Investors cut back bets on Asian chipmakers after blistering rally

{"text":[[{"start":11.9,"text":"Investors are cutting back bets on Asia’s chipmakers, as a $1.8tn rally that propelled them into the ranks of the world’s biggest companies starts to unwind amid anxiety about their dominance of emerging-market indices."}],[{"start":24.9,"text":"Fidelity International and BlackRock are among fund firms harbouring concerns over the sustainability of a bull run in stocks such as Taiwan Semiconductor Manufacturing Corp, South Korea’s SK Hynix and Samsung Electronics, which are crucial suppliers in the race among US hyperscalers for AI chips and data centres."}],[{"start":45.4,"text":"The trio has together nearly doubled in market value over the past six months and now accounts for about 29 per cent of the broad MSCI Emerging Markets index, more than most individual countries, despite a recent sell-off in SK Hynix and Samsung."}],[{"start":null,"text":"

"}],[{"start":61.349999999999994,"text":"The index concentration, plus the proliferation of leveraged bets on Korea’s chipmakers that magnify share price moves, were “markers in the sand”, said Caroline Shaw, multi-asset portfolio manager at Fidelity International. These are “the type of thing we look for to say: is this overdone?”"}],[{"start":78.89999999999999,"text":"While she declined to comment on individual stocks, she said she had reduced exposure to growth stocks and was instead looking at “more unloved companies” in emerging markets."}],[{"start":88.69999999999999,"text":"The three stocks, which all have a market capitalisation of about $1tn or more, have dominated gains in emerging markets so far in 2026, as shortages push up chip prices. Their weighting in the MSCI EM index, which is tracked by many developing market investors, is now nearly triple that of all its Indian stocks, with SK Hynix’s weighting alone larger than Brazil and South Africa combined."}],[{"start":115.74999999999999,"text":"While the MSCI gauge is up about 19 per cent so far this year, it has fallen back from its peak as some investors start to take profits and move back into more traditional developing markets that are less correlated to the AI trade."}],[{"start":130,"text":"Korea’s market has fallen by more than a fifth from its June high, even as SK Hynix, which raised $26.5bn on its Nasdaq debut last week, joined Samsung in posting record profits for the start of the year. "}],[{"start":142.8,"text":"Foreigners have already sold $100bn in Korean stocks this year, hitting the won’s value against the dollar, as some investors reach typical thresholds for portfolio concentration limits. Active managers often cannot devote more than 10 per cent of a fund to a single stock, or — for US tax purposes — put more than half of a fund in stocks with individual weights over 5 per cent."}],[{"start":166.25,"text":"Wei Li, global chief investment strategist at BlackRock, said the world’s biggest asset manager was “happy to take profit at this point” and reduce bigger-than-benchmark weightings in emerging-market stocks because of the volatility in some big chip and memory names. "}],[{"start":181.65,"text":"“Let’s sit tight, given this volatility and the earnings upgrades that have [already] come through,” she said, referring to the lofty expectations that many analysts now have for these stocks."}],[{"start":193.5,"text":"Chipmaker dominance of the index poses a dilemma for emerging-market fund managers."}],[{"start":198.75,"text":"Simply following or chasing the benchmark could badly hurt their performance if the chips sector suffers a sudden setback, for instance due to rising competition or a drop in spending by the hyperscalers."}],[{"start":210.35,"text":"But, at the same time, they do not want to miss out on what could still be years of big share price gains due to demand for ever more complex AI data storage. Samsung and SK Hynix made a combined profit of more than $50bn in the first quarter of this year, compared with less than $10bn in the same period last year."}],[{"start":231.54999999999998,"text":"“These guys have basically become oligopolistic,” said Sunil Tirumalai, head emerging market equity strategist at UBS. “That’s the nature of the technology industry anyway. Once you’re large you tend to become larger and larger,” he added. “As an investor, monopolistic businesses always generate fantastic profits and are very good stocks.”"}],[{"start":253.14999999999998,"text":"However, after the strong share price gains, some analysts see potential dangers. Kieron Poon, investment director for Asian Equities at fund firm Aberdeen, said TSMC’s share price underperformance this year, relative to the other two stocks, was in part due to the revival of US competitor Intel’s chipmaking business under its chief executive appointed last year."}],[{"start":276.15,"text":"“Right now the market is concerned about Intel coming back,” Poon said. “Intel invested a lot in foundries.”"}],[{"start":283.54999999999995,"text":"In the memory sector, some see the biggest challenge to SK Hynix and Samsung Electronics coming from a pair of Chinese businesses preparing to list later this year: Changxin Memory Technologies and Yangtze Memory Technologies Corporation. CXMT specialises in DRam — short-term computer memory — and YMTC focuses on Nand, or longer-term data storage."}],[{"start":307.99999999999994,"text":"“The two pending Chinese IPOs are clearly timed to take advantage of the AI capex boom to raise capital while semiconductor stocks are still hot. And that capital will doubtless be used to increase capacity,” said Christopher Wood, head of global equity strategy at Jefferies, in a recent note."}],[{"start":325.44999999999993,"text":"Some investors believe the fact that emerging markets are now dominated by companies similar to those that feature so heavily in the US market erodes one of the main reasons for allocating to developing economies."}],[{"start":337.49999999999994,"text":"“Emerging markets were seen historically as a diversifier of both risk and performance,” but semiconductor chipmakers now make up large shares of both US and emerging-market indices, said James Johnstone, co-head of emerging and frontier markets at Redwheel."}],[{"start":353.94999999999993,"text":"“Invariably, when you do get this high concentration element, you can often be calling the top of the cycle,” he said. “Invariably, cycles end one of two ways: either demand comes down and prices collapse, or supply comes in and prices collapse.”"}],[{"start":377.99999999999994,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1783934809_7400.mp3"}