Emerging market stocks hit record highs as AI chip optimism lifts Seoul

Emerging market equities staged a broad rally Monday, with South Korea's KOSPI index surging 5% and hitting record highs as AI demand and memory chip cycle recovery drove momentumThe empirical fact that winners keep winning over the medium term.. JPMorgan Chase raised its Kospi target for the second time in less than a month, with a bull case scenario of 10,000 points, citing an improvement in the semiconductor cycle and corporate governance reform. South Korea is the world's largest producer of DRAM and NAND memory, making it a direct beneficiary of the global AI infrastructure buildout. Samsung's impending labor deal resolution removes a key risk factor for memory supply, further boosting sentiment.

India's market lagged the broader EM rally, with the Nifty and Bank Nifty indexes falling 1 to 1.2% amid oil and Iran concerns. India's outsized energy vulnerability and forex pressure from oil imports are weighing on domestic valuations despite strong domestic earnings growth. Emerging Asian currencies slid broadly as crude prices jumped, with the Korean won and Thai baht leading losses. However, the AI narrative is strong enough to offset geopolitical headwinds in the most tech-exposed markets, suggesting a bifurcation between energy-importing and tech-driven EM economies.

JPMorgan's upgraded Kospi target reflects confidence that Korean semiconductor companies will maintain pricing power and volume growth through at least 2026 as AI capex remains elevated. However, the Korean market is also grappling with valuation risks: the Kospi trades at elevated multiples relative to earnings, and a correction could be sharp if AI demand disappoints or if memory prices fall faster than expected. Standard Chartered's CIO flagged "volatility ahead" in Korean tech, noting that high Kospi valuations represent a possible risk factor for a correction despite the long-term AI tailwind.

The broader EM story is split: AI-exposed tech hubs like South Korea are thriving, while commodity-import-dependent emerging markets face headwinds from oil prices. India's decision to urge citizens to cut gold purchases and conserve fuel signals desperation to preserve forex reserves, a sign of genuine economic stress. This divergence could persist throughout 2026 as geopolitical tensions remain unresolved.