A major shift is happening in the world of emerging market investing. The MSCI Emerging Markets Index, a key benchmark for global investors, has seen a dramatic change in its composition over the past year. Just over a year ago, mainland China and India together made up 50 percent of the index. Today, that weight has been overtaken by South Korea and Taiwan, which now account for more than half of the index.
According to recent data, South Korea alone held nearly 24 percent of the index at the end of last month. That is four percentage points more than its previous share. The change is largely driven by the growing importance of artificial intelligence (AI) and related technology industries. South Korea and Taiwan are home to major semiconductor and electronics companies that supply key components for AI systems.
The shift reflects how AI trade is directing capital flows toward these economies. However, it also brings new risks. Concentrating investments in a few countries and sectors can make markets more vulnerable to industry-specific downturns or geopolitical tensions.
Investors are watching closely as the index continues to evolve. The change highlights how emerging markets are no longer dominated by China and India alone. Instead, countries that are central to the AI supply chain are gaining influence in global financial markets.