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Stocks climb 1.6%, currencies dip

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Biren's shares more than double on debut

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South Korean won falls against U.S. dollar

By Niket Nishant

Jan 2 (Reuters) - Emerging market stocks hit a near

five-year high in the first trading session of 2026 as a batch

of data showed solid manufacturing activity, setting an upbeat

tone for a year that faces a high hurdle to ‌surpass 2025's

stellar gains.

The MSCI emerging market stock index rose 1.6%,

while the corresponding currency gauge dipped

0.1%.

Investors are bracing for a slew of cross-currents ​in 2026,

including hopes for continued weakness in the U.S. dollar and a

maturing AI rally. While rate ‍cuts by the Federal Reserve could

weigh on the greenback and boost ⁠demand for emerging market

assets, ⁠some analysts caution that investors may become

selective about positioning.

Those seeking more upside in the AI theme may tilt toward

clear beneficiaries such ‌as Taiwan, South Korea and China.

Shares of Shanghai ​Biren Technology, a Chinese AI

chip designer, more than doubled in their Hong Kong debut on

Friday, highlighting appetite for AI-linked names.

Others still recommend rebalancing toward domestic-focused

markets such ⁠as Brazil and India.

TARIFFS REMAIN IN FOCUS

Purchasing managers' ‍indexes released ​by S&P Global on

Friday showed factory activity in major tech-exporting economies

South Korea and Taiwan snapping months of declines in December,

while most Southeast Asian nations maintained brisk growth.

South Korean shares ‍were last up 2.3%, while

Taiwanese equities jumped 1.3%. Both benchmarks hit

record highs.

Trade and tariffs will remain front and centre in 2026 and

could be pivotal to sentiment around Asia's export-driven

economies.

In India, where a long-awaited trade deal with the U.S. has

still not been announced, the rupee traded in a narrow

range on Friday. Traders said state-run banks were intervening

to support the currency on behalf of ​the central ‍bank.

The South Korean won slipped 0.2% against the dollar,

even after authorities renewed their focus on stabilizing

foreign exchange markets with measures to bolster the won.

In his New Year speech, ​Bank of Korea Governor Rhee

Chang-yong warned that recent dollar-won levels did not

accurately reflect the local economy's fundamentals, signalling

the currency has been too weak.

FACTORY DATA DRIVES TONE

In Europe, the Czech crown and the Polish zloty

fell 0.2% and 0.1% against the euro, respectively.

Poland's manufacturing sector contraction in December, as

output and new orders declined at a faster pace, according to

data from S&P Global.

Czech manufacturing activity, on the other hand, grew in

December for only the ​second time since May 2022. The PX stock

index was hovering around a record high.

In Turkey, manufacturing activity in December shrank at a

slower pace. Stocks jumped 1.1% while the lira

was 0.2% weaker against the dollar.

Trading volumes may normalise starting Monday ‍as more

investors return and China's equity market reopens after

holidays.