Emerging market stocks surge on AI bets; India lags amid oil and Iran concerns

A divergence has emerged within emerging markets: tech-forward economies are rallying on AI tailwinds, while commodity and oil-import-dependent nations are struggling. South Korea's KOSPI surged 5% on semiconductor and memory-chip enthusiasm; SK Hynix opened up 9% in Korean trading. JPMorgan raised its Kospi target to 10,000 for the second time in under a month, citing semiconductor-cycle improvement and corporate governance reform. Taiwan and Singapore are benefiting from TSMC dominance and regional chip-supply positioning. Meanwhile, India's equity indices fell as the rupee weakened and oil prices spiked, with Modi urging citizens to conserve fuel and limit gold purchases to preserve FX reserves.

The structural divide is stark. South Korea, Japan, and Taiwan export high-value chips and optical components to global AI infrastructure; they benefit from elevated prices and supply scarcity. India, with its 1.4 billion population and limited domestic energy resources, faces acute vulnerability: import bills for crude oil are soaring, the rupee is expected to hit 98 per dollar by year-end (a multi-year low), and fiscal pressures are mounting. Thailand is similarly exposed; its largest refiner is pivoting to African and American crude to reduce mideast reliance, signaling how acute the energy shock is for Asia.

Indonesia's central bank tightened policy; its outstanding bills rose most in two years as the monetary authority sought capital inflows. Malaysia's Kumpulan Wang Persaraan Diperbadankan appointed a new CEO (Jay Khairil), signaling potential policy shifts. These moves suggest EM policymakers are bracing for higher rates, lower growth, and potential capital outflows if US-Iran tensions persist.

The debate centers on how long the AI chip rally can insulate tech-heavy APAC economies from broader macro headwinds. If the Iran war resolves quickly, oil falls, and Indian rupee stabilizes, the narrative shifts to synchronized EM growth. If tensions persist, a two-tier EM market emerges: tech gainers (Korea, Taiwan) and oil-shocked laggards (India, Southeast Asia, Indonesia). Forex volatility could accelerate EM currency crises if US rates rise on Iran inflationThe rate at which prices rise across an economy. fears.