Risk sentiment is heating up! Interest rate cuts and positive profit expectations resonate positively, causing emerging market stocks to continue to rise.

Emerging market stocks are once again on the rise, as the possibility of a rate cut by the Federal Reserve and optimistic expectations for earnings boost market risk sentiment. The emerging market stock index rose by 0.6%, marking its second consecutive day of gains. So far this year, emerging market stocks have seen gains every month, with a cumulative increase of nearly 16%, attracting a significant inflow of funds. After suffering losses last Friday due to poor US economic data triggering sell-offs, the index has bounced back. Traders are increasingly anticipating a rate cut by the Federal Reserve following the release of the US non-farm payroll report. This news led to a fall in the stock market and a rise in bond prices. The money market predicts an over 80% likelihood of a 25 basis point rate cut by the Federal Reserve next month, with a one-third probability of another rate cut by the end of the year. Additionally, the rise in US corporate earnings indicates that despite the threat of higher tariffs, global economic activity remains strong. Mohit Kumar, Chief Economist at JP Morgan International, stated: "A moderate economic slowdown would be good news, as the Fed is likely to further loosen its policy. In the medium term, we remain bullish on risk assets. However, we do expect increased market volatility in August, as market positions are still biased towards long positions, and technical factors are also starting to become unfavorable." With speculation in the market that the Federal Reserve is likely to resume its rate cut cycle and the continued weakness of the US dollar, risk asset sentiment has rebounded significantly, driving a widespread rally in emerging market assets in recent days. Asian electronics and technology companies have led the rally, with South Korean chip manufacturer SK Hynix's stock price up 2.1%, and Hong Kong-listed BYD ELECTRONIC (00285) up nearly 8%. In another source of positive sentiment, data shows that China's service industry unexpectedly accelerated in activity in July, reaching its fastest growth rate in over a year. This indicates the industry's resilience during the peak summer tourism season. In Eastern Europe, Hungary's BUX stock index is nearing its historical high, with large banks like OTP Bank seeing their stock prices hit historic highs after significant earnings growth in the second quarter. Investment institutions that are bullish on emerging market assets continue to expand, as the favorable macroeconomic backdropincluding the possibility of a rate cut by the Federal Reserve and Trump's tariff policies as well as immigration restrictions causing the gradual collapse of the "American exceptionalism" narrativehave led institutions focusing on developed markets like Morgan Stanley and Amundi SA to start shifting their asset allocations towards China and other emerging markets. In the foreign exchange market, the situation is less optimistic. The Indian Rupee depreciated by 0.2%, nearing its historical low. The South African Rand also fell by 0.6% as US President Trump announced last week that he will impose a 30% tariff on imports from South Africathe highest tariff level in the sub-Saharan African region. He also stated that he will significantly raise tariffs on Indian exports to the US because India purchased oil from Russia. Analysts at ING, including Chris Turner, wrote in a report: "In the short term, market focus on India has increased due to President Trump's renewed interest in India. Yesterday, the threat against India buying Russian oil became more tangible as Washington has now shifted its attention entirely to this issue."