Emerging Markets: Emergent Leaders

Emerging markets are experiencing a significant technical breakout driven by AI hardware dominance in North Asia, rising commodity prices, and US dollar weakness. The iShares MSCI Emerging Markets ETF has reached new all-time highs, signaling a potential long-term trend reversal against US equities.

Key Takeaways

• 1.Emerging markets are benefiting from a confluence of three major trends: robust demand for AI hardware, rising commodity prices, and a softening US dollar.
• 2.The composition of the MSCI Emerging Markets Index has undergone a structural shift, with Taiwan now the largest country weighting at nearly 25%, surpassing China.
• 3.Technical analysis indicates a major trend reversal in EM relative performance versus the S&P 500, breaking a bearish trend that has persisted since 2010.

Table of Contents

• EM outperform
• Higher commodity prices and US dollar uncertainty are typical tailwinds for emerging markets
• The Emerging Markets ETF (EEM-US) has resumed its uptrend to reach fresh all-time highs
• Moreover, the EM relative performance trend vs the US signals a significant shift in trend
• Does China still dominate EM benchmark composition?
• Focus on the big three: Those regional markets with the heaviest weighting
• (1) Taiwan: TAIEX
• Semiconductor Manufacturing Co., Ltd. (2330-TW)
• (1) China: Hang Seng
• Focus on Alibaba Group Holding Limited (9988-HK)
• (3) South Korea Kospi
• Focus on Samsung Electronics (005930-KR)
• Focus on SK Hynix Inc. (000660-KR)
• A new era for emerging markets?

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