A global reshuffling in stock-market hierarchy is underway. AI is propelling Taiwan and South Korea past a couple long-established Western countries.
A global reshuffling in stock-market hierarchy is underway, with artificial intelligence redrawing the pecking order of equity markets and propelling Taiwan and South Korea past several long-established Western bourses.
Taiwan has overtaken Canada to become the world's sixth-largest stock market, while South Korea has leapfrogged the U.K. into eighth place, according to HSBC data tracking global equity-market capitalization rankings. It's the latest demonstration of how the AI boom is concentrating market power in economies sitting at the center of the semiconductor supply chain.
Taiwan's stock market was only the world's 12th largest in 2004, worth roughly $500 billion. South Korea ranked 13th at $400 billion. Today, the two markets are valued at $4.7 trillion and $4.4 trillion respectively. The top five are the U.S., China, Japan, Hong Kong and India.
A reshuffling like this isn't unprecedented. China entered the top tier of global markets in the late 2000s, while India surpassed Hong Kong in late 2023 before falling back below it.
That said, the ascent of South Korea and Taiwan is striking.
"What is unusual here is the speed and how narrow the drivers are," said Billy Leung, global investment strategist at Global X ETFs. "Top 10 reshuffles happen roughly every cycle, but usually on the back of a domestic boom, a big IPO, or many years of outperformance." The rally has been driven by an extraordinary concentration of capital into a handful of AI-linked firms. TSMC alone now accounts for more than 40% of Taiwan's market capitalization, while Samsung Electronics and SK Hynix together make up a record 42.2% of South Korea's Kospi index.
"Both indices have effectively become AI and semiconductor proxies," said June Chua, head of Asia equities at Manulife Investment Management.
Goldman Sachs' chief regional equity strategist for Asia-Pacific, Tim Moe, agreed.
"It's the AI hardware theme that's clearly what is propelling things." The transition toward agentic AI has triggered "an explosion of so-called token demand," creating a supply shortage that is driving extraordinary pricing power for chipmakers, he said.
That also could make the gains more vulnerable to reversal. South Korean equities dropped late last week after foreign investors dumped roughly $13 billion worth of local stocks, triggering sharp swings in the benchmark index. This also comes as shares of Samsung Electronics, a heavyweight in the Kospi, have whipsawed as investors monitored labor negotiations and potential for a strike.
"We're now reaching levels where many Asian portfolios are starting to face concentration risk, meaning too much exposure to a small number of stocks in the region," said HSBC's Asia-Pacific head of equity strategy, Herald van der Linde. "That may limit further upside." That concentration risk has also prompted comparisons with markets such as Saudi Arabia and Denmark, where benchmark indexes are heavily dominated by Aramco and Novo Nordisk respectively.
Danish stocks came under pressure as worries grew over slowing demand for obesity treatments produced by Novo Nordisk, while Saudi Arabia's market, which is largely driven by Saudi Aramco, weakened alongside falling crude prices. Saudi equities have since recovered part of those losses as oil prices rebounded.
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