Emerging market stocks hit a near five-year high in the first trading session of 2026 as a batch of data showed solid manufacturing activity, setting an upbeat tone for a year that faces a high hurdle to surpass 2025's stellar gains.
The MSCI emerging market stock index rose 1.6 per cent, while the corresponding currency gauge dipped 0.1 per cent.
Investors are bracing for a slew of cross-currents in 2026, including hopes for continued weakness in the US dollar and a maturing AI rally. While rate cuts by the Federal Reserve could weigh on the greenback and boost demand for emerging market assets, some analysts caution that investors may become selective about positioning.
Those seeking more upside in the AI theme may tilt towards clear beneficiaries such as Taiwan, South Korea and China.
Shares of Shanghai Biren Technology, a Chinese AI chip designer, more than doubled in their Hong Kong debut on Friday, highlighting appetite for AI-linked names.
Others still recommend rebalancing towards domestic-focused markets such as Brazil and India.
Purchasing managers' indexes released by S&P Global on Friday showed factory activity in major tech-exporting economies South Korea and Taiwan snapping months of declines in December, while most Southeast Asian nations maintained brisk growth.
South Korean shares were last up 2.3 per cent, while Taiwanese equities jumped 1.3 per cent. Both benchmarks hit record highs.
Trade and tariffs will remain front and centre in 2026 and could be pivotal to sentiment around Asia's export-driven economies.
In India, where a long-awaited trade deal with the US has still not been announced, the rupee traded in a narrow range on Friday. Traders said state-run banks were intervening to support the currency on behalf of the central bank. — Reuters
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