Country-specific drivers coming to the fore - Feb. EM/DM Leading Indicator Watch

• Our 2026 EM/DM Themes had pointed out that country-specific factors would matter more this year given the overall benign macro backdrop. This is now more noticeable with diverging growth, policy, and inflation outlooks among different economies. 
• The main DM outliers are the UK (stagflationary outlook) and Australia (inflation upside). In EM, we still like the macro setups in Brazil and Indonesia, which should benefit equities, while Korean inflation pressures keep us bullish on the KRW. 

Summary by Country:

• UK: More weak data amid stubborn inflation, stick with BoE cutting more later 
• Japan: “Impossible trinity” dynamics persist, global drop in yields offer reprieve for now 
• Australia: Resilient growth underpinned by housing, inflation remains sticky 
• Switzerland: Large current account surplus + no inflation => CHF still biased stronger 
• Brazil: Inflation falling and growth improving => stay bullish equities and bonds 
• Mexico: MXN still vulnerable ahead of USMCA 
• Indonesia: MSCI threat a catalyst for positive reforms, macro outlook still benign 
• South Korea: Inflation risks and Bank of Korea focus on FX is bullish KRW