Key facts
- South Korea is now the world's sixth-largest equity market, overtaking India.
- The rise is attributed to strong performance from South Korean semiconductor companies benefiting from AI demand.
- India's market has declined partly due to foreign investor selling amid geopolitical concerns.
- Goldman Sachs raised its recommendation on Taiwan to overweight and boosted its target price on South Korean shares.
- Goldman Sachs warns of increasing risks of a pullback in AI chipmaker stocks.
South Korea has ascended to become the world's sixth-largest equity market, overtaking India. This significant market shift is primarily attributed to the robust performance of South Korean semiconductor companies, which are experiencing a surge in demand driven by the booming artificial intelligence sector. In contrast, India's equity market has experienced a decline, influenced in part by foreign investor selling, exacerbated by geopolitical concerns. Goldman Sachs stated that while AI chipmaker stock gains may continue, the risks of a pullback are increasing. The firm favors North Asia due to the strongest earnings growth and has raised its recommendation on Taiwan to overweight while boosting its target price on South Korean shares. The MSCI Asia Pacific ex-Japan index is up 27% year-to-date, but excluding South Korea and Taiwan it is down 4%. This performance disparity is largely explained by energy supply shock sensitivity and technology sector exposure, with North Asia being the epicenter of the AI trade. Foreign investors are shifting capital from India to North Asian markets like South Korea and Taiwan, driven by the AI investment boom and extraordinary earnings growth. While India's long-term growth remains strong with healthy earnings, the current global focus is on AI-driven capital expenditure, impacting investment flows.