Emerging Markets' Decade-Long Victory After US Equity Outflows: This Time EM Comes with Taiwan and South Korea Technology

According to historical data, emerging markets (EM) entered a long-term upward trend following periods of fund outflows from US equities. In the previous cycle, this resulted in a decade-long EM outperformance. However, this time the composition of the EM concept has changed; instead of traditional commodity-based or low-cost manufacturing-focused economies, advanced technology companies centered in Taiwan and South Korea are now taking the lead. In particular, Taiwan's semiconductor giant TSMC and South Korea's technology leader Samsung have become key components of EM indices due to their critical positions in the global chip supply chain. These companies directly benefit from the surge in demand for artificial intelligence and data centers. Analysts note that if capital exiting the US flows into these technology stocks, the performance of EM indices will differ in structure from past cycles. In the past, EM gains were typically driven by rising commodity prices or domestic consumption in developing countries. Now, EM growth is linked to global technology exports and innovation capacity. This shift is also changing investors' approach to EM assets, with a more technology-focused and export-driven EM strategy coming to the forefront. Experts suggest that high valuations in the US stock market and uncertainties around interest rates could redirect fund flows, potentially making Taiwan and South Korean stock markets significant destinations. However, they emphasize that for this scenario to materialize, global trade dynamics and the sustainability of technology demand must be maintained. This is not investment advice.