Fidelity Emerging Markets Limited (LON:FEML) has announced its half year report for the six months ended 31 December 2025
- During the six-month period ended 31 December 2025, Fidelity Emerging Markets Limited outperformed the benchmark
- The share price total return was +38.9% while the Net Asset Value (NAV) return was +35.5%,
- Over the same timeframe, the benchmark index, the MSCI Emerging Markets Index, returned +18.1%
- The company’s extensive ‘toolkit’ contributed positively to performance, with long and short positions adding to performance alongside smaller-cap holdings
- Long positions in materials, commodities, and gold miners also added notable value
Financial Highlights
| 31 December2025 | 30 June2025 | |
| Assets | ||
| USD | ||
| Gross Asset Exposure 1 | $1,086.0m | $1,235.3m |
| Equity Shareholders’ Funds | $692.5m | $771.6m |
| NAV per Participating Preference Share 2 | $15.55 | $11.99 |
| Gross Gearing 2,3 | 56.8% | 60.1% |
| Net Gearing 2,4 | 6.0% | 5.5% |
| GBP | ||
| Gross Asset Exposure 1,5 | £807.4m | £901.4m |
| Equity Shareholders’ Funds 5 | £514.9m | £563.1m |
| NAV per Participating Preference Share 2,5 | £11.56 | £8.75 |
| Participating Preference Share Price and Discount Data | ||
| Participating Preference Share Price at the period end | £10.66 | £7.83 |
| Discount to NAV per Participating Preference Share at period end 2 | 7.79% | 10.51% |
| Number of Participating Preference Shares in issue | 44,522,961 | 64,342,245 |
| Earning for the six months ended 31 December | 2025 | 2024 |
| Revenue Earnings per Participating Preference Share 6 | $0.12 | $0.17 |
| Capital Earnings/(Loss) per Participating Preference Share 6 | $2.79 | ($0.37) |
| Total Earnings/(Loss) per Participating Preference Share 6 | $2.91 | ($0.20) |
| Ongoing charges ratio 2 | 0.83% | 0.84% |
1 The value of the portfolio exposed to market price movements.
2 Alternative Performance Measures. See Glossary of Terms.
3 Gross Asset Exposure less Equity Shareholders’ Funds expressed as a percentage of Equity Shareholders’ Funds.
4 Net Market Exposure less Equity Shareholders’ Funds expressed as a percentage of Equity Shareholders’ Funds.
5 The conversion from USD to GBP is based on exchange rates prevailing at the reporting dates.
6 Calculated based on weighted average number of Participating Preference Shares in issue during the period.
Chairman’s Statement
In a year that began with the inauguration of the new US administration and continued with the imposition of various trade tariffs – particularly on Asian and Latin American countries – it is perhaps surprising that emerging markets significantly outperformed their developed counterparts in 2025. Indeed, the 24.4% 12-month sterling total return of the MSCI Emerging Markets Total Return Index (‘the Index’) was almost double the 12.7% total return from the US-dominated MSCI World Index. This is despite the S&P 500 Index of leading US stocks reaching no fewer than 38 new all-time highs during the year, as the rollout of artificial intelligence technologies continued to drive returns for some of its largest constituents.
In their Portfolio Managers’ Report on the following pages, Nick Price and Chris Tennant outline some of the reasons for this remarkable shift in market leadership. These include falling US interest rates and a weaker dollar (both of which are good for exporters to the US and countries with dollar-denominated debt), the commanding position of Asia in the high-tech supply chain, and a strong environment for commodities – particularly precious metals – whose production is largely based in emerging markets. For China, a large-scale stimulus package helped its equity market to post strong returns for the year – well in advance of developed markets, albeit a little behind the broader EM index.
Against such a positive backdrop, it is very pleasing to report that the Company outperformed strongly between 1 July and 31 December 2025. The net asset value (NAV) total return of 34.5% in sterling was almost double the 18.1% return of the Company’s benchmark index, while the share price total return was even better at 38.9%, reflecting a narrowing in the discount to NAV during the period. For the calendar year as a whole, a share price total return of 56.5% placed your Company among the top 10 best-performing investment trusts of the year – a list dominated by precious metals and alternative asset strategies, in which we were the only mainstream equity fund, thereby beating all other emerging (and developed) markets peers.
