Lemanik: Asian Stock Indices Distorted by AI
Investments are increasingly focused on AI giants, while the rest of the market struggles.
“The artificial‑intelligence narrative is skewing the overall sentiment of the Asian equity market. We are witnessing an accelerating trend whereby investors concentrate their bets on the biggest names in AI and semiconductors. This dynamic causes technology‑heavy indices such as South Korea’s KOSPI, Taiwan’s market, and Japan’s Nikkei to vastly out‑perform other markets. However, excluding the AI‑related stocks of Samsung and SK Hynix, the KOSPI would have closed the month deep in the red,” explains Marcel Zimmermann, manager of the Lemanik Asian Opportunity Fund. “The other regional markets—Hong Kong, ASEAN and India—have in fact shown flat‑to‑negative performance throughout May.”
The mid‑May meeting between United States President Donald Trump and Chinese President Xi Jinping helped ease trade tensions in Asian markets and boosted investor confidence. Although significant differences remain, both sides expressed a willingness to keep dialogue open and pursue greater economic cooperation. Economic data across the region have remained broadly solid, underpinned by stabilising manufacturing activity, resilient consumer spending, and continued strength in technology‑driven demand. The Bank of Indonesia raised its policy rate by 50 basis points in response to inflationary pressures and currency weakness. In China, targeted support measures persisted to sustain growth, particularly in the real‑estate sector and domestic consumption.
During the month, we continued to lock in profits on AI‑related tech stocks while diversifying into the Asian biotechnology segment, energy‑storage system manufacturers, component makers for humanoid robots, and food‑sector stocks within the ASEAN area. AI applied to biotechnology is expected to accelerate research and development of new drugs, with the United States and China clearly leading the field. Another high‑potential sector for productivity gains is industrial machinery, where further automation through robots and humanoids could drive margin expansion. Japanese, Chinese, and South Korean equipment manufacturers are well positioned to benefit from this trend.
Overall, Asian equities are supported by stronger earnings outlooks, long‑term growth trajectories, and compelling valuations. We believe a well‑balanced sector diversification can improve risk‑adjusted returns while reducing reliance on single stocks or market events.