiers or

Pooja Malik, CFA: benchmark providers think about some of these countries.

Pooja Malik, CFA: You know, the long standing example is Korea, where MSCI

Pooja Malik, CFA: thinks of Korea as an emerging market and Footsie thinks about

Pooja Malik, CFA: Korea as a developed market.

Pooja Malik, CFA: To me, again, it's amazing that

Pooja Malik, CFA: a developed market or almost

Pooja Malik, CFA: developed market like Korea was

Pooja Malik, CFA: up almost one hundred percent

Pooja Malik, CFA: last year.

Pooja Malik, CFA: I haven't seen a developed market being one hundred percent

Pooja Malik, CFA: in my lifetime of investing.

Pooja Malik, CFA: And I've been doing this a long time.

Pooja Malik, CFA: But that aside, going back to your point about should we view

Pooja Malik, CFA: these nations as as individual sovereign powerhouses rather

Pooja Malik, CFA: than a monolithic asset class?

Pooja Malik, CFA: That trend is already underway, starting with China.

Pooja Malik, CFA: And you've seen the emergence of China.

Pooja Malik, CFA: The growth of China being almost now back to thirty, thirty five

Pooja Malik, CFA: percent of the EM index.

Pooja Malik, CFA: at some point in time, definitely.

Pooja Malik, CFA: I think China will be big enough to be its own asset class.

Pooja Malik, CFA: the other reason for this A call it shift, or really thinking of

Pooja Malik, CFA: em as a bunch of different countries is because the

Pooja Malik, CFA: underlying investor behavior is different in these countries.

Pooja Malik, CFA: The commonality is that all of these countries have a large

Pooja Malik, CFA: retail presence in terms of equity market participation.

Pooja Malik, CFA: But retail investors do behave differently in China versus

Pooja Malik, CFA: Taiwan versus India.

Pooja Malik, CFA: So in our model at Nipun, for

Pooja Malik, CFA: example, we view these countries

Pooja Malik, CFA: as distinct.

Pooja Malik, CFA: The investor behavior is different.

Pooja Malik, CFA: The regulation is different.

Pooja Malik, CFA: The reporting guidelines are different.

Pooja Malik, CFA: The data availability is different.

Pooja Malik, CFA: And I think for a lot of asset managers, understanding these

Pooja Malik, CFA: differences enables better alpha extraction in Em.

Pooja Malik, CFA: So from my perspective, to answer your question, yes, these

Pooja Malik, CFA: countries are different.

Pooja Malik, CFA: They've always been different.

Pooja Malik, CFA: Understanding and recognizing

Pooja Malik, CFA: these differences is important

Pooja Malik, CFA: from a manager or investor

Pooja Malik, CFA: standpoint.

Pooja Malik, CFA: At the same time, classifying

Pooja Malik, CFA: them as EM makes it easier for

Pooja Malik, CFA: an allocator.

Pooja Malik, CFA: So, you know, imagine you're a pension fund and you have, let's

Pooja Malik, CFA: say sixty percent of your portfolio in equities.

Pooja Malik, CFA: and then you have, you know, ten percent of that in EM, so sixty

Pooja Malik, CFA: percent, you know, ten percent of sixty percent is six percent.

Pooja Malik, CFA: and then you want to break that

Pooja Malik, CFA: out into twenty five individual

Pooja Malik, CFA: countries.

Pooja Malik, CFA: All of a sudden you have these tiny allocations to manage.

Pooja Malik, CFA: And so I think that's why from an allocator standpoint, it's

Pooja Malik, CFA: ease of convenience rather than anything else to keep it as one

Pooja Malik, CFA: category versus I think if you think about it from an alpha

Pooja Malik, CFA: generation perspective, it's often helpful to break it out.

Pooja Malik, CFA: The Uber sort of covering around my statement here is the

Pooja Malik, CFA: disconnect between how important EM is from a GDP perspective.

Pooja Malik, CFA: versus how important or not it

Pooja Malik, CFA: is in the benchmarks, meaning

Pooja Malik, CFA: that EM is a big driver of GDP

Pooja Malik, CFA: growth.

