Emerging Markets Opportunities Commentary | 2Q 2026

Author

Alice Popescu, CFA, CMT, DMS

Analyst & Portfolio Manager

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07-15-2026

Dear Investor,

As Mark Twain once said, “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” This quarter, the “majority” was easy to identify. Roughly 90% of the MSCI EM Index’s returns came from semiconductors and tech hardware, and over 70% came from just three stocks. As the market considers the implications of this unprecedented level of concentration, we have been more deeply investigating several considerations receiving less attention – commodity price exposure, peak-cycle earnings, and borrowed money.

Our curiosity and investigative discipline shapes what we own and how the portfolio is built. We have exposure to the technology theme, including memory, but we are selective – avoiding the commodity producers whose pricing power we believe to be cyclical rather than structural. Across industries, we are focused on companies with some of the sturdiest balance sheets we have seen in EM in years, built to withstand higher-for-longer rates. In both cases, durability designed, not declared.

The MSCI EM Index gained 24.1% this quarter, as measured in US dollars.ⁱ Against this backdrop, and amidst the narrow market leadership driven by a small subset of companies (Chart 1), the Altrinsic Emerging Markets Opportunities portfolio underperformed, gaining 12.1% gross of fees (11.8% net).

Technology: Investing in the Theme, Owning It Differently

History suggests that stock market returns powered by a highly concentrated market are rarely sustainable over the long term. Across four decades, rising returns on invested capital have driven EM technology companies to grow their balance sheets in pursuit of that opportunity, only for surging asset growth to push industry returns back down toward the cost of capital as capacity normalizes – most starkly illustrated during the dot-com build-out. Now, forecasted returns on invested capital sit at record highs just as capital intensity accelerates. Technology hardware is capital intensive and highly cyclical. The current cycle has surpassed previous peaks and duration, with powerful driving forces that are susceptible to change. In light of this, and consistent with our long-term perspective, we seek undervalued technology companies that compound quietly through multiple cycles (Chart 2), applying the same balance sheet lens we use for all emerging market businesses. By doing so, we accept that we might be out of step when a single trade dominates the tape, as it has this quarter (Chart 3).

1. Separating Cyclical Benefits from Structural Advantage

We believe the market is conflating short-term pricing power (created by explosive growth in demand and an exceptional supply shortage) with genuine structural innovation. Today’s supernormal profitability reflects scarcity as much as technological leadership, making it difficult for many companies to sustain current returns on invested capital as supply normalizes. That is why we choose to be positioned differently. We prefer businesses with unique technology, recurring demand, and defensible market positions over those reliant on commodity pricing. Our technology exposure spans companies involved in semiconductor testing, uninterruptible power, cabling and connectivity, printed circuit boards and chip substrates, PCs and smartphones, and servers – much of the critical infrastructure that allows AI to function (Table 1).

We have owned Samsung since the inception of the Altrinsic Emerging Markets Opportunities strategy over five years ago; our concern is not memory companies themselves, but rather the current tendency to treat peak-cycle economics as permanent. Meanwhile, a concentrated position in South Korean memory stocks like SK Hynix is, in our view, a single commodity bet, as Chinese competitors are closing the gap every quarter, adding further pressure. South Korea’s financial services regulator publicly expressed regret¹ for approving leveraged single-stock ETFs on the two memory makers, products that pushed retail margin lending to a record $40 billion USD. When a regulator laments the speculation built on two stocks, we take note.

2. The Bar for Memory Earnings is Exceptionally High

Commodity DRAM contract prices are up over 600%; every prior surge ended in 50–60% drawdowns. EM semiconductor stocks may, in aggregate, appear cheap on a forward profit margin basis, but we believe those expectations are exceptionally high as that view assumes sales nearly triple between 2025 and 2028 and profit margins sustain at 2-3x their long-term average (Chart 4). Hitting that bar would require multi-year linear growth in an industry defined by short, sharp cycles – even when the long-term structural trend is intact. The real threat of accelerating Chinese competition further exacerbates the challenge. We are looking for businesses where normalized, through-cycle earnings compound. Memory, by contrast, tends to destroy capital at the trough.