While all the supportive market factors outlined above fed into this very favourable period of performance for the Company, to beat a rising market so emphatically requires a high degree of differentiation. Your Portfolio Managers’ extended investment toolkit helped in this regard, with the short book having a positive impact even in a rising market.
Short positions accounted for more than 5% of the outperformance in the period under review. Certain themes also proved key in their contribution, including a large overweight in materials, concentrated in precious metals (a store of value in times of higher inflation) and copper, which is a vital component in electrification. Materials made up nearly 29% of the gross portfolio at 31 December versus just over 7% of the Index, so it is clear that holders of an index fund would not have benefited from the performance of this theme to anything like the same degree. In relation to other themes, particularly in industrials and technology, stock selection also contributed substantially.
Your Board remains committed to the advantages of active investing, especially in eras of change in market leadership, and this is an excellent example of how active investment management can enhance returns and how your Company’s go-anywhere process can deliver.
Furthermore, we remind investors that the Company’s Russian holdings remain valued at zero due to Russia’s ongoing invasion of Ukraine. While any resolution of the conflict and subsequent reinstatement of international trading in Russian stocks could therefore result in a restoration of this hidden value, we will continue to reassess our position as the situation evolves, and greater clarity emerges.
Outlook
Since the end of the reporting period, the macroeconomic and geopolitical landscape has shifted dramatically and become more volatile. This means that the outlook for emerging markets has become more uncertain in the short-term. Amid the volatility, opportunity emerges to acquire good quality businesses at particularly attractive valuations. The Board is confident that the team at Fidelity can make best use of the extended investment toolkit and, have the necessary experience to navigate these turbulent waters and we believe that despite undeniable short-term uncertainty the long-term case for investing in emerging markets remains strong.
Board composition
There have been no changes to the Board of Directors in the period under review. However, Katherine Tsang will have completed nine years’ service (the recommended maximum under corporate governance rules) in July 2026, and as such she intends to stand down at the 2026 Annual General Meeting (AGM). A search is currently under way to identify a suitably qualified individual to succeed her.
Strathclyde share repurchase
In November 2025, the Company completed the repurchase of a large shareholding (16.4 million shares) from the Strathclyde Pension Fund, equivalent to roughly 25% of the shares in issue. These shares were bought back at an agreed 14% discount to NAV and subsequently cancelled. Given the share price discount to NAV at the time of the repurchase was less than 10%, the transaction led to an immediate uplift of more than 4.5% in the NAV per share for continuing shareholders, underlining the Company’s commitment to a fair outcome for all its investors.
Discount management
During the period under consideration, the Company’s discount to NAV narrowed from 10.5% to 7.8%. While investment trust discounts in general also narrowed during the period (from 14.0% to 12.5% on average), your Board believes the Company’s below-average discount reflects a number of factors. These include the strong performance of the FEML portfolio, our differentiated investment process and the clearly growing appetite for emerging markets, Fidelity’s strong brand and clear marketing strategy and Nick and Chris’s growing presence and strong messaging in the media and at many investor events, as well as their regular insightful contributions online via our website.
However, we also recognise the importance to investors of taking direct action to limit the discount, and as such we have continued to buy back shares in the market when the discount is sufficiently wide that taking such action would have a positive impact on NAV, repurchasing 3,378,107 shares (excluding the Strathclyde repurchase), or c 5.25% of the total at the start of the Half Year, between 1 July and 31 December 2025. Since then, a further 1,866,065 shares have been bought back, and at the latest practicable date (10 March 2026), the discount to NAV stood at 7.0%.
I would also remind readers that the Company has committed to undertake a tender offer for up to 25% of its then shares in issue (excluding any shares held in treasury) should its NAV total return fail to exceed the benchmark over the five years ending on 30 September 2026. As at 31 December 2025 (nine months short of the full five-year period), the Company’s NAV total return was 8.32% ahead of that of the benchmark.
