Bloomberg Managing Editor for Asian Equities Lianting Tu stated that China's AI and semiconductor champions are in a bull market, with the Star 50 index up over 60% year-to-date. However, consumer sectors in China remain a laggard. The discussion also highlighted that while Taiwan's Taiex is up with some niche supply-chain players achieving triple-digit year-to-date gains, South Korea's Kospi is down due to foreign outflows and concerns about memory-chip margins. Malaysia has also seen incremental flows, suggesting a rotation of capital within Asian markets.
Yuka Hata, Head of Fund Investments at Japan Investment Corporation, presented a strong case for Japan, emphasizing its deep industry and data foundation as competitive advantages for building a physical AI space, including robotics, factory automation, precision components, and sensors, where Japanese firms already hold significant market share. Mark Cranfield, Bloomberg Live Strategist, echoed this sentiment, framing Japan as an opportunity with "catch-up room" compared to other leaders, pointing to improving manufacturing activity and a weaker yen supporting exporters.
While the AI rally has been a significant global story, strategists are increasingly seeing opportunities beyond the initial winners. Eastspring Investments Portfolio Manager Christina Woon advised caution, stressing the importance of selective investing and avoiding overextended names given the strong tech run. S&P noted that surging AI capital expenditure from hyperscalers is boosting the semiconductor and AI server supply chains, providing better visibility on profitability for the sector. However, low visibility on AI monetization, elevated energy costs, and geopolitical conflicts could potentially slow data center build-outs and weaken chip demand.
South Korea's equity market has surged, with total market cap up to 86% this year to $5 trillion, surpassing India as the world's sixth-largest equity market. Samsung and SK Hynix, both now in the $1 trillion valuation club, have driven the Kospi to gains of over 100% due to AI memory demand. Despite this, underlying macroeconomic data shows accelerating consumer inflation, weighing on the won and pushing short-term bond yields higher as markets anticipate monetary tightening. M&G Investments Portfolio Manager Vikas Pershad noted that while the focus continues to narrow on AI, opportunities are emerging across the entire region, and his firm is diversifying holdings within the semiconductor supply chain by reducing exposure to foundry and memory in favor of areas like connectivity and chemical components.
The biggest variables for the second half of 2026 include the Bank of Japan's stance on defending the yen, whether China's AI leadership extends beyond a narrow group of semiconductor stocks, and the continued rotation of capital into overlooked markets. A weak yen has boosted Japanese exporter earnings but also increases the risk of intervention and a carry-trade unwind. The shift in the center of gravity for AI towards Asia is expected to continue, presenting both opportunities and risks for investors.
