Real Winners and Losers Emerge in Asia After Fed Meeting

The march higher continues. Selectively.

Investors in Asia looked past the implications of Wednesday’s U.S. Fed policy meeting to bid up Asian equities Thursday, figuring the “lower” cost of oil will ease inflationary pressures and more than offset any potential higher borrowing costs down the road.

It is the three East Asian markets in Tokyo, Seoul and Taipei that continue to set and renew all-time records. They’ve done it again Thursday.

We’ve had an interest-rate rise in Japan, with rates rising to their highest level in 31 years. But there are positives to take out of that decision from the Bank of Japan, as I outlined in my last column.

Plenty of Losers Around Asia

We shouldn’t let these new stock-market records blind us to the reality that there are real winners and losers in Asia this year.

Markets in Hong Kong and China are nearing or already at bear-market territory, with the Hang Seng benchmark in Hong Kong down 6.7% year to date. Hong Kong stocks dipped again Thursday, down 1.6% to directly reflect the potential for future Fed rate hikes. Hong Kong’s currency is pegged to the U.S. dollar at a fixed exchange rate, which means Hong Kong effectively doesn’t set its own monetary policy and instead “imports” U.S. interest rates.

Indian equities have been mired in underperformance for more than a year. The Nifty 50 has lost 7.8% year to date, while the Sensex is 9.2% lower. The New Zealand stock market is struggling for direction and down 1.4% in 2026 as of Thursday. Australian equities are only just in the black, the S&P/ASX 200 benchmark down 0.6% Thursday and up just 2.3% this year.

Indonesian equities are the worst performers in the region, down 28.6% given doubts over the leadership of President Prabowo Subianto, and as index providers pressure regulators to improve governance.

Chip Stocks Push East Asia to New Highs

But you will find none of that negativity in East Asia, where semiconductor stocks and Artificial Intelligence (AI) plays continue to push markets to new records.

I got the first chance to dig into the implications of the Fed meeting on Thursday’s Money Talk podcast with Peter Lewis. There’s a link to the Spotify version of the show here.

You can also find details of the very handy daily newsletter that Peter puts together, focusing on Asian angles, here. It’s on Substack or delivered by email into your inbox daily.

Indexes Set New High-Water Marks

In Japan, the Nikkei 225 Thursday crested above 71,000 for the first time in history, and set a new all-time closing high, up 1.65% to 71,053.

The broad-market Topix, which moved past 4,000 for the first time on Monday, finished at a fresh record of 4,068, with a 1.4% rise Thursday.

Likewise, in South Korea, the Kospi topped the 9,000 mark for the first time ever, with the Korean benchmark adding 2.3% on the day to finish at a record 9,064.

The Seoul market continues to lead the world with a 115.1% year-to-date rise, thanks in large part to its high concentration in chip manufacturing.

Taiwan Central Bank Raises Growth Forecast

In Taiwan, the Taiex rose 1.3% to end Thursday at a new record closing high of 46,465.20. That re-set the June 3 record, the first day the Taiwan index moved past 46,000.

Taiwan’s central bank Thursday upped its growth outlook for the year, thanks to the boom in AI interest. That directly benefits Taiwan Semiconductor Manufacturing Co. (TSM) (TW:2330), which has a commanding 73% market share of worldwide chip foundry production.

Taiwan’s economy increased 8.68% last year, the fastest pace in 15 years. The Taiwan central bank now expects growth of 9.45% for 2026, up from its March forecast of 7.25%. Still, the central bank left interest rates unchanged at 2.0%, with the board shifting to a hawkish stance and warning that inflation needs to be “closely monitored.”

TSMC’s Strong Showing

We saw TSMC inch ahead 1.1% Thursday, giving it a 55.5% increase on the year so far. As I noted heading into this year, TSMC is one of my perennial favorite investments in Asia, although I forced myself to look beyond it in picking Tokyo-listed chip-testing equipment maker Advantest (ATEYY) (T:6857) as my Asian equity pick for 2026.

Advantest is up 54.3%, essentially matching that strong showing from TSMC. I remain very happy with that pick so long as this rally in semiconductors is sustained.

The biggest concern would be the overcrowding into those trades, as well as the amount of leverage investors are taking on to access them.

Heavy Crowding Into Chip-Stock Trade

I get a regular report from Interactive Brokers telling me what the most active stocks are on that platform. It’s a five-day moving average of orders. And it’s shocking how concentrated the list is.

Check out the top 15 tickers:

SpaceX (SPCX)

Micron Technology (MU)

Direxion Daily Semiconductor Bull 3x ETF (SOXL)

Nvidia (NVDA)

Marvell Technology (MRVL)

Intel (INTC)

Tesla (TSLA)

SanDisk (SNDK)

Microsoft (MSFT)

Invesco QQQ Trust (QQQ)

Advanced Micro Devices (AMD)

Oracle (ORCL)

ProShares UltraPro QQQ (TQQQ)

Direxion Daily Semiconductor Bear 3x ETF (SOXS)

Roundhill Memory ETF (DRAM)

The list includes orders through Tuesday, so it doesn’t reflect the impact of the Fed meeting. But I count 12 of the 15 as direct chip-stock plays, and the other three (SpaceX, Tesla, Microsoft) are tech stocks with an AI element.

Trading In and Out of DRAM

I’m trying to trade in and out of DRAM, given the massive volatility on the Korean market. The Roundhill Memory ETF (DRAM) has a concentrated 10-stock portfolio of memory makers, with almost 75% of the exposure given over to Micron and its Korean competitors, Samsung Electronics (KR:005930) and SK Hynix (KR:000660).

I bought into the position earlier in June, averaging a purchase price of $61.90. Wednesday’s sale at $71.50 nets a 15.5% profit.

But I’m on the wrong side of the trade Thursday, with DRAM up again contrary to my expectations that the Fed decision would cause it to continue to fall. The ETF is up 10.0% to $77.00 as I write, aided by Thursday’s 8.1% rise for Micron in early trade.

Still, I would expect the volatility in the Korean chipmakers in particular to be extreme, offering the opportunity to buy back into any dips. The movements in either direction are exacerbated by 16 newly listed single-stock leveraged exchange-traded funds (ETFs) in South Korea, which are supremely popular with retail investors.

Leveraged Exposure to Samsung and Hynix

The new ETFs, listed on May 27, are providing leveraged 2x exposure to stocks such as Samsung and Hynix. It is magnifying the volatility of such stocks, with Hynix up 6.5% Thursday, for instance, and Samsung ahead 4.6%.

There’s plenty of Fear of Missing Out in small investors who are borrowing to buy these leveraged ETFs on margin. They get squeezed when there are losses, such as the “Black Monday” decline of 8.3% on June 8. This whipsaw action for stocks in Seoul will continue given the crowded, over-borrowed nature of the trades.

Traders are pricing in cheaper oil, with Brent crude at $77.24 per barrel right now, down from a peak of $114.44 in early May. But as I said on Money Talk, there’s still room for the U.S.-Iran memorandum of understanding to fall apart. The agreement opens the Strait of Hormuz for two months, with three Saudi Arabian supertankers apparently already benefitting by free passage. But we may see restrictions on ship passage after that.

Even if the deal holds, the inflationary pressures of higher energy costs are already being felt in Asia, and will continue for months as oil and gas flows normalize. Oil also remains up 29.7% from levels below $60 in late February, when U.S. attacks on Iran began.

It won’t be oil that finally derails the repeat series of records for East Asian markets. I’m sure it will be the high degree of leverage and the circular nature of corporate spending by the “hyperscalers” that catches investors out if and when we see any hint of weakness in the AI trade.