Pooja Malik, CFA: Almost sixty percent of the

Pooja Malik, CFA: world's GDP growth is coming

Pooja Malik, CFA: from EM, but EM is only ten

Pooja Malik, CFA: percent of global equity

Pooja Malik, CFA: benchmarks, right?

Pooja Malik, CFA: So that disconnect is what you

Pooja Malik, CFA: see when you think about the

Pooja Malik, CFA: allocator perspective versus the

Pooja Malik, CFA: manager perspective.

Tanya Suba-Tang: So kind of following up a little bit on that.

Tanya Suba-Tang: But for the decades, obviously

Tanya Suba-Tang: the narrative was emerging

Tanya Suba-Tang: markets were risky due to the

Tanya Suba-Tang: volatile politics.

Tanya Suba-Tang: So, you know, kind of taking up how you said to kind of start

Tanya Suba-Tang: thinking of these as individuals have perceptions of risk shifted

Tanya Suba-Tang: in today's global environment?

Pooja Malik, CFA: Yes. Risk is a very slow moving phenomena.

Pooja Malik, CFA: You know these are embedded in people's minds and mindsets.

Pooja Malik, CFA: And it takes a long time for

Pooja Malik, CFA: people's perceptions of risk to

Pooja Malik, CFA: change.

Pooja Malik, CFA: Two things have happened simultaneously, Tanya.

Pooja Malik, CFA: The first is the uncertainty in

Pooja Malik, CFA: the US has gone up because of

Pooja Malik, CFA: unpredictable actions from the

Pooja Malik, CFA: administration over the last two

Pooja Malik, CFA: years.

Pooja Malik, CFA: Whether that was tariffs, whether it was Venezuela in I

Pooja Malik, CFA: don't know where we're going to go with Greenland.

Pooja Malik, CFA: But a lot of that uncertainty

Pooja Malik, CFA: has caused investors to have a

Pooja Malik, CFA: heightened risk perception of

Pooja Malik, CFA: the US.

Pooja Malik, CFA: At the same time, many of the

Pooja Malik, CFA: major markets in Em are becoming

Pooja Malik, CFA: more stable.

Pooja Malik, CFA: So if you think about countries like China and India, the reason

Pooja Malik, CFA: they're becoming more stable is because their domestic economies

Pooja Malik, CFA: have grown to a point where they're less export sensitive

Pooja Malik, CFA: than they used to be.

Pooja Malik, CFA: Historically, domestic

Pooja Malik, CFA: consumption has gone up domestic

Pooja Malik, CFA: demand for equities has gone up

Pooja Malik, CFA: and government policy support in

Pooja Malik, CFA: these local markets have gone

Pooja Malik, CFA: up.

Pooja Malik, CFA: The other thing that we've seen in these major markets in the

Pooja Malik, CFA: E.M. is that the fiscal balance sheets of these governments have

Pooja Malik, CFA: become more stable over time versus the US debt situation has

Pooja Malik, CFA: worsened over time.

Pooja Malik, CFA: Again, it's not to say that one

Pooja Malik, CFA: is better or one is worse, but

Pooja Malik, CFA: just if I look at trends over

Pooja Malik, CFA: time, balance sheets have

Pooja Malik, CFA: improved in EM at the government

Pooja Malik, CFA: level and become weaker in the

Pooja Malik, CFA: US.

Pooja Malik, CFA: So as a result of this,

Pooja Malik, CFA: perceptions have shifted,

Pooja Malik, CFA: although slowly, and I think

Pooja Malik, CFA: that shift is likely to

Pooja Malik, CFA: continue.

Pooja Malik, CFA: You could also see a point in time where many of the other

Pooja Malik, CFA: EM's, even though they're smaller, like Taiwan, I think

Pooja Malik, CFA: you could see that market also become more stable.

Pooja Malik, CFA: I think markets like Latin America are still very high risk

Pooja Malik, CFA: because those are narrower markets, smaller markets, fiscal

Pooja Malik, CFA: situations still tough.

Pooja Malik, CFA: The one area to watch out for in

Pooja Malik, CFA: emerging markets is the Middle

Pooja Malik, CFA: East, because the Middle East

Pooja Malik, CFA: historically has been a very oil

Pooja Malik, CFA: sensitive market.

