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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Harding Loevner Emerging Markets Equity 2026 Q2 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q2 2026 Letter Analysis

Harding Loevner Emerging Markets Equity Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Harding Loevner Emerging Markets Equity. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+18.92%

YTD+18.34%

Annualized+10.37%

Positioning StanceNEUTRAL

Market CapLarge Cap

GeographyAsia, Emerging markets

Digest Analysis

Quick Take

"Emerging markets delivered the strongest quarterly return since 2009, led by Taiwan and South Korea's AI supply chain dominance."

Executive Summary

Harding Loevner's Emerging Markets Equity strategy returned 19.2% gross in Q2 2026, trailing the MSCI EM Index's 24.2% rise primarily due to underweights in semiconductors and semiconductor equipment. The quarter was shaped by the continued acceleration of the global AI infrastructure boom and the US-Iran conflict. Taiwan and South Korea surged 49% and 88% respectively, driven by AI supply chain companies, while China lagged on soft domestic demand. The concentration of EM stock returns within Information Technology masks the breadth of AI-related innovation occurring among EM companies. Since DeepSeek's breakthroughs, intense competition has produced highly efficient AI models at a fraction of frontier model costs, enabling companies like Naver, Tencent, and Bochu to use AI pragmatically to improve products and expand markets while funding investments from operating cash flows. The strategy adjusted risk guidelines to provide greater flexibility in IT sector exposure, raising the sector limit to 35% and single stock limit to 8%, while maintaining its fundamental process of building a diverse portfolio across industries.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

68%

CautiousHigh

Moderate (68%)

The portfolio holds 60+ positions across diverse sectors and geographies, indicating moderate rather than extreme concentration. However, the manager demonstrates conviction through specific, sized positions: SK hynix at 5.3%, Samsung at 5.4%, TSMC at 5.8%, and Tencent at 3.8%. The letter provides detailed, company-specific thesis work on holdings like Naver, Tencent, Bochu, Silergy, Kakao, and Hoa Phat, with clear catalysts and competitive advantage analysis. The decision to adjust risk limits to allow up to 8% single-stock positions and 35% IT sector weight shows willingness to express conviction, though the manager maintains diversification discipline. The specificity of analysis and willingness to hold concentrated positions in select names justifies a score in the high-moderate range, but the 60+ position count and emphasis on diversification prevents a higher score.

Growth Outlook

65%

BearishBullish

Bullish (65%)

The manager expresses constructive optimism about the AI-driven opportunity set in emerging markets, noting that massive capital investment plans support elevated demand and that technological transformations may represent a rare step change in fundamentals. However, this is tempered by acknowledgment of market concentration risks, soft demand in China, and energy market volatility. The language 'it is possible that this is one of those rare moments' and discussion of 'strong prospect that the IT sector will continue to be a rich source of high-quality, durable-growth companies' reflects measured optimism rather than unqualified bullishness.

Risk Appetite

45%

DefensiveAggressive

Balanced (45%)

The portfolio maintains meaningful exposure to the AI theme through holdings in semiconductors and related infrastructure, but the manager explicitly acknowledges being underweight the strongest-performing areas (semiconductors and semiconductor equipment), which was the primary cause of underperformance. The decision to raise sector and single-stock limits reflects a willingness to increase exposure, but the manager frames this carefully around risk management rather than aggressive deployment. Cash remains at 4.5%, and the tone emphasizes maintaining diversification rather than concentrating into the hottest areas.

Capital Deployment

25%

De-riskingDeploying

De-risking (25%)

Cash remains at 4.5%, unchanged from typical levels. The manager added three new positions (Silergy, Kakao, Hoa Phat) and sold two (MakeMyTrip, Telkom Indonesia), representing modest rotation rather than aggressive net deployment. The adjustment to risk guidelines creates capacity for future deployment but does not represent immediate capital deployment. The language emphasizes 'flexibility' and 'discretion' rather than active deployment. This represents selective, measured activity rather than aggressive capital deployment or de-risking.

Forward Guidance

40%

CautiousExpansionary

Neutral (40%)

The manager is selectively adding positions (Silergy, Kakao, Hoa Phat) and has adjusted guidelines to allow greater IT exposure, indicating a modest deployment bias. However, the language is measured: 'there is potential timing risk' and the emphasis on 'greater flexibility' rather than aggressive action. The manager is positioning for long-term opportunities but not rushing to deploy capital aggressively. The phrase 'this added flexibility will also afford portfolio managers greater discretion' suggests optionality rather than urgent deployment.

Language Signal

50%

BearishBullish

Balanced (50%)

The letter contains balanced directional language. Bullish terms include 'strong growth outlook,' 'favorable,' 'attractive,' 'compelling,' 'enhanced return potential,' and 'long-term investment opportunities.' Bearish or cautious language includes 'potential timing risk,' 'concerns,' 'soft demand,' 'weak,' 'disappointing,' 'pressure,' and 'volatility.' The discussion of AI opportunities is constructive but not euphoric, and risks are acknowledged throughout. The net balance leans modestly positive but is far from overwhelmingly bullish.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

The manager identifies multiple specific risks with meaningful discussion: acute index concentration creating 'a more challenging environment for active managers,' potential timing risk in increasing IT exposure after strong performance, government policy uncertainty in Indonesia, weak macroeconomic conditions in China, energy market volatility from the US-Iran conflict, and concerns about AI disruption to internet platforms. The discussion of adjusting risk limits due to index concentration and the acknowledgment that 'there is potential timing risk' demonstrates clear risk awareness. However, the manager does not frame these as systemic or catastrophic risks, and the tone remains measured rather than alarmed. The risks are identified and managed rather than portrayed as existential threats.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

The manager sees a rich opportunity set, particularly in AI-related innovation across diverse EM industries. The letter highlights opportunities in semiconductors, power management, social media, steel production, and various AI applications. The phrase 'the IT sector will continue to be a rich source of high-quality, durable-growth companies in the future' and the discussion of 'breadth of AI-related innovation occurring among EM companies' indicate a broad opportunity set. The manager added three new positions during the quarter and adjusted guidelines to capture more opportunities. However, the emphasis on selectivity ('selective opportunities') and the acknowledgment of concentration risks prevent this from scoring in the highest range.

Time Horizon

72%

Short-TermLong-Term

Decade+ (72%)

The manager explicitly frames the investment case around 'long-term investment opportunities' and discusses companies that 'should ultimately enhance shareholder returns' over time. The analysis of companies like Naver, Tencent, and Bochu focuses on multi-year competitive advantages and business model evolution rather than near-term catalysts. The phrase 'we invested in these well-managed companies (in the case of Tencent and Naver, well before the recent years' rapid rise of AI)' demonstrates a multi-year holding period. However, the letter also discusses specific near-term catalysts like capacity expansions, tariff implementations, and quarterly earnings, indicating a medium-term rather than permanent capital horizon. The quarterly reporting structure and active management approach (21.4% annual turnover) suggest a 2-4 year typical holding period rather than indefinite ownership.