Emerging markets are an AI play at a huge discount, says HSBC's Alastair Pinder

Core Insights - US markets are reaching record highs but are underperforming compared to emerging market indices, with a significant percentage of global stock indices at all-time highs, the highest in 26 years [1] - Emerging markets, particularly in Asia, are seen as undervalued opportunities in the AI sector, presenting a chance for diversification [4][5] - The strengthening dollar has been supportive for international equity markets, but a potential weakening of the dollar next year could further benefit emerging market equities [6] Emerging Markets - Emerging markets are experiencing a shift, with new economy sectors like technology, semiconductors, and electric vehicles increasing their representation in the EM index from 15% to nearly 40% [8] - Countries like Germany are highlighted for their infrastructure spending, which is expected to drive growth and is not fully priced into the market [9][10] - Elevated interest rates in countries like Mexico and Brazil provide room for cuts, which could support valuations and lead to a valuation rerating in these markets [11] Trade Policies and Stimulus - Tariffs have paradoxically benefited international markets by prompting stimulus measures in countries like China and Germany to offset their impact [12] - The reduction of tariff uncertainty and the potential for new trade deals, such as the USMCA, are seen as positive catalysts for international markets [13]