3. China is Closing the Gap, One Qualification at a Time

We see Chinese competition as a clear emerging threat, not a tail risk.² China’s leading memory players, CXMT³ and YMTC, already hold about 10% of the global DRAM market share. Apple has requested permission to buy from these ‘blacklisted’ Chinese companies, and should they receive it, others may not be far behind.⁴ When the world’s most powerful component buyers formally approve Chinese memory manufacturers, excess supply is likely to follow, severely hampering the incumbents’ pricing power.

4. Where Compounding Meets Quality Multiples

Businesses like Chroma ATE (test and measurement), Advantech (industrial computing and edge AI), Sinbon (electrification and electronification cabling), and Tripod (printed circuit boards) earn through the cycle with recurring demand, defensible niches, and no commodity price exposure. We believe the compounding math favors them over producers that are hostages to a spot price over the long-term. This shows up directly in our bottom-up driven positioning: hardware and equipment – including the multi-cycle businesses above – represent 84% of our technology holdings versus 38% for the index; semiconductors are 8% versus 60%; and software services are 8% versus 2%, driven by enterprise digitization rather than AI capex.ⁱⁱ The result is exposure to the AI theme’s higher-quality expression, at multiples that do not demand perfect cycle timing.

We believe our emerging markets technology exposure is differentiated in both composition and philosophy. Memory giants like SK Hynix are raising record capital to spend record sums, right at the point in the cycle when capex goes from celebrated to questioned.^5,6 Rather than chase peak-cycle memory economics, we favor the infrastructure layer underpinning AI, businesses with recurring demand and defensible niches, and valuations that do not assume flawless cycle timing – while remaining clear-eyed about the competitive threat China’s domestic champions pose to incumbent pricing power. As of this writing, despite an underweight positioning in the tech sector overall (Altrinsic EM Opportunities 22.6%; MSCI EM Index 45.3%), we are invested in thirteen tech businesses, including ten in Taiwan and many off the beaten path (see Table 1 for details).

Sturdier by Design: EM Balance Sheets in a Higher-Rate World

Last quarter, we argued EM financial institutions had quietly become better run, better capitalized, and more durable than credited. This quarter, we widen the lens outside financials: interest rate pressure persists, but EM companies carry less debt and longer maturities, invest without stretching their balance sheets, and earn financial productivity through operating profitability, not leverage. This balance sheet progress is also reflected by EM corporate credit spreads, which are near all-time lows.

Inflationary pressures driven by surging memory prices, the Middle Eastern conflict, and other factors have paused the anticipated global interest rate-cutting cycle. Markets that entered 2026 expecting meaningful EM easing now price in broadly flat rates, with energy-importing Asia pricing roughly 36 bps of hikes.

Still, relative to DM, the inflation differential in EM countries remains near decade lows. By the end of the quarter, oil prices had retreated, but a continuation of geopolitical volatility is keeping interest rate risk elevated. The difference this cycle: EM companies confront it with the sturdiest balance sheets in years.

EM companies carry less debt than legacy concerns imply; net debt/EBITDA hovers near historic lows (Chart 5), and interest coverage is at 7-8x, with debt mostly in local currency. Debt maturity management tells the same story: short-term debt is down to around 40% of the total (Chart 6), reducing rollover risk precisely when it matters.

This balance sheet discipline has not come at the expense of growth. Capex/D&A⁷ has fallen from above 2.0x to roughly 1.35x (Chart 7), indicating EM companies continue to invest. But they have done so prudently, as goodwill⁸ remains just 0.3% of assets despite also pursuing acquisition-supported growth.

The source of returns on equity (ROEs) matters as much as the levels. ROEs have expanded over the past decade on the back of better profitability and operating quality. Asset turns are near decade highs while leverage peaked pre-pandemic. ROEs from asset productivity are durable, while those from leverage are not.

Our portfolio sits at the deep end of this quality upgrade. It has demonstrated a persistent ROE premium of roughly 150-200 bps for most of the past five years (Chart 8), with approximately 30% lower earnings volatility (Chart 9). It earns more…and more consistently…without extra leverage. The portfolio matches the index on balance sheet quality and has interest coverage of 14.4x, while delivering higher dividend and free cash flow yields at a meaningfully lower P/E (Table 2).

The bottom line: Today’s MSCI EM universe reflects a clear quality upgrade with higher margins and stronger ROEs from operating efficiency, rather than borrowed money, as well as falling balance sheet risk. Our portfolio holds the sharper end of that upgrade. Low debt. Longer maturities. Better financial productivity. In a world where interest rate risk refuses to retire, this is the resilience we want to own.