2025 AGM and final dividend
The Company held its Annual General Meeting (AGM) on 1 December 2025. The other directors and I thank you for your approval of all resolutions presented at the meeting. Once again we particularly appreciate the level of shareholder support and engagement evidenced by more than 36 million shares – a turnout of more than 75% following the reduction in the share base resulting from the Strathclyde repurchase – being voted. Shareholder enfranchisement remains a key advantage of the investment trust structure, and it is gratifying to see such a high level of engagement. At the EGM in October to consider the Strathclyde repurchase, turnout was similarly high at 76.3%, with more than 99% of votes cast in favour of the transaction.
At the AGM, shareholders approved the final dividend of $0.26 (19.80p) per Participating Preference Share, a 30.0% increase on the $0.20 (15.74p) paid in respect of FY24. The dividend was paid on 9 December 2025. Shareholders should note that the Company does not have a fixed dividend policy because income is an output rather than an aim of the investment process. Therefore, while the payout was substantially increased in respect of FY25 as a result of higher dividend receipts, there should be no expectation that future dividends will be maintained at or above this level.
The Board will review the final dividend payment for FY26 later in the year based on dividend receipts from the companies held in the portfolio.
As I write this towards the end of the third quarter of our financial year, while the rapidly changing geopolitical landscape may lead to volatility in the near term, I remain optimistic about the longer-term outlook for emerging markets. Strong underlying fundamentals, attractive valuations and supportive structural growth drivers continue to underpin the investment case. In this context, I believe the Company remains well placed to benefit from the opportunities that these markets can offer over time.
Portfolio Managers’ Half Year Review
Macroeconomic Review
Emerging markets delivered exceptional performance in 2025 and continued to rally over the last six months of the year, outperforming developed markets. The backdrop for EM remained supportive, with several interest-rate cuts from the Fed boosting sentiment, alongside the presence of a much more balanced US dollar than we have seen in recent years. Performance was supported by strong returns in several Asian markets, particularly Taiwan and Korea, which benefited from AI-related demand and emerging signs of governance reforms in Korea, whilst strong commodity prices provided a boost to commodity-exporting economies like South Africa and parts of Latin America. The renewed focus on anti-involution in China supported investor sentiment somewhat, although the market marginally underperformed over the period as weak activity data emerged towards the end of the year.
Please note the period for this investment review is 1 July 2025 to 31 December 2025. As a result, the performance review and positioning update relate to this period and therefore precede the events taking place in Middle East in early March 2026. We have, however, incorporated a forward-looking perspective in the outlook section to reflect more recent developments, but note that as this is a rapidly developing situation, the team’s views are subject to change as events evolve.
Portfolio performance: Six months to 31 December 2025
It was a strong period of performance for the investment company, which delivered net asset value (NAV) total returns of 34.5% vs. the index which returned 18.1% (GBP, net of fees). It was pleasing to see the portfolio’s enhanced toolkit have a positive effect on performance, with contributions from the long and short books, the latter notable given the market performed so well, as well as from yield enhancement. In addition to robust investment performance, there was an uplift to the NAV per share of approximately 4.5% following the conditional share repurchase conducted in Q4.
The drivers of this outperformance were broad based, with the strongest contribution coming from our materials exposure, where we have a considerable overweight. Gold miners have benefitted from the continued shift in central bank reserves away from US Treasuries, as well as strong retail demand for the precious metal, both of which underpinned the rally in the commodity. Here, some of our smaller-cap positions performed particularly well, with South Africa-focused gold miner Pan African Resources , which also has a tailings-reprocessing operation, the top performer following the ramp-up of its new mine and as its growing market cap boosted liquidity, making it a more viable alternative for gold exposure among institutional investors. West Africa-focused gold miner Endeavour Mining also rallied on rising free cash flow.
Stock picking in industrials was also positive, with one of our newer additions to the portfolio, Chinese power equipment maker Sieyuan Electric , contributing off the back of a series of strong quarterly results, underpinned by margin expansion and a rising market share. Korea’s SK Square , the holding company for memory company SK Hynix, also performed well, supported by the strong supply-demand outlook for memory, and went some way to offsetting the detraction from the underweight positioning in Korea after investor optimism around the value-up initiative drove a rally in the broader Korean market. Conversely, the short position in an Asian cathode maker weighed on returns after it rose on optimism around rising energy storage demand and a broader sector re-rating, despite no material improvement in underlying fundamentals and a weak balance sheet.
