Which came first: the rally in emerging markets, or the boom in their tech stocks? The sector has become the biggest single grouping in emerging markets this year for the first time since the dotcom boom. Cue several as-yet unsuccessful efforts to label EM techs with a catchy equivalent to the US FANGs (Facebook, Amazon,
Netflix and Google). But simply equating the sector with hot US tech rivals sells it short: hardware, as well as internet enthusiasm, is driving this rally.
Emerging market equities are enjoying their best year since 2009, with MSCI’s benchmark index up 17 per cent. Strong exports and earnings upgrades are the biggest drivers, particularly in Asia, which accounts for more than two-thirds of the index (and all of its tech stocks). Even profits at unloved Chinese groups are generally expected to rise, giving Asian EM stocks one of their best-ever runs of improving profit forecasts at 12 months and counting. The tech sector, up 38 per cent this year, has led the advances. Within that, Tencent and Alibaba are up 43 per cent and 62 per cent respectively. Samsung Electronics is 35 per cent higher and poised to overtake Intel as the world’s largest chipmaker. Taiwan Semiconductor, the world’s biggest chip foundry, has gained 18 per cent. Combined, they have added $325bn in market capitalisation.