North Asian markets are significantly outperforming their South Asian counterparts, driven by better insulation from energy shocks, stronger fiscal capabilities, and advancements in AI, according to Tim Moe, Chief Asia Pacific regional equity strategist at Goldman Sachs. He noted that North Asia’s greater buffer stocks allow these markets to absorb higher energy costs more effectively, while South Asia struggles with limited fiscal capacity and vulnerability to energy price fluctuations.
This divergence is reflected in stock performance, with South Korea and Taiwan leading the charge, up over 80% year-to-date, largely due to their tech-heavy indices. Meanwhile, South Asian markets, particularly Indonesia, are down 25%, hampered by a lack of technological investment and significant energy vulnerability. Moe highlighted concerns about the sustainability of profits in Korean semiconductor stocks, which are trading at low multiples, indicating market skepticism about their long-term profitability.
Investors should remain vigilant, as Moe cautioned about a potential correction in the summer months due to looming energy supply shocks. This warning underscores the importance of monitoring geopolitical tensions and market fundamentals in the coming weeks.
Source: cnbc.com