Emerging Stocks Jump to 2021 High as AI Frenzy Fuels Tech Rally

(Bloomberg) -- Emerging-market equities extended their winning streak for a fourth day, climbing to the highest level since 2021 as artificial intelligence optimism — fueled by a landmark OpenAI share sale — lifted global sentiment.

The MSCI index for EM stocks rose as much as 1.5% on Thursday, led by gains in technology shares including Taiwan Semiconductor Manufacturing Co., Alibaba Group Holding Ltd and Tencent Holdings Ltd. Meanwhile, a gauge tracking EM currencies was little changed.

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OpenAI’s valuation surged to $500 billion after current and former employees sold about $6.6 billion in stock, a leap from its prior $300 billion level. The ChatGPT maker also struck agreements with South Korean chipmakers to support its Stargate project, further fueling AI enthusiasm.

“Investors are captivated by the AI and technology theme,” said Rajeev De Mello, a global macro portfolio manager at Gama Asset Management. “The Fed’s easing campaign has also been supportive for tech and as the end of the year approaches, investors who have been more cautious are covering their underweights.”

Marc Bindschaedler, emerging-markets equities specialist at Vontobel Asset Management, noted that China is only at the start of its AI investment cycle, adding that interest in EM stocks is reviving after years in the shadows. Still, he cautioned that momentum-driven rallies can be prone to sharp pullbacks.

Currencies from Poland and Romania led gains in emerging-markets while the Turkish lira underperformed its peers. In bond market, Mozambique and Ghana dollar bonds are among the best performers.

Elsewhere, Citigroup strategists recommended taking profit from the South African rand’s rally. “As the US government shutdown has flowed into our markets as stronger EMFX, the rand has performed fairly well given the cleaner domestic story,” they wrote. “While we take tactical profits at these levels given the short tenor of the trade, our fundamental medium-term view on the currency remains positive.”

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