How pronounced is the rotation in Asian markets?

  • At midday on 5 November, the Korea Composite Stock Price Index fell 5.18% and the Taiwan Weighted Index declined 2.54%; meanwhile, the Hang Seng Index rose 3.09% and the CSI 300 Index gained 0.36%. Goldman Sachs linked the regional divergence to investors withdrawing funds from AI hardware.
  • Falling crude oil prices benefited oil-importing countries but weighed on energy stocks; renewable energy, some materials stocks and Chinese internet platforms attracted funds. Japan's market was also mixed, with auto stocks rising and chip and AI-related shares weakening.

Why are South Korean and Taiwanese semiconductor stocks under pressure?

  • In South Korea, Samsung Electronics and SK Hynix were reportedly each down more than 5% at midday. Goldman Sachs said investors reassessed their AI exposure after the Democrats' sweeping victory in the US midterm elections, while clean energy and solar stocks were supported by policy expectations.
  • Taiwanese semiconductor stocks remained weak. In the previous trading session, overseas investors net sold 149.9 billion New Taiwan dollars of Taiwanese stocks, and margin financing positions fell by 22.9 billion New Taiwan dollars; Taiwan's proposed tightening of chip export controls on mainland China also added pressure to the technology sector.
  • The volatility was not one-way: in the previous trading session, the Taiwan Weighted Index rebounded sharply from its intraday low; South Korea's two leading semiconductor companies also narrowed intraday losses of 5%–7% to less than 1.5% by the close.

Which areas are attracting funds in mainland China and Hong Kong?

  • Mainland China's renewable energy sector led gains, driven by domestic policy support and stronger expectations following the US midterm elections. Within TMT, performance diverged: AI applications and software strengthened, while hardware was weaker; oil, coal and financial stocks lagged.
  • Mainland trading remained active: turnover exceeded 2 trillion yuan in the previous session, and Goldman Sachs expected it to exceed 2.5 trillion yuan on 5 November, about 50% above the 20-day average. Although the Shanghai Composite erased an opening loss of about 1%, it still met resistance near its 20-day moving average at 3701 points.
  • In Hong Kong, investors shifted from AI hardware to Chinese internet platforms. Goldman Sachs said the market had renewed its focus on relatively low-valuation platform stocks, with Alibaba, Tencent and Meituan among the leaders; Tencent's newly released Hy4 model also provided a catalyst for the technology sector.

Why are Japanese sectors diverging?

  • Weakness in chip and AI-related stocks weighed on the Nikkei, which fell 1.49% at midday; gains in auto stocks supported the broader TOPIX.
  • Driven by expectations of tariff relief, Toyota, Nissan and Honda rose as much as 8.5%, 7.9% and 7.2%, respectively. Trading houses also provided support: Mitsubishi Corporation raised its full-year net profit forecast to 1.2 trillion yen and announced a 1 trillion yen share buyback plan.