Emerging Market Stocks Surge Towards Record Highs
The MSCI Emerging Markets Index has seen a notable rise, inching closer to its highest level ever, largely fueled by a booming artificial intelligence sector. Since April, this area has contributed roughly $10 trillion to global shareholder wealth.
As of 7:51 a.m. London time on Monday, the index increased by 1.2%, marking a record close and its most robust start to a year since 2018. A significant portion of these gains stemmed from Taiwan Semiconductor Manufacturing Co., especially after Goldman Sachs raised its price targets for suppliers linked to Apple and Nvidia. Other significant contributors include Samsung Electronics, SK Hynix, and Alibaba Group Holding Ltd.
Starting 2026 on a positive note, developing-market stocks not only posted the largest annual gains in eight years but also outperformed their U.S. counterparts in 2025—a first for this period. The upswing is bolstered by economic reforms spanning from Ghana to South Korea, alongside a declining dollar and U.S. investors looking abroad for opportunities.
Checking in on Asia, there’s a growing optimism about the future of AI and expectations for more economic stimulus from China, which are fueling investments. Asset managers are increasingly viewing this sector as undervalued.
“It certainly took a long time,” remarked Todd Thorne, a senior ETF and technical strategist at Strategas in New York. “Global ETFs usually see continued inflows to keep their allocations balanced, but many feel their exposure is quite low. So there’s definitely space for investors to boost their allocations, particularly to dilute their U.S. AI exposure.”
Emerging market stock indexes have now seen a seven-day rise, marking the longest winning streak since September 17. The year-to-date growth has reached 3%, with a valuation now at 13.4 times expected earnings—above the five-year average of 12.3 times.
However, indicators like the Relative Strength Index and Bollinger Bands, which many traders watch, suggest the index is entering overheated territory. This could mean a potential rebound is on the horizon.
“In the short term, emerging markets might stay buoyed, but the rally will likely be choppy and selective, rather than smooth,” explained Charu Chanana, chief investment strategist at Saxo Markets. “On the bright side, the momentum in Asian technology and the AI supply chain could keep pushing the index up, assuming global risk appetite holds strong.”
Traders are now searching for new catalysts to ignite the next upswing, especially as upcoming U.S. economic data and key financial results will offer insights into market health. Yet, concerns related to possible interest rate cuts by the Federal Reserve, renewed geopolitical tensions following a U.S. raid that arrested Venezuela’s leader, and various upcoming elections in Latin America have left some investors feeling a bit cautious.