The portfolio enjoyed some of the tailwinds of AI-driven demand over the period, with stock picking in IT being another contributor to returns. Here, Taiwan’s Elite Material , a maker of copper-clad laminate, which we added to at the nadir of the post-Liberation Day tariff fallout, rose on continued strong demand supported by hyperscaler investment in data centres. There were however some notable detractors within the short book, including in an Asian memory chip designer which rallied with other legacy memory names on rising DRAM prices, despite having no exposure to this type of memory.
The exposure to financials was more challenging during the period with stock picking and the overweight positioning detracting. Kazakhstan’s dominant e-commerce and payments platform Kaspi was among the key detractors, weighed down by the market’s high interest rates, as well as some concerns around smartphone registering rules and the suspension of the dividend to fund the acquisition of a Turkish business. We see the latter two issues as largely transitory, and the inflation backdrop has started to improve, so we continue to have conviction in the stock, especially given its cheap valuation and dominant position in the local consumer finance and e-commerce segments. Broader weakness in the Indian market also dragged on some of our Indian financial positions, including SME lender Five Star Business Finance , which suffered from a regulatory push to curtail non-bank lending, although the company is still growing quickly. However, it was positive to see our underweight positioning in the Indian market offset this somewhat.
Stock picking in consumer discretionary was another weaker area during the period, driven in part by the overweight exposure to South African holding company Naspers (which holds a large stake in China’s Tencent), which underperformed as local investors rotated into precious metal stocks given strength in this segment. Polish auto parts distributor Auto Partner also fell after disappointing on margins, although some of this appears to be due to cyclical effects such as local currency strength and input deflation, and it appears that pricing conditions are likely to improve going forward.
The overall exposure to Indonesia, including stock picking and the overweight positioning in the market, also detracted amid concerns around the political backdrop and as investors re-allocated exposure to EM markets like Taiwan. However, this indiscriminate de-rating has seen many high-quality Indonesia businesses reach trough multiples, providing some excellent valuation opportunities.
Portfolio positioning as of 31 December 2025
The focus continues to be on holding long positions in well capitalised businesses with under-levered balance sheets, whilst looking for short opportunities among companies with a deteriorating fundamental outlook or with broken balance sheets.
Over the second half of 2025 the materials exposure increased, in part due to organic growth from strong performance, making it the portfolio’s most significant overweight, with exposure predominantly concentrated in copper and gold.
In copper, we are entering a decade of stronger growth, driven by EVs and related infrastructure, grid investment to facilitate the energy transition, and data centre demand, whilst a lack of greenfield discoveries and a reduction in the quality of key mining assets will lead to weaker supply growth. As at year end we held miners including Africa-focused Ivanhoe Mines , which operates one of the last high-grade copper mines in the world and which we added to opportunistically after the stock underperformed following a seismic incident that impacted production at a flagship asset.
We also like gold miners, where the market seems to have entered a new paradigm with the traditional inverse relationship with real yields weakening following the confiscation of Russian reserves and the deterioration of fiscal conditions in the West. Here, many producers are trading on attractive free cash flow yields at spot and are likely to either re-rate or get acquired given the consolidation we are seeing. We were active in managing exposure, trimming positions where the risk-reward became less attractive, such as South Africa’s AngloGold Ashanti and Pan African Resources , and reallocating to miners that had been overlooked, including South Africa-based Harmony Gold and South-America focused Aris Mining . There was also exposure to platinum via South African PGM miner Valterra Platinum , given PGMs are in deficit and elasticity of demand is very low, meaning there is scope for prices to move a long way.
We continue to have significant exposure to financials , where exposure is diversified across regions. Many smaller EM countries have oligopolistic banking structures, meaning they generate high returns on equity but trade at very low multiples, so it is an area where we see huge opportunity. Held in the portfolio are numerous value plays, including in CEE markets where several names are extremely cheap but have little sensitivity to rate cuts, such as Hungary’s OTP Bank , as well as several fintechs, including Brazilian digital challenger bank Nubank . We continued to have some exposure to structural growth stories in the Indian market as well, although we reduced some exposure to Indian banks such as HDFC and ICICI over the period due to the increase in competition in the sector. Here we are seeing state owned banks, which previously weren’t credible competitors to their privately owned peers, becoming more aggressive in credit origination, leading to greater market fragmentation.
