EM Stocks Set for Worst Week Since April as AI Concerns Spread
EM stocks are staging a dramatic reality check, ending a strong run with their worst weekly performance since April. Despite earlier optimism fueled by AI-driven tech rallies, emerging market equities, especially in Asia, are now reeling under concerns about overvaluation, uncertainty in AI investment returns, and looming caution from the Federal Reserve on interest rates. It seems AI’s promise is both a blessing and a burden, sparking a selloff reminiscent of Wall Street’s recent jitters. Investors are evidently debating whether this is just a sharp but temporary pullback or a signal for more turbulence ahead.
This nervousness has translated into a significant 2% dip in the MSCI Emerging Markets index last Friday, marking the steepest weekly drop in seven months. Asian markets, notably South Korea's tech-heavy Kospi, saw substantial losses as key tech giants like Samsung and SK Hynix suffered. The retreat comes despite some positive earnings surprises, highlighting a broader skepticism about the sustainability of the AI sector's skyrocketing valuations. Compounding these pressures is uncertainty over the Federal Reserve’s rate policy, with hawkish signals dampening hopes for near-term cuts, thereby weighing on risk appetite globally and intensifying downward pressure on emerging currencies and equities alike.
