Goldman Sachs EM Weekly Kickstart: MSCI EM Fell 1.4% Amid Momentum Unwind and Software Sell-Off
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For the week ending February 6, 2026, the MSCI Emerging Markets (EM) Index declined by 1.4%, pressured by a broad drop in global risk appetite, a significant reversal in momentum factors, and a software sector sell-off. Foreign investors pulled a net 9.3 billion dollars out of EM equities, with South Korea seeing outflows of 7.5 billion dollars and Taiwan 3.3 billion dollars. Conversely, India attracted 800 million dollars in net inflows. China and South Korea lagged, while India led major markets.
The momentum factor experienced a sharp unwind globally, heavily impacting South Africa, Latin America, and North Asia. The global software sector tumbled nearly 20% year-to-date due to AI disruption fears, though EM tech stocks showed relative resilience, falling only 5%.
Approximately 18% of EM companies, representing 39% of the market cap, have reported fourth-quarter results broadly in line with expectations. Communication services and healthcare delivered positive surprises, while materials and real estate missed estimates. The 2026 EPS estimates were revised upward by 3.1% week-over-week, primarily driven by South Korea.
Currently, the MSCI EM Index trades at 12.8 times its 12-month forward price-to-earnings ratio, which is 0.9 standard deviations above its 10-year average. Goldman Sachs maintains a procyclical stance, favoring tech and AI-related sectors, metals and mining, and real estate.