Taiwan’s Taiex leads Asian stock market recovery after AI-led sell-off

Gains prevail across Asian share markets in Monday’s trading.
A 5.30% daily advance puts Taiwan’s benchmark at the forefront of the rally.
A market recovery follows the technology sell-off sparked by the Democrats’ sweeping US midterm election victory.

A tentative calm has returned to Asian equities, with most markets advancing on Monday. The recovery follows a turbulent week in which concerns over Artificial Intelligence (AI) drove some of the sharpest declines in years across the region’s technology-heavy markets.

Leading the rebound, Taiwan’s benchmark TAIEX advanced around 5.30% to 41,800. Last week, the index recorded its biggest weekly fall in two decades as concerns over AI profitability and infrastructure demand fuelled a sell-off following the Democrats’ wins in the US midterm elections.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Another potential source of volatility, analysts said, is an internal investigation by industry bellwether Nvidia into whether its CEO Jensen Huang was targeted by a foreign spying operation.

In Japan, the benchmark Nikkei 225 gained 2.90% to 59,090. Minutes of the BoJ’s September meeting, published last week, showed that most policymakers considered further interest rate rises appropriate as underlying inflation neared the central bank’s 2% target.

Among Chinese markets, a 0.35% advance took the main SHANGHAI index to 3,660, while the Hong Kong Stock Exchange added 0.13% to reach 24,520. By contrast, the Shenzhen Stock Index slipped 0.14% to 11,160.

Asian equities: frequently asked questions

Which key indices track Asian stock markets?

Several major equity indices are based in Asia, a region that accounts for around 70% of global economic growth. Prominent benchmarks in its developed economies include South Korea’s Kospi and Japan’s Nikkei – the latter covers 225 companies listed on the Tokyo stock exchange. China’s three key indices are the Shanghai Composite, the Shenzhen Composite and Hong Kong’s Hang Seng. India’s position as a large emerging economy is also drawing investor interest towards its equities, with increasing investment in companies that form part of the Sensex and Nifty indices.

Which sectors feature prominently in Asian equity markets?

The sectoral composition of Asian markets reflects the differences among the region’s major economies. Indices in Japan and South Korea, and increasingly in China, are dominated by technology companies. In Hong Kong and Singapore, both regarded as key financial hubs, financial services take the leading role in equity markets. Manufacturing has a substantial presence in China and Japan as well, particularly in automobiles and electronics. Meanwhile, expanding middle-class populations in countries such as China and India are raising the profile of retail and e-commerce businesses.

What influences the performance of Asian equities?

Although numerous forces shape Asian equity indices, their primary driver is the combined performance of constituent companies, as reported in quarterly and annual earnings. National economic fundamentals, central bank decisions and government fiscal policies also matter. At a broader level, technological advances, political stability and the rule of law can affect share markets. US equity indices provide another influence, since Asian markets frequently follow Wall Street’s overnight performance. Overall market risk sentiment is relevant too, as shares are viewed as riskier investments than alternatives such as fixed-income securities.

Which risks should investors consider in Asian stock markets?

Alongside the inherent risks of equity investing, Asian shares carry regional risks that investors need to consider. Political systems across Asia range from full democracies to dictatorships, creating potentially substantial differences in political stability, transparency, the rule of law and corporate governance requirements. Natural disasters and geopolitical developments, including trade disputes and territorial conflicts, can trigger stock market volatility. Exchange-rate movements can also influence Asian equity valuations, particularly in export-oriented economies. These economies generally face pressure from a stronger currency and benefit from a weaker one, which makes their products less expensive overseas.