Tencent and Alibaba lead the MSCI Emerging Markets Index to soar! Achieving the best weekly performance since July

According to the Zhitong Finance and Economics APP, tracking the benchmark indexes of many emerging markets achieved their best weekly performance since July 2023, driven by the strong performance of US technology giants. Tencent (00700) and Alibaba (09988), which have a high weight in the Hong Kong stock market, made the largest contribution to the rise of the benchmark index, followed closely by TSMC, a high-weight stock in the Taiwan stock market. Data shows that as of the collective closing of Asian stock markets on Friday, the benchmark stock indexes of emerging markets recorded the largest weekly increase in 9 months, boosted by the strong demand for generative AI technology from global companies as confirmed by US corporate earnings reports, leading to a widespread surge in Asian technology stocks.

Google (GOOGL.US) and Microsoft (MSFT.US), the two US technology giants, reported earnings that boosted investors' bullish sentiment towards Asian technology companies globally. Data shows that the MSCI Emerging Markets Index rose by 1.1% at the close of Asian stock markets on Friday, reaching its highest point in two weeks, and with a weekly increase of nearly 4%, marking the largest weekly gain in 9 months, with Tencent, Alibaba, and TSMC contributing the most to the gains.

In terms of market risk appetite, after the US market closed on Thursday, under the strong support of the global AI boom, both Microsoft and Google reported performance indicators that exceeded expectations and achieved significant growth, reviving investors' "AI faith" in global technology stocks. The fervor for AI among technology stock investors may once again create huge waves in global stock markets. This wave of bullish sentiment driven by AI is crucial for the stock prices of internet technology giants such as Alibaba and Tencent, which have a high weight in the Hong Kong stock market, as well as for the trends of technology stocks such as TSMC, MediaTek, and Foxconn, which have a high weight in the Taiwan stock market.

After experiencing an incredibly strong week of gains, the MSCI Emerging Markets Index is set to erase the sharp monthly decline caused by the significant reduction in market expectations for a Fed rate cut and concerns about rising US inflation. The Hang Seng Index, the benchmark index of the Hong Kong stock market, achieved its best weekly performance since 2011, accompanied by a sharp increase in trading volume and strong momentum. The index broke above the 200-day moving average on Friday, signaling a very strong bullish signal.

Although economic growth in the Asian region is generally slowing down and macro risks such as the hawkish monetary policy expectations of the Federal Reserve continue to pressure emerging market stocks, the outlook for the stock market has improved due to the spillover effect of strong profits from US technology giants under the influence of AI. This has helped Asian stock markets outperform significantly this week compared to the other two emerging market regions that have performed well in the long term—Latin America and the EMEA region (Europe, Middle East, and Africa) The overall strong performance of emerging market stocks has overshadowed the bond market and foreign exchange market, which have been seeking clues from the pricing of the Federal Reserve.

The strong earnings reports from US tech giants are inspiring analysts to raise their profit expectations for emerging market companies, especially internet and technology companies listed in the Hong Kong stock market. Analysts have raised the 12-month average profit expectations for the overall components of the MSCI Emerging Markets Index to the highest level since September 2022. Strong performance expectations from Asian tech companies such as Tencent, Alibaba, and TSMC are leading this growth.

However, after a significant rebound in Asian stock markets on Friday, European stock markets failed to replicate the strong gains seen in Asia during the trading session, mainly due to investors awaiting the US March PCE inflation data report. The currency market has shifted bets on the first rate cut by the Federal Reserve from September to December, following the release of US GDP data on Thursday showing a better-than-expected slowdown in the growth of the world's largest economy, the United States, coupled with persistent core price pressures