Asian tech stocks shine amidst geopolitical gloom as emerging markets welcome four consecutive gains
Despite the escalating geopolitical risks in Europe and the Middle East, the strong performance of Asian tech stocks has driven emerging market equities to achieve a four-day winning streak, with the MSCI Emerging Markets Index rising by 0.8%, reaching a four-year high. Taiwan Semiconductor's sales growth of 34% has boosted its stock price. Market optimism regarding a weaker dollar and expectations of interest rate cuts by the Federal Reserve is also on the rise. Poland's stock market sentiment is affected by the drone incident and increased bank tax rates, while the risk of escalating conflicts in the Middle East has increased, but the new shekel has rebounded against the dollar
According to Zhitong Finance APP, despite the ongoing geopolitical risks in Europe and the Middle East, the strong rally of Asian tech stocks has created a hedge, driving emerging market stocks to achieve the longest four-day consecutive rise since June.
Data shows that the MSCI Emerging Markets Index rose by 0.8%, reaching a four-year high, with Taiwan Semiconductor (TSM.US) contributing about a quarter of the gains. The company's stock price soared to a record high after management announced a 34% increase in August sales, highlighting the continued global demand for cutting-edge artificial intelligence (AI) chips.
"Since September, emerging market stocks have gained significantly, mainly due to the optimistic sentiment in the Asian tech sector, while expectations of a weaker dollar and the Federal Reserve's impending interest rate cuts are also heating up," said Nenad Dinic, emerging markets equity strategist at Zurich Cantonal Bank.
He added, "In addition, the uncertainty surrounding U.S. tariff policies has largely subsided, providing support for stable capital inflows."
The overall movement of the emerging market currency index was relatively stable, with the New Taiwan Dollar leading the gains, while Eastern European assets performed poorly. Following Poland's downing of several cross-border drones during Russia's airstrikes on neighboring Ukraine, the Polish Zloty fell more than 0.5% against the Euro, and stocks listed on the Warsaw Stock Exchange also performed poorly.
"The Polish government's previous announcement to raise the banking tax rate has negatively impacted domestic market sentiment, and the occurrence of this drone incident may further exacerbate this pessimistic atmosphere," pointed out Adnan El-Araby, Chief Manager of the Baillie Gifford Emerging Europe, Middle East and Africa Opportunities Fund.
In the Middle East, Israel's attack on Hamas leadership in Qatar this week drew criticism from the United States and heightened the risk of escalating conflicts in the region. However, the impact of this event on the market has been mixed: among emerging market assets, some Israeli dollar bonds performed poorly, while the New Israeli Shekel rebounded against the dollar on Wednesday.
In Southeast Asia, Indonesia's newly appointed Finance Minister Sri Mulyani Indrawati pledged to keep the fiscal deficit within the statutory limit of 3% of GDP, leading to a rebound in various Indonesian assets