Our exposure to information technology is focused in technology hardware with an underweight to IT services companies, which we think are under pressure from AI-related disruption. Our largest absolute position at year end was in Taiwanese semiconductor foundry TSMC , where we continue to have a very positive view, given the company is yet to flex its pricing power despite the fact that it holds a monopoly over the market. We expect TSMC to increase prices this year, creating significant upside. We also like Taiwanese copper-clad laminate producer Elite Material , an R&D focused business with high barriers to entry that is geared to data centre trends, operating in a near monopoly with a strong competitive moat. We focused on diversifying our technology hardware exposure over the period, introducing a new position in Taiwan’s Wiwynn , an ODM producer of servers focused exclusively on hyperscale customers which sold off on concerns around a near-term slowdown in demand, providing a good entry point into what we think is the best-run ODM in the sector. We were also active to take profits in stocks that had run ahead of fundamentals, exiting for example Taiwanese testing equipment manufacturer Chroma ATE after it rallied significantly from April lows, leaving the risk-reward less attractive.
At year end we had an overweight exposure to the memory space, where memory manufacturers have become far more disciplined in capital deployment with an effective oligopoly between three players supporting a strong demand backdrop with limited capacity additions and ongoing de-commoditisation of the sector. Here we hold Korea’s Samsung Electronics and SK Hynix , although over the period we trimmed these names to take some profits and shift some exposure to their holdcos ( Samsung C&T and SK Square ).
At a country level, we continue to have an underweight exposure to mainland China , although positioning vs the index at year end was more neutral when we consider exposure to Hong Kong and Naspers. Over the period we added exposure to innovative technological leaders in China, particularly to R&D-intensive names within the industrials space, which have been a key driver of the Chinese economy over the last year. Examples include grid equipment supplier Sieyuan Electric , which benefits from tight global supply-demand dynamics in high-voltage switchgear, which is prompting global customers to switch from DM competitors to Sieyuan, and is the only private company competing with a group of inefficient SOEs, and dominant battery maker CATL , which is gaining market share from Korean and European peers. We also initiated positions in Huaming Power Equipment , a leading manufacturer of tap changers, devices used in electrical transformers where demand is strong, and within the healthcare sector APT Medical , a leading domestic medical equipment supplier, where revenues should be driven by treatment penetration and China’s ageing population, compounded by localisation as the business gains market share from Western peers and a nascent export business.
Looking to other parts of the market, we remained underweight Chinese banks, a sector experiencing net interest margin compression and which at some point will face a very negative credit cycle. We have also become more sceptical on the outlook for Chinese consumption and believe it will be hard to drive a sustained recovery in Chinese housing, while much of the recovery in demand has been driven by short-term tailwinds like trade-in subsidies, which only pull forward demand. As a result, the exposure to consumer goods sectors was reduced. This has included trimming exposure to the sportswear market, including Anta Sports , where competitive rivalry is high given a fragmented market, and white goods, where we closed the position in Haier Smart Home , although we do still see stock-specific opportunities in some ‘experiences’ categories such as music streaming, where under-monetisation and a lack of competitive pressures has created a favourable backdrop for companies such as Tencent Music Entertainment . We do also continue to like South African holding company Naspers , where we see significant growth potential in its underlying asset Tencent , given the company is under-monetised vs peers, with capacity to increase its ad load and implement more targeted ads with the help of AI, which should support pricing power.
Elsewhere in Asia, we continued to have a small underweight in both Taiwan and Korea , although exposure to both markets increased during the period. In Taiwan we see multiple opportunities further down the AI supply chain, including in names such as Elite Material and Wiwynn (discussed above). In Korea, we added some holdco exposure in the memory space ( SK Square, Samsung C&T ) where we like the underlying operating business. We think that signs of governance improvement in Korea are a step in the right direction, but we remain cautious as share price moves over the period were extreme and actual improvements at the company level have so far been muted. We also added positions in Korea Investment Holdings , a brokerage platform that should benefit from greater trading activity, and Youngone , a well-run OEM for outdoor wear, with decent category exposure, considerable potential to benefit from the value-up initiative and a cheap valuation.