Performance Review and Investment Activity

The greatest sources of positive attribution this quarter were health care (Richter Gedeon), energy (Petronet), and real estate (Vinhomes). Negative attribution came primarily from our relative underweight exposure to, and positions in, information technology (Samsung, Tata Consulting Services, HCL Technologies), consumer staples (Raia Drogasil, China Resources Beer, Sumber Alfaria), and industrials (Grupo GPS, Corporacion America Airports SA, Motiva).

From a geographic perspective, gains in China (Lenovo, Tencent, Airtac) and the Philippines (International Container Terminal Services), as well as our underweight positioning in Saudi Arabia were sources of positive attribution. These were offset by our underweight and specific exposure to South Korean companies (Samsung, Silicon2, Krafton) as well as not owning SK Hynix; some of our Indonesian stocks that remained under pressure due to a regulatory hurdle from MSCI ratings as well as government policies and a weaker currency (Telkom Indonesia, Bank Mandiri, Sumber Alfaria); and our exposure to Brazil (Raia Drogasil, Grupo GPS, B3 SA – Brasil, Bolsa, Balcao).

Portfolio activity was low, as we exited two positions. In Brazil, we sold Banco Itaú as valuations surpassed our most optimistic medium-term return scenarios. In China, we sold China Resources Gas in favor of better risk-reward opportunities elsewhere in the portfolio. We trimmed several information technology holdings which reached our bull-case scenarios as AI enthusiasm surpassed historic levels, and we reinvested in Brazilian holdings that reported solid results but lagged on macro concerns including slower rate cuts and rising political volatility.

Concluding Remarks

“Quality without results is pointless. Results without quality is boring.” – Johan Cruyff

Johan Cruyff, the Dutch football player-turned-manager who won eleven major championships as a manager, scouted talent wherever it lived, championing stars from Bulgaria and Brazil when rivals looked only to Europe’s traditional powerhouse countries. We invest much the same way, pursuing quality companies wherever they are found – our version of ‘total football’⁹ on the EM pitch. Further, our discipline forces us to discover what sits beneath any result (whether earnings are at cycle peaks, pricing power can last, or returns on capital rest on leverage), as we look for quality, rather than lucky outcomes. We seek to own businesses that earn through the cycle, not just at its crest, built on what we believe are the sturdiest EM balance sheets in years.

Sincerely,

Alice Popescu

¹South Korea market watchdog offers rare mea culpa over leveraged ETFs – Reuters, 22 Jun 2026.
²Apple interest thrusts China’s CXMT into memory chip spotlight – Financial Times, 8 July 2026.
³ChangXin Memory Technologies (CXMT), China’s largest DRAM maker; Yangtze Memory Technologies Corp (YMTC), largest NAND flash maker.
⁴Apple seeks to buy memory Chips from blacklist Chinese company – Financial Times, 26 Jun 2026.
⁵SK Hynix announces plans to double capacity to ease memory crunch – Bloomberg, 2 Jun 2026.
⁶Can hyperscalers justify their huge AI capex? – CNBC, 13 Feb 2026.
⁷Depreciation & Amortization
⁸Goodwill is an intangible asset that appears on a buyer’s balance sheet after they acquire another company. It represents the premium paid over the fair market value of the target company’s net assets. Source: Investopedia.
⁹Total football is a tactical system in association football in which any outfield player can take over the role of any other player in a team. A player who moves out of his position is replaced by another from his team, thus retaining the team’s intended organizational structure. In this fluid system, no outfield player is fixed in a predetermined role; anyone can successively play as an attacker, a midfielder and a defender.

ⁱ Performance is presented gross and net of management fees for the composite and includes the reinvestment of all income. Gross returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. Net of fee performance was calculated using the highest applicable annual management fee of 0.85% applied monthly. Prior to July 1, 2025, the highest management fee applied was 0.95%. All performance and attribution commentary is in USD, unless otherwise specified. Policies for valuing investments, calculating performance, and preparing GIPS reports are available upon request. Past performance is not indicative of future results. The outlook and opportunities noted throughout this letter are the opinions of Altrinsic as of the date of this letter. There is no guarantee that we will be successful in implementing investment strategies that take advantage of such perceived opportunities or that any investment in the securities discussed will be profitable. Please see Important Considerations and Assumptions at the end of this letter for additional disclosures. Data sourced from FactSet, MSCI, Bloomberg, and Altrinsic research.

