The unraveling of the AI trade after the US midterm elections is forcing investors to rethink their Asia playbook, reviving demand for out-of-favor Chinese and Indian stocks as well as companies poised to benefit from easing inflation and trade tensions.
Aberdeen Investments favors markets powered by stronger domestic growth, including India and Vietnam, and sees upside in Chinese technology firms. Hedge fund Lotus Asset Management is long Hong Kong equity futures, while Allianz Global Investors is looking at healthcare and consumer companies.
Asia has been among the hardest hit by the market fallout from the Democrats’ sweep of Congress. Many of the region’s biggest stocks — from Samsung Electronics Co. and SK Hynix Inc. to Taiwan Semiconductor Manufacturing Co. — are critical suppliers to the global AI build-out, leaving local markets especially exposed as investors brace for greater scrutiny of the industry and question whether massive spending on computing infrastructure will generate sufficient returns.
“I expect investors to diversify more broadly and reduce their concentration in the AI trade,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA. “This should be supportive of China and other markets where valuations are less demanding.”
India could also benefit, although its dependence on imported energy remains a headwind, he added.