Chart of the Week: EM’s vanishing diversification

{"text":[[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":6,"text":"Good morning. Historically, developed market investors have looked to emerging market stocks for diversification. In addition to providing exposure to different economies and (in some cases) lower valuations, emerging market assets provided exposure to sectors under-represented in developed world indices, such as energy and commodities. Increasingly, however, emerging market indices have fallen into the same pattern as the US market — top-heavy and tech-oriented. The MSCI EM index has surged 14 per cent this year, more than double the S&P 500’s gains, as Asian chipmakers have powered higher.  "}],[{"start":43.95,"text":"A decade ago, the entire IT sector accounted for less than 20 per cent of the benchmark MSCI EM index. Today, just three chipmakers — TSMC, Samsung and SK Hynix — account for 21 per cent of the index. This shift has also reduced the index’s geographic variety, leaving its fate highly dependent on the tech hubs of Taiwan, South Korea and China."}],[{"start":67.05000000000001,"text":"The dominance of tech in emerging market indices exposes them to the same bubble fears that loom over the US market. The indices will also change dramatically if, or when, South Korea and Taiwan get promoted to developed market status. Both countries have worked towards improving market accessibility to receive upgrades; for South Korea, the change could come as soon as sometime this year and take effect in 2027. Do emerging markets still provide diversification? Send us your thoughts: unhedged@ft.com "}],[{"start":100.85000000000001,"text":"Good reads from Unhedged"}],[{"start":102.9,"text":"Hakyung: Carried by the waves"}],[{"start":105.5,"text":"Katie: “Professionalism and competence” gone awry"}],[{"start":110.15,"text":"Daire: Businessmen first, diplomats second"}],[{"start":114.5,"text":"Rob: Copyrighting AI"}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":123.9,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777724509_8240.mp3"}