Emerging Markets Insights: China's evolving consumer landscape

Three things we are watching

1. China’s Spring Festival: This year’s Spring Festival, or Lunar New Year, will cover a record nine days, from February 15-23, 2026. While China’s three Golden Week holidays cover 5% of the calendar year, they represent 20% of tourist spending. They drive the gifting economy, in which families and friends buy gifts ranging from a modest basket of fruits to expensive alcohol and gold jewellery. Some attractions, such as the Badaling section of the Great Wall, experience a 10-fold increase in visitors. This year’s Spring Festival is expected to witness a modest increase in consumer spending, reflecting the uneven nature of the economic recovery, as well as a state guided preference for domestic over foreign travel.
2. Korean tech surge: The MSCI Korean Semiconductor Index rose 277% in US-dollar (USD) terms during 2025.¹ The key question for investors is whether stock prices reflect all the good news, or further upside is possible. From an earnings perspective, we believe the semiconductor industry group will drive Korean information technology sector earnings in 2026, which consensus forecasts to rise 60%.² This pace of earnings growth reflects surging demand and disciplined capital expenditure (capex), which has led to a dramatic rise in memory prices in recent months, a segment of the industry in which Korean semiconductor companies specialise. While selected companies continue to restrain capex, others are pressing ahead. A US memory company recently announced a US$31 billion investment in Asia, as they forecast the increase in demand is structural as opposed to cyclical.
3. ͏͏Emerging market (EM) earnings: The 2025 EM earnings season is forecast to see a 12% increase in earnings growth, accelerating to 17% in 2026.³ The increase in expected earnings is concentrated in the technology sector, with Korean and Taiwanese information technology and Chinese consumer discretionary (platform) companies accounting for 50% of earnings growth in the year ahead. There is potential for the recovery to broaden beyond these sectors as the USD weakens and interest rates decline. Uncertainty created by tariff volatility remains a risk, but companies appear to be managing the uncertainty successfully.

Outlook

China’s consumption outlook for 2026 is expected to see moderate, albeit uneven, growth. Our China consumer analyst embarked on a visit to China and gleaned some insights on what consumer companies are doing to grow amid this backdrop. This journey generated insights that may surprise investors.

Home appliances

The analyst visited the leading home appliance company in China. This company has two main businesses—the smart home solutions (home appliances for consumers) and commercial and industrial for enterprise consumers. The latter covers areas such as energy solutions and industrial technology, intelligent building technology and robotics. 

The property market in China continues to struggle, and this encompasses both residential and commercial segments. The company our analyst visited is thus relying on less-explored forms of buildings, such as high-speed rail stations and farms, which increasingly require advanced cooling systems to prevent severe heat stress in livestock. The livestock sector is paramount to China’s stability and economic growth. China is the largest global producer of meat, eggs and milk. China ranks fifth in the world for its livestock industry strength,⁴ and the strategic importance of this industry acts as the primary catalyst for a systematic, technology-driven upgrade of farms. In January 2026, China launched an action plan to speed up agricultural modernisation over the next five years.

Beverage manufacturer

The intensifying competition among food delivery companies in China has produced an unlikely winner, in our view—energy drinks. As food delivery companies hire more delivery drivers to cope with the increased number of orders, the demand for energy drinks rises. Delivery drivers face immense pressure to deliver in the quickest time possible while undertaking long shifts, leaving them to rely on energy drinks as a replacement for meals. The caffeine content in these drinks helps to manage fatigue and maintain alertness. 

A company that our analyst views as an industry leader has even made their drinks more suitable for drivers—by having a functional cap to pour the drink into, multi-tasking as a cup. This reduces spillage and acts to protect the bottle opening from dust. The potential for further growth extends beyond delivery drivers, including longer-distance drivers such as courier, taxi and truck drivers. Another consumer group is live streamers. In China, top livestream creators hold sessions that can last from five to 15 hours daily, with longer sessions a commonplace for major shopping festivals.

Conclusion

While China’s consumption environment in 2026 may remain uneven, the insights from our analyst’s trip suggest that opportunity has not disappeared—it has simply shifted. Companies that are willing to adapt, invest patiently and look beyond traditional growth engines can find new pockets of resilience. In an uneven recovery, the bright lining lies in innovation, diversification and a long-term mindset, which may position these businesses to emerge stronger as conditions gradually improve.

Market review: January 2026

EM equities strengthened in January 2026. Equity gains within EMs resulted largely from domestic developments, as EMs collectively shrugged off geopolitical tensions around Iran, Venezuela and Greenland. For the month, the MSCI EM Index returned 8.86% while the MSCI World Index delivered a more contained 2.26%.

The emerging Asia region advanced, with most countries delivering positive performance. Equities in South Korea and Taiwan reported outsized gains as some of their largest technology corporations reported stronger-than-expected quarterly results, underscoring the positive sentiment around artificial intelligence (AI). South Korea’s defence companies also performed well, benefitting from increased military spending globally. Taiwan’s gains also benefitted from a trade deal with the United States, which will bring Taiwan’s tariff rate in line with levies on neighbouring countries like Japan and South Korea. China’s stock market also closed higher, fuelled by sustained optimism over the country’s AI advances, and notable strengths in food delivery and technology stocks on reports of an extension of an anti-involution crackdown that started in 2025.

However, Indian equities descended, as they traded against headwinds from continued outflows, disappointing quarterly earnings from several index heavyweights and stagnation in trade negotiations with the United States. While an India-European Union trade agreement had positive follow-through, this was insufficient to overcome negative sentiment from the challenges described. Indonesian equities plunged after news of a possible downgrade of the country’s stock benchmark to frontier-market status and a possible reduction of the country's weighting in various indices.

Equities in the emerging Europe, Middle East and Africa region also ended higher, taking cues from global markets. Saudi Arabian equities rose after the kingdom opened its capital markets to all categories of foreign investors to boost inflows and enacted transformative reforms to its real estate sector. The latter will create a foundation for foreign investment in Saudi real estate. Other Persian Gulf markets advanced on corporate earnings and firmer oil prices. Egyptian stocks outperformed on foreign inflows, firmer sentiment and clear signals of structural reform.

Equities in the emerging Latin America (LatAm) region advanced, with all countries registering gains. Brazil’s annual inflation rate for 2025 came in slightly lower than expected and was a welcome surprise. On the export front, Brazilian exports were resilient, brushing off months of US tariffs by expanding shipments to other major trading partners. Mexican equities rose on a combination of factors, such as a weaker US dollar and rising commodity prices.