Taiwan's stock market rose to become the world's No. 5, overtaking India, powered by a surge in TSMC, the world's largest semiconductor foundry. Analysts say that in the frenzy over artificial intelligence (AI) investments, global capital is flowing to semiconductor manufacturing countries such as Taiwan and Korea, while India is wobbling amid high oil prices and foreign capital outflows.
According to data compiled by Bloomberg on the 26th, Taiwan's stock market capitalization reached $4.95 trillion (about 7,395 trillion won), surpassing India's $4.92 trillion. As a result, Taiwan became the world's No. 5 stock market after the United States, mainland China, Japan and Hong Kong.
There is a view that Taiwan's market rise is essentially being led by a single company, TSMC. As demand for AI Semiconductor has surged, TSMC shares have jumped 46% so far this year. With competition intensifying to expand AI servers and data centers, demand for high-performance chips has soared, pushing TSMC to the forefront as the biggest beneficiary. TSMC now accounts for about 42% of the Taiwan Capitalization Weighted Stock Index (Taiex). Analysts say the so-called "mega-cap" phenomenon, in which a single corporations lifts nearly half of a nation's benchmark index, is propelling Taiwan's market higher.
Regulatory changes are also working in TSMC's favor. Taiwan's financial authorities recently raised the single-stock investment limit for domestic funds to as much as 25% from the previous 10%. The cap was eased when a particular stock accounts for more than 10% of the Taiwan market, and TSMC is effectively the only corporations that meets this threshold now.
By contrast, India's stock market, which had been on a long bull run for the past decade, has wobbled this year. India's benchmark index is down 8% this year, raising the prospect of the first annual decline in 10 years. India's weighting in the MSCI Emerging Markets Index has also dropped to about 12% from 19% last year.
Experts point to India's limited presence in the AI supply chain as a key reason for its underperformance. Franklin Templeton fund manager Yiping Liao said, "The expansion of Taiwan's market capitalization is ultimately the result of concentration in the technology hardware industry," adding, "Semiconductor corporations are at the center of the AI investment cycle." Liao added, "Markets with a weak base in technology hardware such as semiconductors are bound to be outpaced by manufacturing hubs like Taiwan and Korea."
Bloomberg also said that higher energy expense from elevated oil prices, inflation concerns and a weaker rupee have combined to drive about $24 billion in foreign capital out of India's stock market this year alone. Much of that money is said to have moved to the Taiwan and Korea markets, where expectations for AI gains are high.
Still, in terms of the real economy, India remains far ahead of Taiwan. According to the International Monetary Fund (IMF), India's gross domestic product (GDP) stands at $4.15 trillion, continuing one of the fastest growth rates in the world. Taiwan's GDP is about $977 billion. Allison Shimada, a portfolio manager at Allspring Global Investments, said, "India's market has paused for breath under the burden of high valuations, but within India, a 'financialization' trend—where personal asset shifts from real estate to financial asset—is advancing rapidly," adding, "The long-term growth potential remains intact."