Taiwan and South Korea stocks diverge amid AI chip concentration worries

Asian equity funds have delivered strong returns this year, driven by exposure to Japan, South Korea and Taiwan, with the region out‑performing the U.S. by about 16% YTD. The rally has been heavily concentrated in three AI‑related semiconductor giants—TSMC, Samsung Electronics and SK Hynix—which together account for more than 30% of the MSCI Emerging Markets Index, a share comparable to the “Magnificent Seven” in the S&P 500.

Fund managers are now trimming exposure to these megacap chips. Invesco has cut its Samsung position by over 60% since the start of the year, while JPMorgan Asset Management and GMO are seeking diversification into sectors such as gaming, energy and consumer goods, and into markets like India and China. Société Générale advises a relative‑value strategy of going long Taiwanese equities and short South Korean stocks, arguing that earnings durability in Taiwan’s wafer‑foundry and logic‑chip businesses outweighs the higher growth but weaker profit outlook in Korea.

In Hong Kong, MPF‑linked Asian‑stock funds that held larger allocations to Japan, Korea and Taiwan posted the best half‑year gains, the top performer gaining more than 85%. However, with Asian markets now showing signs of a rotation and the Korean index down over 20% from its June peak, the concentration risk is prompting a broader shift away from AI‑centric holdings.