Taiwanese shares have outperformed their South Korean peers by the widest margin since 2009, underscoring their relative resilience as the Middle East tensions roil markets.
Last month, Taiwan’s benchmark TAIEX fell 10 percent, while South Korea’s KOSPI gauge plunged 19 percent. Taiwan’s largest equity exchange-traded fund was set for record inflows in the month as domestic investors piled into the technology-heavy product.
The more modest decline in Taiwanese shares also reflects their smaller gains of about 22 percent from the beginning of the year up to the start of the Iran conflict, compared with a 48 percent rally in South Korean stocks that made them the world’s best performers at the time.
Photo: Ritchie B. Tongo, EPA
Investors remain broadly constructive on Taiwan given its key role in the global semiconductor supply chain. HSBC Holdings PLC upgraded the Taiwanese stocks to neutral to increase its exposure to the artificial intelligence (AI) theme in Asia.
“We prefer Taiwan over Korea as our primary AI-related equity exposure in the region,” with earnings expectations still among the strongest in Asia, HSBC strategists including Herald van der Linde wrote in a note yesterday. On the other hand, highly concentrated holdings in South Korea by global emerging market funds risks more outflows, he said.
Asian stocks were mostly lower on the final day of last month and first quarter yesterday as investors weighed a report indicating US President Donald Trump was willing to end the Iran war even if the key Strait of Hormuz remained closed but also threatened to strike its energy infrastructure if it did not make a deal.
Seoul led losses by shedding 4.3 percent and Taipei fell 2.45 percent. Tokyo, Shanghai, Singapore, Bangkok and Jakarta were also down.
The KOSPI extended its decline from a record high in late February to nearly 20 percent, the threshold typically considered a bear market. Samsung Electronics Co and SK Hynix Inc, the country’s two most valuable stocks, were the biggest drags, dropping more than 5 percent each.
South Korean equities were among the hardest hit in the month as fears of quicker inflation and higher interest rates led to doubts about the durability of the AI boom.
“Everyone’s attention is stuck on this war in the Middle East,” Reed Capital Partners Pte Ltd chief investment officer Gerald Gan (顏傑瑞) said in Singapore. “As long as there are no meaningful signs of both sides wanting to back down, more weakness will be reflected in the equity market, and that includes the big tech names in the KOSPI.”
Beyond geopolitics, investor unease has been compounded by Google’s new technology, which the company said can sharply reduce the amount of memory needed to train large language models — a development that may erode the pricing power of South Korean chipmakers if hyperscalers require fewer high-end components. Samsung Electronics and SK Hynix have seen multi-day selloffs.
“Investors are also worried about how the recent developments in Google’s TurboQuant could affect demand for memory chips, a core product of South Korea’s semiconductor industry,” Natixis SA senior economist Gary Ng (吳卓殷) said. “Investors can only ride the volatility until things become more certain.”
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