AI trade keeps capital – and risks – flowing to emerging markets

For the most dramatic change in a benchmark index in financial markets in recent years, look no further than the stock markets of developing economies. Just over a year ago, mainland China and India had a combined weight of 50 per cent in the MSCI Emerging Markets Index. Fast forward to today, and it is South Korea and Taiwan that account for over half of the gauge.At the end of last month, the weight of South Korea in the index stood at nearly 24 per cent, four percentage points more than that of China, whose economy is almost 10 times the size of South Korea’s. The weight of Taiwan’s economy alone stood at 27 per cent. That’s double the weight of India’s 11 per cent.The speed and scale of the shift in the composition of the index attest to the profound impact of the Artificial Intelligence (AI) boom. As JPMorgan pointed out in a report on May 11, “the Asia [technology] hardware ecosystem sits at the centre of the global AI buildout”.