ⁱⁱ Comparing holdings in a representative fully discretionary account in the Altrinsic Emerging Markets Opportunities strategy against the MSCI Emerging Markets Index, as of 06/30/26. Altrinsic independently analyzes each security recommended for purchase and categorizes it into the MSCI GICS sector that it deems most appropriate. Altrinsic’s sector classification may differ from MSCI.

GIPS Report – Altrinsic Emerging Markets Opportunities Composite

N.A. – Information is not statistically meaningful due to an insufficient period of time.

N.A.¹ – Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. *Results shown for the year 2021 represent partial period performance from April 1, 2021 through December 31, 2021. The composite inception date is 1 April 2021.

** EM Strategy AUM is 46m USD as of 2022, however two accounts were excluded from this Composite in December 2022 since there was a significant cash flow of over 40%. Both the accounts were added back in the Composite in Jan 2023.

The Altrinsic Emerging Markets Opportunities Composite is a diversified (typically between 60 – 90 holdings), bottom-up, fundamental, value oriented, Emerging Market focused portfolio, benchmarked to the MSCI Emerging Markets (Net) Index. The MSCI Emerging Markets (Net) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets. Portfolios in the composite may invest in countries that are not in the MSCI Emerging Markets (Net) Index. The Altrinsic Emerging Markets Opportunities Composite invests in all capitalizations with no stated caps on small and mid-cap companies. Additional information is available upon request. The minimum account size for this composite is $5 million. Returns include the effect of foreign currency exchange rates.

Altrinsic Global Advisors, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS Standards. Altrinsic Global Advisors, LLC has been independently verified for the periods from December 8, 2000 through December 31, 2024.

A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as w ell as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. The Altrinsic Emerging Market Opportunities Composite has had a performance examination for the periods beginning April 1, 2022 through December 31, 2024. The verification and performance examination reports are available upon request.

Altrinsic Global Advisors, LLC is a registered investment adviser. A list of all composite and pooled fund investment strategies offered by the firm, with a description of each strategy, is available upon request. The type of portfolios in which each strategy is available (segregated account, limited distribution pooled fund, or broad distribution pooled fund) is indicated in the description of each strategy.

Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Composite policy requires the temporary removal of any portfolio incurring a client initiated significant cash inflow or outflow of at least 40% of portfolio assets. The temporary removal of such an account occurs at the beginning of the month in which the significant cash flow occurs and the account reenters the composite after the first full month under management if fully invested. Additional information regarding the treatment of significant cash flow s is available upon request. Composite performance is presented net of foreign withholding taxes on dividends, interest income, and capital gains. Withholding taxes may vary according to the investor’s domicile. The MSCI Emerging Markets (Net) Index deducts withholding tax by applying the maximum rate of the company’s country of incorporation applicable to non-resident institutional investors. Past performance is not indicative of future results.

The US dollar is the currency used to express performance. Returns are presented gross and net of management fees and include the reinvestment of all income. Gross returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. Net of fee performance was calculated using the highest applicable annual management fee of 0.85% applied monthly. Prior to July 1, 2025 the highest management fee applied was 0.95%. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. Policies for valuing investments, calculating performance, and preparing GIPS Reports are available upon request.

The investment management fee schedule is 0.85% on the first $25 million, 0.75% on the next $50 million, and 0.65% on the remainder. Some accounts may pay incentive fees. Actual investment advisory fees incurred by clients may vary.

The Altrinsic Emerging Markets Opportunities Composite was created and incepted April 1, 2021.

Important Considerations & Assumptions

This presentation has been prepared solely for informational purposes and nothing in this material may be relied on in any manner as investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you.

All information is to be treated as confidential and may not be reproduced or redistributed in whole or in part in any manner without the prior written consent of Altrinsic Global Advisors, LLC (“Altrinsic”). The information contained herein shall not be relied upon as a primary basis for any investment decision, including, without limitation, the purchase of any Altrinsic products or engagement of Altrinsic investment management services; there is no and will be no agreement, arrangement, or understanding to the contrary.

