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The Rebound Rise: TSMC, Samsung Propel Recovery Amid AI and Chip Industry Surges

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Emerging Markets on the Mend

After enduring significant losses in 2022, emerging market assets hit bargain prices, sparking a resurgence led by tech giants like Taiwan Semiconductor Manufacturing Co (TSM) and Samsung Electronics Co (SSNLF).

The fate of emerging market equities, especially in the manufactured goods sectors, is intricately linked to the cyclical performance of the U.S. economy, heavily reliant on exports to the largest consumer market in the world.

Tech-Powered Rejuvenation

By October 2022, as supply chain disruptions hindered exports of key semiconductor supplies and other goods from Asia, a resurgence in emerging markets was ignited.

Coupled with this resurgence was the substantial growth in artificial intelligence research and development that propelled U.S.-based tech giants such as Microsoft Corporation and Nvidia Corporation to unprecedented heights throughout 2023.

Despite a myriad of challenges like surging interest rates, conflicts in Ukraine and the Middle East, elevated energy prices, regional banking turmoil, and a recession in parts of the eurozone, emerging markets saw a remarkable revival.

Navigating China’s Challenges

Though China continues to present a risk, its government has committed to bolstering its struggling markets, which witnessed a 20% slump in the Shanghai Composite index from May 2023 to February 2024. Since the February low, the index has rebounded by 12.8%.

As China works to address its economic and geopolitical hurdles, potentially revealing more initiatives at the upcoming National People’s Congress, investors concerned about Chinese exposure have options such as the MSCI Emerging Markets Ex-China ETF (EMXC), which excludes Chinese-listed stocks and has surged by 30% since hitting its low in October 2022.

In the wake of the IEMG ETF’s recovery, climbing 22.6% from its October 2024 trough to $50.80, the landscape for emerging markets seems promising despite past setbacks.

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