The US government shutdown is expected to come to an end, risk appetite is returning, and emerging market stocks and currencies are rebounding in both markets.

The optimistic mood of the market about the impending end of the longest government shutdown in US history has boosted the Asian emerging markets stock markets, especially technology stocks closely related to AI, which experienced a rebound last week after a downturn from historical highs due to the "AI bubble" narrative, highlighting a significant increase in market risk appetite. On Monday, the MSCI Emerging Markets Index, which measures the emerging markets stock market, rose nearly 2%, while another benchmark index tracking the returns of large and mid-cap stocks in emerging markets recorded a similar increase. The MSCI index measuring the currencies of emerging economies also rose by about 0.5%, with the currencies of emerging markets in Asia leading the index. It was recently reported that the US Senate passed a procedural federal government budget vote by a vote of 60 to 40, actively advancing legislation to end the government shutdown, with several moderate Democratic lawmakers crossing the aisle to support the agreement. The prolonged government shutdown had restricted global investors' access to various economic data in the US, making it harder for investors to assess the actual health of the US economy and interest rate prospects. "Monday's market trends - including the significant weakening of sovereign currencies such as the US dollar against the Australian dollar and the South Korean won, considered proxies for risk appetite - reflect the market's optimistic expectations for the US government's imminent reopening," wrote Frances Cheung, Head of Foreign Exchange and Rates Strategy at Oversea-Chinese Banking Corp., in a report. Reports about reducing dividend taxes and potentially increasing pension stock allocations have strongly driven the benchmark Korean stock market - the Kospi Index - which led the stock markets in the Asian region. The Korean won strengthened for the first time in six trading days, especially supported by signs of foreign buying of local Korean stocks, with prices of two major storage giants benefiting from the unprecedented AI boom - SK Hynix and Samsung Electronics - showing the strongest rebound on Monday. As AI chip leader AMD and SSD storage giant SanDisk announced remarkably strong performance under the drive of the AI boom, and Wall Street financial giants such as Goldman Sachs and UBS released research reports refuting the "AI bubble", market concerns about the AI bubble significantly eased, leading to sharp increases in stock prices of Japanese giants closely related to AI such as Advantest, Tokyo Electron, and SoftBank Group. The Japanese blue-chip benchmark stock index - the Nikkei 225 Index - also led the Asian stock markets in gains. Hotel and airline stocks in the Chinese stock market saw significant increases, driven by better-than-expected October consumer price data and demand expansion during the Golden Week holiday. Overall, Monday's significant rebound marks a significant turnaround in the market since the hit suffered by emerging markets last week due to concerns about the AI bubble, which significantly affected the technology sector's overvaluation concerns. An Asian benchmark stock index - the MSCI Asia Pacific Index - recorded its worst performance since August. However, with the global AI investment boom driving it, the MSCI Asia Pacific Index has still risen by about 25% so far this year. Furthermore, a potential "short squeeze storm" in the US stock market is expected to boost bullish sentiment in both the US and global stock markets. If the shutdown crisis is resolved rapidly in the coming days, the most immediate impact may be the influx of around $1 trillion from the US Treasury's general account (TGA) back into the US bond trading and economic system, injecting massive liquidity into the market. This key change is reversing the previous bearish trading logic, leading to a strong year-end rebound driven by liquidity, and potentially an epic short squeeze situation that is already in the making. According to the latest insights from Goldman Sachs' trading desk, the current market structure has laid the groundwork for a potential short squeeze in the US stock market. Despite recent weak index performance, open interest in S&P 500 index futures increased by $21 billion, indicating that the market has added long positions rather than shorts covering the dominant position.