Recent data from HSBC reveals a notable shift in the global stock market hierarchy, driven by the surge in artificial intelligence and its reliance on semiconductor production. Taiwan's stock market has surged to become the sixth largest globally, valued at $4.7 trillion, while South Korea has climbed to eighth place with a market capitalization of $4.4 trillion.
This marks a significant rise from their positions in 2004, when Taiwan was the 12th largest at $500 billion and South Korea was 13th at $400 billion.
The rapid ascent of these markets is attributed to a concentration of capital in a few AI-related firms, with TSMC representing over 40% of Taiwan's market and Samsung Electronics along with SK Hynix accounting for 42.2% of South Korea's Kospi index.
Analysts, including Billy Leung from Global X ETFs and June Chua from Manulife Investment Management, note that both indices have become proxies for AI and semiconductor performance. However, this concentration also raises concerns about potential market volatility, as evidenced by recent fluctuations in South Korean equities following significant foreign sell-offs.
HSBC's Herald van der Linde warns of increasing concentration risk in Asian portfolios, which could limit future growth potential, drawing parallels to markets like Saudi Arabia and Denmark that are heavily reliant on a few dominant companies