Emerging markets at a capital allocation inflection point?

Emerging markets have historically lagged the US in part because rising share counts diluted earnings growth, especially once translated into US dollars. That dilution drag is now starting to ease as major Chinese internet platforms and leading South Korean companies shift from net issuance toward sustained buybacks and more shareholder-friendly capital allocation.

Strong balance sheets, solid cash generation and policy support in Korea suggest this may be more than a cyclical response, although rising AI investment needs could temper buyback momentum. The trend remains uneven across regions, with continued issuance elsewhere and ongoing risks around governance and share-based compensation.

If improving capital discipline endures, EM investors may see stronger EPS compounding, better alignment between corporate growth and shareholder returns, and a potential narrowing of the valuation gap versus developed markets over time.