Big Asia Stock Funds Turn to Laggards to Cut Risk From AI Swings

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessBig Asia Stock Funds Turn to Laggards to Cut Risk From AI SwingsInvestors in Asia are snapping up stocks from Indonesian banks to Chinese e-commerce titans and Indian technology firms, trimming bets on popular AI trades which have turned increasingly volatile.Author of the article:Winnie Hsu and Samie Modak You can save this article by registering for free here. Or sign-in if you have an account.52)9286bdjgwd(}wa4qlwe8[_media_dl_1.png Bloomberg(Bloomberg) — Investors in Asia are snapping up stocks from Indonesian banks to Chinese e-commerce titans and Indian technology firms, trimming bets on popular AI trades which have turned increasingly volatile.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountFidelity International and BNP Paribas Asset Management are among those reducing exposure to Korean equities and semiconductors to add wagers on Chinese companies. Similarly, M&G Investments has cut holdings in Taiwan while Eastspring Investments has rotated into laggards including India.As a result, Southeast Asian stocks are on track for their best monthly performance against broader Asian peers in 24 years, with Indonesia one of the world’s top performers in July. Meanwhile, India is among regional markets that have drawn the most foreign inflows this month.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe reshuffle highlights growing caution among investors on the AI trade, which in Asia has been characterized by wild swings in markets such as South Korea. Even as global chip stocks staged a partial recovery from a rout earlier this month, nagging concerns about firms’ ability to monetize the revolutionary technology has led more fund managers to seek opportunities in defensive sectors from banks to consumer goods, as well as underperformers including China’s Internet giants.“The extreme volatility you’re seeing in Korea and to a lesser extent Taiwan has made it a little bit more difficult to buy the dip,” said Ian Samson, a portfolio manager at Fidelity. “The volatility means that from a portfolio construction perspective, we have to be careful about buying too aggressively.”Like Fidelity, Citigroup also recently cut Korean stocks and upgraded their Chinese peers in its emerging-market allocation, citing volatile trading in Korea and the potential for China to benefit as the local rally broadens beyond a narrow group of AI winners.Korean shares have slumped more than 21% this month, while Taiwan’s have fallen over 5%, with overseas investors pulling about $4.4 billion and $19 billion from Korean and Taiwanese equities, respectively. “Kospi VIX remains super elevated and waiting for the leverage holdings to wash out,” said Matthew Haupt, a hedge fund manager at Wilson Asset Management, referring to the volatility gauge tracking Korea’s equities benchmark. “There are more stable markets to trade themes rather than Korea at the moment.”By contrast, Hong Kong’s Hang Seng Index is set for its biggest monthly outperformance ever against Korea’s Kospi gauge, boosted by catch-up gains in Chinese internet giants and banks. Elsewhere in the region, the MSCI ASEAN Index has climbed 5.8% this month, versus a near 4% decline in the MSCI Asia Pacific Index, putting it on pace for the biggest monthly outperformance in more than two decades.Leading the Southeast Asian pack, Thai stocks have surged around 30% this year on bets that the country’s current government will bring an end to years of political turbulence. In Indonesia, banks have rallied following a surprise central bank rate hike. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Meanwhile, India has received about $2 billion of global fund inflows into its equities market so far this month, making it one of the top destinations in the region. Beaten-down shares of the country’s information technology firms HCL Technologies Ltd. and Tata Consultancy Services Ltd. have rallied about 18% and 11% in July, respectively.To some investors, the rotation may be tentative due to longer-term optimism about AI demand and earnings growth. A renewed surge in oil prices also threatens the momentum of energy-dependent markets such as Southeast Asia and India.“We have been trimming Korea exposure progressively over the last couple of weeks as risk/reward became increasingly asymmetric at these levels — though this is tactical rebalancing rather than a structural exit,” said Yi Ling Ong, managing partner at Golden Horse Fund Management.For one, Alphabet Inc.’s plans to spend up to $200 billion this year on AI computing power offered a brief boost to hardware stocks, before a selloff resumed on Friday. Next week, concern around AI spending will face a new test when Meta Platforms Inc., Microsoft Corp., and Apple Inc. report their quarterly earnings. Alphabet, Microsoft, Amazon and Meta have forecast as much as $725 billion in capital expenditures this calendar year, and Wall Street expects that figure to climb to nearly $900 billion in 2027, according to the average of analyst estimates compiled by Bloomberg. But for now, the persistent worry that the AI rally has run too far, too fast remains a key driver of less glamorous stocks that offer steadier returns and stronger earnings clarity. “It’s just the uncertainty, unpredictability of this volatility,” said John Tsai, portfolio manager at Eastspring Investments, adding that the next leg of rotation will hinge on “results from the big US tech companies and their longer-term capex guidance.”Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.