On the other hand, at year end we were overweight Indonesia , a country with attractive demographic tailwinds, where we added exposure to take advantage of a de-rating in the market. Here, companies like Indofoods , the world’s largest noodle business, and leading grocery retailer Alfamart , should both benefit from a rise in formal retail penetration but are trading on very cheap multiples.
In Latin America, we were overweight Brazil as at year end. Although the outcome of the 2026 election remains uncertain and the range of outcomes is wide, the market continues to trade at a deep discount vs history and could rally significantly on a favourable outcome. We believe the risk-reward looks favourable and looked to add positions in several high-quality banks. We also had an overweight position in commodity exporting countries like Mexico and Peru , where the strong outlook for commodities like copper is supportive and should filter through to the consumer, too.
Within the short book , exposure is diversified and stock-specific, with an effort to avoid crowded shorts. We typically look for two main traits: companies with fundamentals experiencing a structural or cyclical decline, and red flags around the balance sheet. Key positions include shorts in the Asian battery value chain , which form a pair trade with CATL . These companies are losing money, have weak balance sheets and a much smaller R&D budget than CATL. Elsewhere we hold several short materials positions, including an Asian agrochemical company facing a patent cliff and an EMEA agrochemicals business where the valuation is a hangover from the 2022 bull market, despite negative gross margins and high debt levels. Over the period, we introduced a short in an Asian e-commerce company , where competitive pressures are eroding profitability, and an Asian auto parts manufacturer with unsustainable debt levels, whose returns have been challenged by the commoditisation of its core business.
Outlook
The outlook for EM appears constructive. The asset class continues to benefit from a relatively strong fiscal position vs DMs, attractive valuations despite last year’s rally, and a supportive earnings backdrop, underpinned by commodity strength and AI-driven demand for key EM tech companies. That said, recent concerning events in the Middle East (as at 11 March) have clearly added complexity, increasing volatility, prompting some de-risking, and pushing oil prices higher, with potential implications for inflation. While near-term uncertainty has risen, many of the structural drivers that supported EM over the past year remain in place, although clearly volatility remains elevated, and in particular the path for inflation and interest rates has become less certain.
Taking a step back, the fiscal backdrop in EM remains supportive. The US continues to run an elevated deficit, with growing scrutiny around debt sustainability. By contrast, many EM economies have shown greater fiscal restraint in this cycle. While US policy uncertainty has weighed on appetite for US assets, key EM markets such as China have been able to shift towards reflation given constraints in previous periods. Much of the weak sentiment towards EM in recent years stemmed from the drawdown in China, but it now appears that much of what drove EM’s derating is reversing.
A weaker USD, driven in part by fiscal expansion in the US, has been supportive for EM over the past year. Clearly, higher oil prices could lift inflation and increase the likelihood of tighter Fed policy, potentially strengthening the USD, particularly in a risk-off environment. However, it is important to point out that many EM economies are now less reliant on dollar funding than in previous cycles, reducing sensitivity to USD moves.
The backdrop remains favourable for key mined commodities, particularly for copper and gold, supporting terms of trade and domestic demand in exporting markets such as Peru, Chile and South Africa. While lower oil prices had previously provided an additional boost to consumption, the outlook here is more uncertain and depends heavily on the duration of the conflict – persistently higher prices would clearly weigh more heavily on lower-income EM countries and large Asian oil importers.
Technology is another tailwind for EM, and one that is likely to persist despite geopolitical turbulence. While AI enthusiasm has driven US equity performance in recent years, critical parts of the AI supply chain sit in EM, particularly in Taiwan and Korea, and we continue to think that much of the value accrual from AI and data centres will go to EM companies. We see more attractive valuations across the hardware ecosystem in these markets, where EM companies trade on materially lower multiples than DM peers.
EM as an asset class is not without risks, and recent developments in the Middle East underscore the need for continued vigilance. We are closely monitoring both the macro and geopolitical backdrop and company-specific implications.
Nick Price
Chris Tennant
Portfolio Managers, Fidelity Emerging Markets Limited
12 March 2026
