Emerging-market stocks are on track for their best August since 2004

In August, the MSCI Emerging Markets Index rose by more than 4%, putting it on track to post its best monthly gain since 2004, according to Bloomberg. The rally is spreading beyond the largest artificial intelligence companies and is gaining additional momentum from commodities amid bets on a weaker dollar, the agency notes.

Despite a slight decline on Monday (–0.04%), the MSCI Emerging Markets Index’s gain in August shows that emerging-market stocks remain a favorite among investors worldwide seeking to diversify their portfolios and move away from U.S. dollar-denominated assets, Bloomberg notes. Emerging-market currencies are also benefiting from this outflow and are poised to post gains for the second consecutive month, as well as their best quarterly performance since June 2025, the agency emphasizes.

The MSCI Index includes stocks of large companies from Taiwan, China, South Korea, India, Brazil, and other countries. Among its largest components are shares of chipmakers Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics, and SK Hynix (all three have been down slightly over the past month). Instead, shares of MediaTek (+10% on the Taiwan Stock Exchange), Delta Electronics (+12%), and China Construction Bank Corporation (+3% in Hong Kong), among others, contributed to the index’s growth in August. Bloomberg also notes that the rise in emerging-market stocks was supported by relatively small companies operating in the AI sector and in non-technology sectors, such as Chinese biotechnology.

But the main factor supporting emerging-market securities in August was a strategy aimed at a weaker dollar, the agency notes: “Concerns over the U.S. budget and public debt triggered another influx of capital into emerging-market assets denominated in local currencies, including stocks. Sentiment toward the AI industry’s leading companies has stabilized, and the trend toward a weaker dollar has pushed gold prices higher,” says Hasnain Malik, head of emerging markets equity strategy and geopolitics at Tellimer.

Despite strong performance over the past month, emerging market stocks are under pressure due to concerns about an escalation of the conflict in the Middle East, as well as growing expectations of a U.S. interest rate hike. Against this backdrop, the MSCI Emerging Markets Index fell 1.4% at its intraday low on August 31. Remarks by Federal Reserve Chair Kevin Warsh that inflation has not yet shown a significant slowdown led market participants to raise the probability of a 25-basis-point U.S. interest rate hike in September to more than 60%. A rate hike could offset the effect of the dollar’s depreciation by strengthening the U.S. currency and boosting Treasury yields, which would reduce the appeal of risky assets, Bloomberg explains.

This article was AI-translated and verified by a human editor