(Bloomberg) -- Emerging-market stocks climbed to a fresh record high, propelled by Asian technology shares on optimism over artificial intelligence and as the dollar weakened.

An MSCI Inc. index of developing-market stocks rose as much as 1% to 1565.05 on Wednesday, surpassing an intraday all-time high set in late January. An MSCI index of Asian shares also hit a record. Benchmarks from South Korea to Mexico and Brazil are hovering near all-time highs.

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The rally follows gains of more than 30% in emerging-market stocks last year, driven by Asian markets like Taiwan and South Korea. The region is a beneficiary of high demand for AI-related hardware, including semiconductors, while also luring in investors looking to diversify away from US assets.

“EM equities are a weak dollar story along with rotation out of crowded US tech - especially mega-cap tech,” said Billy Leung, an investment strategist at Global X Management in Sydney. “We are seeing global flows rotate into other regions and sectors, with Asia tech and semiconductor supply chains benefiting from AI capex expectations.”

Emerging-market currencies also gained, with an MSCI gauge of the cohort rising as much as 0.2%, while the dollar weakened. The Bloomberg Dollar Spot Index is 4% below a peak in November.

LGT Private Banking is bullish on emerging Asia currencies, especially the won, Taiwan dollar, and on the yuan in the short-term, it said in a note.

Light Allocations

“Investor sentiment on EM is running high, based on our recent conference surveys, but we see still light allocations,“ Goldman Sachs strategists including Kamakshya Trivedi wrote in a Tuesday note.

Outflows from South Korea stocks reached $6.6 billion this year, even as the benchmark surged 27%. India and Indonesia are also seeing foreign selling.

Momentum in EM stocks may further strengthen as nations like Mexico, Brazil and Vietnam are set to benefit from a shift in global supply chains, helping steer flows to these markets. A dollar under pressure is also adding to the bullish sentiment.

“Past episodes of sustained dollar weakening have led to emerging market rallies that last for years,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. “This time, there’s additional AI tailwinds with critical semiconductor supply chains based in Asia still trading at significant discounts to US peers.”

--With assistance from Marcus Wong and Ravil Shirodkar.

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