Pooja Malik, CFA: The big change in the Middle

Pooja Malik, CFA: East over the last three years

Pooja Malik, CFA: has been the emergence of Saudi

Pooja Malik, CFA: Arabia as a very large market,

Pooja Malik, CFA: with a very keen political and

Pooja Malik, CFA: economic ambition to grow

Pooja Malik, CFA: non-oil GDP.

Pooja Malik, CFA: So if you think about where

Pooja Malik, CFA: China was twenty years ago, one

Pooja Malik, CFA: of the things that enabled China

Pooja Malik, CFA: to grow was a very strong vision

Pooja Malik, CFA: from the leadership where the

Pooja Malik, CFA: Chinese authorities wanted China

Pooja Malik, CFA: to be an economic and financial

Pooja Malik, CFA: superpower.

Pooja Malik, CFA: Now, markets like India and

Pooja Malik, CFA: Saudi also have very clear

Pooja Malik, CFA: visions of where they want to

Pooja Malik, CFA: be.

Pooja Malik, CFA: So, for example, India wants to be the third largest country in

Pooja Malik, CFA: the world after US and China.

Pooja Malik, CFA: And that's a stated vision.

Pooja Malik, CFA: And so policy support for that

Pooja Malik, CFA: vision is improving year on

Pooja Malik, CFA: year.

Pooja Malik, CFA: The same thing in Saudi where

Pooja Malik, CFA: Saudi wants a significant part

Pooja Malik, CFA: of their GDP to come from non

Pooja Malik, CFA: oil revenues.

Pooja Malik, CFA: And so we're seeing investments in infrastructure.

Pooja Malik, CFA: We're seeing changes in the real estate sector.

Pooja Malik, CFA: We're seeing changes in banking to support that vision.

Pooja Malik, CFA: And that's why I have this belief that I think the risk in

Pooja Malik, CFA: emerging markets is going to go down over time, where I wouldn't

Pooja Malik, CFA: say that we'll see convergence, but I think uncertainty in the

Pooja Malik, CFA: US has gone up at a time when risk in EM is going down.

Pooja Malik, CFA: So you're right.

Pooja Malik, CFA: And actually it was a very interesting question because I

Pooja Malik, CFA: do think perceptions of risk have started shifting And over

Pooja Malik, CFA: time, we are also going to be seeing this in the numbers.

Pooja Malik, CFA: You know, many of us that tend to invest in stocks, we're all

Pooja Malik, CFA: very quantitatively inclined.

Pooja Malik, CFA: And I myself come from a quant background.

Pooja Malik, CFA: We're starting to see this

Pooja Malik, CFA: already that the volatility of

Pooja Malik, CFA: Indian equities has gone down

Pooja Malik, CFA: over time.

Pooja Malik, CFA: We're starting to see that in China.

Pooja Malik, CFA: And I think over time we'll see that more and more EM countries.

Pooja Malik, CFA: So you're right that while EM

Pooja Malik, CFA: remains more risky, more

Pooja Malik, CFA: volatile than developed, we're

Pooja Malik, CFA: starting to see that shift where

Pooja Malik, CFA: EM is becoming more stable and

Pooja Malik, CFA: developed markets are becoming

Pooja Malik, CFA: more volatile.

Tanya Suba-Tang: Wow. Thank you so much for all that insights.

Tanya Suba-Tang: It's amazing to know what's really changed, like you said

Tanya Suba-Tang: the last eighteen months.

Tanya Suba-Tang: So I am looking forward to maybe

Tanya Suba-Tang: connect with you in the next

Tanya Suba-Tang: eighteen months and see where we

Tanya Suba-Tang: are and maybe get some more

Tanya Suba-Tang: updates.

Pooja Malik, CFA: sounds great.

Pooja Malik, CFA: Thanks for having me, Tanya.

Lindsey Helman: Thank you to this month's guest,

Lindsey Helman: Pooja Malik, for joining us

Lindsey Helman: today to discuss the emerging

Lindsey Helman: markets landscape.

Lindsey Helman: Join us next time for another

Lindsey Helman: Financial Perspectives episode

Lindsey Helman: airing on the last Tuesday of

Lindsey Helman: the month.