On July 20, Citi released its outlook report for emerging market equities for the second half of 2026 on July 19, focusing on whether market performance will shift from a narrow lead by technology stocks to a broader 'expansion'. The report noted that while the MSCI Emerging Markets Index has performed strongly year-to-date, returns have been highly concentrated in technology stocks from South Korea and Taiwan. With macro data showing signs of cyclical improvement and increased volatility in AI trading, the market is positioned for broader expansion. In terms of allocation, Citi upgraded its rating for China to 'overweight', citing its reasonable valuations, light positioning, and potential benefits from global growth improvements and a low oil price environment. At the same time, it tactically downgraded South Korea to 'neutral' to address high volatility but maintained an 'overweight' rating for Taiwan due to its core position in the AI supply chain and strong earnings outlook. Additionally, Mexico's rating was upgraded to 'neutral'. Citi maintains an optimistic view on the MSCI Emerging Markets Index, setting a year-end target price of 1870 points (approximately 12% upside) and a mid-2027 target price of 2050 points. Despite short-term volatility related to AI themes, Citi still recommends maintaining a core overweight position in AI/technology over a 6-12 month horizon while looking for potential opportunities in sectors like industrials and healthcare that are adopting AI.