AI Chip Rally Spurs Concentration Risk, Fund Outflows
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- TSMC now accounts for almost a third of the MSCI Asia Pacific ex‑Japan Index together with Samsung and SK Hynix, creating concentration risk that exceeds typical benchmark diversification.
- Jupiter Asset Management’s Asia Equity Income fund has been forced to sell its top performers—TSMC, Samsung and MediaTek—after they posted YTD gains of 52%, 159% and 184% respectively.
- HSBC reports that TSMC is the biggest portfolio underweight among Asian and global emerging‑market funds, as the AI rally distorts equity benchmarks and makes it hard for active managers to keep up.
- BNP Paribas data show Asian active funds have seen $269 billion of cumulative outflows over five years, while passive funds have attracted $510 billion, with a quarter of that inflow occurring in the last six months.
- Korean won has come under pressure as forced selling adds to market volatility, with a record $27.9 billion outflow from South Korean equities in May.
- Stock pickers are adding mid‑cap AI supply‑chain firms such as ASMPT and Grand Process Technology to diversify away from the three dominant chipmakers.
- Bernstein’s Asia quant strategist says the rally since April has raised concentration risk in Asian equities to levels never seen before.
Why it matters: Active managers lose exposure and face forced selling, while passive funds capture unprecedented inflows. The concentration risk also adds pressure on the Korean won and nudges investors toward smaller AI supply‑chain stocks for diversification. This shift reshapes fund flows and amplifies market volatility across Asia.