This material has been prepared by Altrinsic on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. However, no assurances or representations are provided regarding the reliability, accuracy or completeness of such information and Altrinsic has not sought to independently verify information taken from public and third party sources. Altrinsic does not accept liability for any loss arising from the use hereof. Any projections, market outlooks or estimates in this document are forward-looking statements and are based upon certain assumptions. Due to various risks and uncertainties, actual events or results, or the actual performance of any investment or strategy may differ materially from those reflected or contemplated in such forward-looking statements. Except where otherwise indicated, the information provided, including any investment views and market opinions/analyses expressed, constitute judgments as of the date of this document and not as of any future date. This information will not be updated or otherwise revised to reflect information that subsequently becomes available, or changes in circumstances or events occurring after the date hereof.

The data and information presented is based on representative accounts and is for informational and illustrative purposes only. Individual client data and information may vary based on different objectives for different clients. This material does not constitute investment advice and should not be viewed as current or past recommendations or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. Any documents describing Altrinsic’s products or services shall not constitute an offer to sell or a solicitation to buy the securities from any person in any jurisdiction where it is unlawful to do so. Any specific investments referenced may or may not be held by accounts managed by Altrinsic and do not represent all of the investments purchased, sold or recommended for client accounts. Readers should not assume that any investments in securities described were or will be profitable. There are no guarantees that investment objectives will be met. Investing entails risks, including possible loss of principal. Altrinsic may modify its investment approach and portfolio parameters, in the future, in a manner which it believes is consistent with its overall investment objective of long-term capital appreciation and reduced risk.

Past performance is not a guide to or otherwise indicative of future results. No representation is being made that any account will or is likely to achieve future profits or losses similar to those shown. Any investment results and portfolio compositions are provided for illustrative purposes only and may not be indicative of the future investment results or portfolio composition of any account, investment or strategy managed by Altrinsic.

Disclosure of Risk Factors: An investment in any account, investment or strategy is speculative and involves a significant degree of risk, which each prospective investor must carefully consider. Returns generated from an investment in any account, investment or strategy may not adequately compensate investors for the business and financial risks assumed. An investor in any account, investment or strategy could lose all or a substantial amount of his or her investment. Before making an investment, prospective investors are advised to thoroughly and carefully review any disclosure documents with their financial, legal and tax advisors to determine whether and investment is suitable for them.

Additional Performance Disclosure – Use of Benchmarks: Benchmarks are provided for illustrative purposes only. Comparisons to benchmarks have limitations because benchmarks have volatility and other material characteristics that may differ from the accounts, investments or strategies managed by Altrinsic. Because of these differences, benchmarks should not be relied upon as an accurate measure of comparison.

Important Disclosures with Respect to Australia: These materials are not, and under no circumstances are to be construed as, a prospectus, an offering memorandum, an advertisement or a public offering of any securities described herein in Australia or any province or territory thereof. Under no circumstances are these materials to be construed as an offer to sell securities or as a solicitation of an offer to buy securities in any jurisdiction of Australia. Altrinsic Global Advisors, LLC is regulated by the US Securities and Exchange Commission (SEC) under US laws which differ from Australian laws, however, Altrinsic Global Advisors, LLC is exempt from the requirement to hold an Australian Financial Services License (AFSL) under the Corporations Act in respect of financial services it provides to wholesale clients only in Australia.

Certain information contained herein (the “Information”) is sourced from/copyright of MSCI Inc., MSCI Solutions LLC, or their affiliates (“MSCI”), or information providers (together the “MSCI Parties”) and may have been used to calculate scores, signals, or other indicators. The Information is for internal use only and may not be reproduced or disseminated in whole or part without prior written permission. The Information may not be used for, nor does it constitute, an offer to buy or sell, or a promotion or recommendation of, any security, financial instrument or product, trading strategy, or index, nor should it be taken as an indication or guarantee of any future performance. Some funds may be based on or linked to MSCI indexes, and MSCI may be compensated based on the fund’s assets under management or other measures. MSCI has established an information barrier between index research and certain Information. None of the Information in and of itself can be used to determine which securities to buy or sell or when to buy or sell them. The Information is provided “as is” and the user assumes the entire risk of any use it may make or permit to be made of the Information. No MSCI Party warrants or guarantees the originality, accuracy and/or completeness of the Information and each expressly disclaims all express or implied warranties. No MSCI Party shall have any liability for any errors or omissions in connection with any Information herein, or any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. (www.msci.com)

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Emerging Market Opportunities

Quarterly Letter

Emerging Markets Opportunities Commentary | 2Q 2026

Alice Popescu, CFA, CMT, DMS

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