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2026-10-09 16:09:12 G Sachs said in a research report that emerging market equity indices are becoming increasingly focused on technology and highly concentrated, raising concerns over the rising dominance of artificial intelligence. Driven by the AI investment boom, technology hardware stocks have surged sharply, pushing the concentration level of emerging market indices to a record high. S Korea and Taiwan together account for about half of the MSCI Emerging Markets Index, while the information technology weighting exceeds 40%. The top three stocks, the "AI Big Three" - TSMC (2330.TW), Samsung Electronics (005930.KS) and SK Hynix (000660.KS) - together account for about 30%. The broker noted that the rise in concentration reflects exceptionally strong earnings growth rather than speculative exuberance. Despite the increase in concentration, MSCI Emerging Markets valuations have fallen by more than 20% this year because earnings growth has outpaced share price gains. MSCI Emerging Markets earnings surged 95% YoY in 2Q26, and the broker forecasts 65% growth for 2026. The "AI Big Three" are expected to contribute about 40% of net profit and around 60% of index EPS growth. EPS growth is projected to slow to about 20% and 14% in 2027 and 2028, respectively. The broker believes that the correlation between broad emerging market indices and AI has increased, while diversification has declined. Sensitivity to traditional macro drivers is also lower than several years ago. In contrast, emerging markets excluding technology remain closely linked to global macro and local factors, supporting a more granular approach to managing emerging market risks. The broker recommended maintaining regional diversification by continuing to Overweight Brazil, South Africa, Greece and Hungary, while remaining positive on North Asia. It also suggested balancing technology and momentum exposure with defensive factors, considering equal-weight or capped benchmarks, and using derivatives for hedging.(su)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |