Strong US dollar combined with AI chip export controls impact emerging market assets, declining for two consecutive days.

Due to the impact of the strengthening of the US dollar and the US plan to extend restrictions on the export of AI chips, emerging market stocks fell for the second consecutive day on Thursday. The MSCI Emerging Markets Stock Index fell by 0.5%, down 10% from its high on October 2, nearing a technical correction, led by Samsung Electronics and TSMC. Earlier reports indicated that the Biden administration planned to take new measures expanding semiconductor trade restrictions to most parts of the world. Chinese technology stocks remained flat on the day, looking to record the largest single-week decline in seven weeks. Meanwhile, this week the US dollar and US Treasury yields rose again, damaging markets in developing countries. Minutes from the recent Federal Reserve meeting showed officials leaning towards a cautious approach to rate adjustments in the coming months. Lilian Chovin, Asset Allocation Director at Coutts in London, said, "Emerging markets are being negatively affected by the movement of the US dollar and rising yields, which is tightening financial conditions. At some point in the future, emerging markets may rebound, but it's still too early to build positions now." In addition, Goldman Sachs strategists have lowered their forecast for emerging markets stock market returns in 2025, lowering the year-end target for the index from 1200 points to 1190 points. Nevertheless, there is still some upward potential from the current level of 1066 points, with Goldman Sachs expecting returns to be moderate driven by earnings. The bank emphasized increasing positions in countries such as China, South Africa, and Saudi Arabia, and upgraded its rating for the Turkish stock market. In the forex market, the MSCI Emerging Markets Index fell for the second consecutive day. Meanwhile, the cost for US dollar investors to hedge Asian investments is set to drop from a two-year high, potentially reducing support for currencies in the region. Poland is set to issue euro-denominated bonds, contributing to a record-breaking start to emerging market bond issuances this year, with countries competing to secure funding before the inauguration of US President-elect Trump. US markets will be closed on Thursday to commemorate a national day of mourning for former President Jimmy Carter. The bond market will close at 2 pm New York time, potentially affecting trading volume in emerging markets on that day.