Emerging Markets Surge Amid Global Economic Shifts

Emerging market currencies and stocks continued to rise as investors analyzed Nvidia's earnings and global economic trends. February saw rate cuts in Hungary, Russia, Nigeria, and Thailand, while Brazil and Mexico maintained their monetary stance. EM assets benefit from reduced U.S. exposure amid AI trade concerns and shifting tariffs.

Emerging market currencies and stocks saw an uptick on Thursday as investors digested Nvidia's positive earnings and balanced a range of economic data and interest-rate forecasts.

In a bustling February, Hungary initiated its first rate cut since 2024, with Russia, Nigeria, and Thailand also lowering borrowing costs. Meanwhile, Brazil appeared ready to follow, as Mexico maintained its rates. The leading EM equity index rose by 0.4%, tracking its third consecutive monthly advance and marking its strongest week since September.

EM assets benefited this month from strategic shifts away from U.S. investments. Concerns about potential setbacks in the AI market, high-tech valuations, and uncertainty over former President Donald Trump's tariff policies prompted this pivot. Although tariffs have not heavily impacted global trade, they have prompted a redirection of trade routes, fueling unexpected growth in some developing nations, according to the European Bank for Reconstruction and Development.

In Asia, South Korea's decision to keep rates unchanged led to a 3.7% surge in Seoul's stock market, buoyed by Nvidia's promising results. Nvidia's projections for first-quarter revenue exceeding expectations highlight continuous investment in AI processors by big tech companies.

Mark Haefele, the chief investment officer at UBS Global Wealth Management, recommended diversifying AI investments across various sectors and regions. Meanwhile, South Africa noted a decrease in producer inflation, and a positive national budget response propelled Johannesburg equities. In Europe, Budapest's careful rate cut strengthened the forint, indicating its strongest week since 2023.

Elsewhere, the Egyptian pound rallied after a recent dip, following the IMF's completed reviews, clearing Egypt's path to access $2.3 billion. Simultaneously, Ukraine's international bonds remained stable, with an IMF review of an $8.1 billion lending agreement underway.

(With inputs from agencies.)