Emerging Markets Stage Strong Rally as South Korea Surpasses France in Global Stock Rankings

Emerging Markets Continue to Surge

Key Figures:

• $3.76 trillion: South Korea's stock market valuation
• 44%: Kospi index gain this year
• 15%: Year-to-date gain for MSCI's emerging stock index
• 2.6%: MSCI's technology sub-index gain on Wednesday
• 1.3%: MSCI's emerging stock index gain on Wednesday

Market Update

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Emerging-market stocks and currencies continued their upward trend on Wednesday, with the South Korean bourse reaching a new high to become the world's ninth largest, surpassing France and Germany. This milestone was driven by the latest Asian tech gains, as well as the rebound of Indian information technology shares. The Citrini Research report predicting widespread job losses linked to AI adoption had previously caused a decline in IT shares, but the relief came after Anthropic PBC announced that its Claude chatbot integrates rather than displaces existing systems.

Tech Spending Drives Growth

Tech shares in Taiwan and South Korea are benefiting from increasing tech spending, with MSCI's technology sub-index rising 2.6% on Wednesday. Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. led the gains, driving the MSCI emerging stock index to a 1.3% increase and a new record high. This extends year-to-date gains to 15%.

Currency Gains

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Emerging currencies also extended their gains, with the dollar remaining under pressure. The Korean won rallied 0.4%, bolstered by equity inflows, while China's onshore yuan extended its longest winning streak in over 15 years. The Thai baht underperformed after a surprise rate cut by the Bank of Thailand.

Expert Analysis

Bank of America strategist Mikhail Liluashvili argues that there is room for the rally to continue, citing the US administration's desire for a more competitive currency. He notes that previous dollar downcycles have seen EM local debt and equities rally 100%, suggesting two-thirds of the rally could still be ahead.

Regional Performance

The Hungarian forint gained the most in the EMEA region, after a poll showed the opposition Tisza party widening its lead over Prime Minister Viktor Orban's ruling Fidesz. The forint touched Nov. 2023 highs against the euro, benefiting from the central bank's pledge to remain cautious on policy. In South Africa, the rand firmed 0.4% against the dollar, while 10-year bond yields ticked marginally lower ahead of Finance Minister Enoch Godongwana's annual budget.