Investing in Asia and Emerging Markets: Is now the time to (micro) chip in?
Global stock markets have been boosted by excitement around the potential power and value of Artificial Intelligence (AI).
Many investors will be familiar with the names of the largest US technology companies whose share prices have been on a strong run, but these giants are now looking more richly valued. The global AI industry is still in its infancy, and like many new technologies, change will offer different opportunities and risks for investors.
Rob Mansell, Portfolio Manager at Barclays, explores why investors looking to capture the AI theme outside the US may want to consider looking towards Asia for fresh ideas.
Look below the surface
Every day we benefit from the incredible scientific achievements in making computer chips smaller and more powerful. But we could not have come this far without key industries and companies in Asia, which is home to companies that produce the parts inside our phones and laptops and supply the tools or materials that are essential to create these tiny components.
The chips inside our electronic devices contain billions of tiny switches, transistors, that are invisible to the human eye. Just one square millimetre on a chip can be home to 200 million transistors. Making chips this small means working at the cutting edge of what is possible. There are very few companies in the world who can manage this incredibly delicate process. Most of the companies capable of producing enough of these tiny powerful chips for our smartphones are based in Asia. Without these key industries based in Taiwan and South Korea, we simply wouldn’t have semiconductor chips or smartphones.
Is Chinese AI overlooked by investors?
In January 2025, a Chinese company released a new AI reasoning model which beats or matches the performance of the best performing models developed by the U.S. technology giants. This created uncertainty in markets around what may be achievable by rivals and put Chinese technology companies back on the radar of many investors.
There are certainly challenges to be braved for investors in a rapidly evolving market like China. However, for investors looking to diversify beyond large positions in the U.S., China could offer new long-term opportunities. Despite its challenges, China is home to world-leading companies across key industries like consumer electronics, wind turbines, and electric vehicles – industries that are likely to be essential in the future.
Emerging markets explained
Asia is the largest region in the so-called emerging markets, and it remains attractive for long-term investors who are looking for diversification in their investment portfolio. An emerging market is one of a developing nation with a fast-growing economy. Emerging markets in this region, from India to Indonesia have large and growing populations, more people joining the middle class, and a rising demand for new products and services on which people and businesses could spend their money. This story underpins opportunities in tech, consumer brands and more, as companies look to grow and even expand globally.
It’s worth remembering that investing in emerging markets is considered higher risk because of factors such as currency volatility, political uncertainty and unregulated markets.
However, as part of a globally diversified portfolio, and with a long-term investment horizon required to tolerate the inevitable volatility that comes with investing in emerging markets, an allocation to this often-overlooked asset class is worth consideration.
How to invest in Asia
Investors in a diversified Asia or Emerging Markets fund can get exposure to the largest companies (foundries) that make AI computer chips, as well as some of the most important suppliers of precision tools that are key to the production of chips.
Investing in the wide array of countries and industries that span Asian and emerging markets can be challenging, so it’s worth considering an “active” investing approach.
This means choosing a fund managed by experts who select specific companies likely to succeed and grow in their home economies.
Alternatively, investors could choose a “tracker” fund, which simply follows a broad Asia or emerging markets stock market index without focusing on specific companies.
Funds worth considering for a long-term investor portfolio
Here’s a little more detail on some of the Emerging Market funds that you can find on the Barclays Funds List.
Fidelity Asia Fund
The fund invests in companies located across the Asian Pacific Basin, excluding Japan, stretching from India and China to Indonesia and Thailand. The fund manager looks for strong companies that have potential to grow their earnings at a higher rate than the market is expecting. The fund typically invests in the shares of 60-70 companies and will have diversified exposure across sectors such as technology, financials and consumer discretionary.
Find out more
Ninety One Emerging Markets Equity Fund
This fund invests in high quality companies that are attractively valued. The fund manager also looks for ‘momentum’ – where certain industries, sectors or individual companies are receiving such strong attention from investors, that the share prices of these businesses continue to rally. The fund typically invests across sectors and countries in emerging markets.
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Barclays GlobalAccess Emerging Market Equity Fund
The fund offers diversified exposure across the different countries and sectors within emerging markets, and blends growth and value stocks which helps the fund perform in various market conditions.
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iShares Pacific ex Japan Equity Index Fund
This tracker fund tracks the performance of the FTSE World Asia-Pacific ex-Japan Index offering equity exposure to a selection of countries across the Asia-Pacific region, excluding Japan. The fund predominantly invests in large/mega cap stocks located in Taiwan, Australia and South Korea. It is mainly invested in technology and financials but can invest in all sectors.
As a tracker fund, it can never outperform the index it is linked to. The fund offers low-cost access to these markets and is an option for investors who want to diversify their portfolio globally.
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Investing in these funds may not be right for every investor. Investors should ensure that the fund’s objectives are aligned with their own before investing and that any new investment forms part of a diversified portfolio.
Find out more about diversification.
