Emerging market stocks hit record as investors assess factory data, Mid-East peace prospects

[BENGALURU] Emerging market (EM) stocks climbed to an all-time high on Monday (Jun 1), kicking off the month on a strong footing, as investors cheered manufacturing activity in Asia and held out hopes of a deal to end the Middle East conflict.

The MSCI index of EM stocks rose 1.4 per cent, with tech-heavy bourses in Taiwan and South Korea climbing to a record.

A deluge of manufacturing data showed that Asia’s factory activity expanded steadily in May, helped by some stockpiling, as companies attempted to get ahead of supply shocks stemming from the US-Iran war.

The strong print allayed fears of a potential hit from higher oil prices, which have eased over the last few weeks but remain well above pre-war levels.

“The strength of the manufacturing sector suggests that the region is continuing to shrug off the big jump in global energy prices,” said Gareth Leather, senior Asia economist at Capital Economics. “The main reason for this is the ongoing surge in global demand for electronics.”

In South Korea, shares of Samsung Electronics and LG Electronics jumped nearly 10 per cent and 30 per cent, respectively, as expected meetings between Nvidia’s CEO Jensen Huang and South Korean executives boosted hopes of tie-ups in artificial intelligence and robotics.

Investors are also holding out hopes for an end to the Iran war – which has now lasted over three months – despite intermittent setbacks and strikes that have at times threatened to derail diplomatic efforts towards a peace deal.

The emerging market currencies gauge was flat. The US dollar index was also little changed.

“FX markets are looking fatigued with the Gulf story. Weekend news of the US and Iran still negotiating a peace deal while exchanging limited military fire has so far had little effect,” said Chris Turner, global head of markets at ING.

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