Surge in trading Asian technology stocks drives EM rally.
Technology stocks have driven Emerging Market (EM) equity prices so far this year after replacing commodities shares in late-2014 as the heaviest weighting in the Morgan Stanley Capital Investment (MSCI) EM index. While the index is up 23% so far this year, its technology sub-component, dominated by Asian listings, has risen by more than 40%.
- The dollar index has lost more than 8% this year, benefiting EM currencies and local government debt, and is set to remain under pressure.
- The Vix index, Wall Street’s ‘fear gauge’, stands just above its record low but it could reverse suddenly, decimating returns on assets.
- Stronger goods trade has driven the Asian hardware rally, but rising worldwide protectionism may chip away at the trade recovery.
- Asian technology firms dominate in hardware but diversifying into software against Facebook, Amazon, Netflix and Google may prove difficult.