Global Investors Shift Capital to Taiwan Equities, Away From Korea
Global investors are moving capital into Taiwanese equities and out of South Korean shares. This follows July's AI-related stock rout, with Taiwan showing steadier earnings prospects and greater diversification.
Capital Flows Diverge After AI Rout
Global investors have recently favoured Taiwanese equities over South Korean shares. Foreign investors became net buyers of Taiwan stocks last week, ending a six-week selling streak, Bloomberg data shows. They accumulated $1.7 billion in Taiwan stocks during August 2026. Conversely, investors net sold $6.2 billion from Korea in the same period.
This capital reallocation follows a market decline in July 2026, which particularly affected artificial intelligence (AI) related stocks in both markets.
Taiwan Perceived as Less Risky
This shift suggests investors may prefer markets with less volatility and greater diversification when returning to AI-exposed assets. Taiwan is seen as offering more even-keeled returns, less dependent on leveraged trades.
Warren Chiang, a portfolio manager at Grantham Mayo Van Otterloo & Co., described Taiwanese companies as "very, very high quality." He added that the market is "not excessively risky from a fundamental sense," despite global economic movements.
Korea Faces Cyclicality and Leverage
Taiwan’s tech sector, anchored by foundries like Taiwan Semiconductor Manufacturing Co. (TSMC), exhibits less earnings cyclicality, noted Societe Generale equity strategist Frank Benzimra. In contrast, South Korea’s market faces concerns over leverage and cyclical chip earnings.
Hebe Chen, senior market analyst at Vantage Global Prime, stated Korea "trades with much heavier leverage and speculative positioning." This can trigger outsized market moves even without fundamental deterioration.
Analysts’ earnings estimates for Taiex companies rose 9.5% in July 2026 on a 12-month forward basis, Bloomberg data shows. This surpassed the 7.4% revision for Korea’s Kospi, a first in nearly a year. While Korea’s Kospi trades at lower valuations and a record discount after the sell-off, its performance hinges on AI sector monetisation.
Societe Generale’s Benzimra highlighted this as the "long term risk," with investor focus on whether heavy research and development spending generates sustained returns.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
Comments.
Comments are moderated. We remove what is unlawful, abusive or off-topic, and and you remain responsible for what you post.
Reader comments open soon. Until then, corrections and responses go to our newsroom, and we publish what we get wrong on Corrections.