Is 'U.S. Exceptionalism' Over as Global Investors Seek Exposure Elsewhere?
Asian stocks have shot out of the gate with a record start to 2026, continuing a trend from last year.
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Asian equities have entered 2026 in exceptionally strong shape, posting their best start to a year on record.
The MSCI All Countries Asia Pacific is up 4.3% since the close on Dec. 31. Given that the vast majority of Asian markets were shuttered on Jan. 1, that’s come on just three trading days.
That’s the best opening since such records began in 1988, according to Bloomberg data. Market watchers suggest that global-minded investors are seeking exposure outside the United States at this early stage of the year.
Korea the Top Performer
South Korea’s Kospi is leading the way, as it did over the course of last year. The index is up 7.4% in the three trading days since the end of last year, building on the 75.7% leap for full-year 2025, the best showing among major stock markets worldwide.
Seoul’s largest listing, Samsung Electronics (KR:00593), has powered ahead 14.5% so far in 2026, investors once again cheering the tech conglomerate’s shift into the higher-performance chips that power Artificial Intelligence.
The Korea exchange’s second-largest stock, the High Bandwidth Memory (HBM) chipmaker SK Hynix (HXSCL) (KR:000660), has added 11.9% in the same timeframe. It made the world’s first 12-layer HBM chip, and specializes in supplying semiconductors to power AI infrastructure.
Together, Samsung and Hynix make up 36% of the market capitalization in Seoul. So any exposure to the Kospi or similar South Korean index will include a hefty dose of exposure to those two stocks.
Taiwan Toppy Too
The region’s semiconductor stocks have supercharged the gains in Seoul and Taipei, where the Taiex has been another standout, up 5.5% since its close on Dec. 31. Chip-foundry market-share leader Taiwan Semiconductor Manufacturing Co. (TSM) (TW:2330) is up 9.7% in these first few days of 2026 alone.
TSMC makes up 46.2% of the total Taiwan market’s capitalization at last count. So where it goes, Taiwan’s index follows.
Other chip stocks listed in Taiwan such as Nanya Technology (TW:2408), up 18.1% to lead gains in Taiwan so far this year, have also performed well.
You would have to consider the 3.5% gain for “fabless” chip designer MediaTek (TW:2454) something of a resurgence. It struggled to eke out a gain last year thanks to a sales-decline setback that saw it lose 25.4% of its value between mid-September and mid-November. The shares have now rebounded 29.1% as an “AI play,” though still remain much near the level that they entered 2025.
Electronics Outsourcers Surge
Beyond chips, tech in general has fared well, with strong showings for Taiwanese electronics components makers like passive-component maker Yageo (YAGOY) (TW:2327), advancing 10.0% in 2026, and contract manufacturer Quanta Computer (QUCCF) (TW:2382), up 3.7%.
Although Asian equities lost their steam heading into year-end, they are back on track in 2026. The gains are also not restricted to the tech sector, even if the markets with the highest tech proportion are posting the best numbers.
In Tokyo, the exporter-heavy Nikkei 225 is up 4.2% and the broad-market Topix has added 3.5% since the end of 2025.
Old-World Gains in Japan
Among the top performers, you’ll find old-world industries such as electricity utility TEPCO (TKECY) (T:9501), up 13.5% this year alone to top the Nikkei, as well as shipbuilders Kawasaki Heavy Industries (KWHIY) (T:7012), up 10.6% for the second-best showing, and IHI (T:7013), up 9.8% and good for third place among the Nikkei’s 225 names.
Financials have also entered the year on a surge. Regional banks such as Resona Holdings (RSHGY) (T:8308), up 7.8%, and Chiba Bank (CHBAY) (T:8331), up 7.2%, are leading the way, investors predicting these “city banks” will benefit proportionately more from rising interest rates in Japan than their multinational counterparts.
They have even outdone Japan’s chip plays in these early stages of the year. My selection for the top stock pick this year, the chip-testing equipment maker Advantest (ATEYY) (T:6857), won’t however be complaining about its 5.6% gain in the first three trading days in Tokyo. Japan’s largest chipmaker, Tokyo Electron (TOELY) (T:8035), is up 3.5%.
U.S. Exceptionalism at an End?
We entered 2025 with the punditry talking about “U.S. exceptionalism,” and all bets on Wall Street outperforming its global peers. That made me uncomfortable, as I explained at the time. And indeed, Asian equities outstripped their U.S. counterparts, as I noted in my look back at 2025. Seoul led the way with that massive 75.7% upswing, but the China plays in Hong Kong also outstripped the S&P 500, leading the Hang Seng higher to the tune of 30.6%. Taiwan added a handy 26.9%.
Now we enter 2026 with the AI surge seeming to know no end. Again, that makes me uncomfortable.
It appears that “everyone knows” we are in a bubble on AI stocks, but that no one knows when it will end. Bulls will point to the strong gains for AI chipmakers, selling real chips for actual profits rather than dot-coms built on an idea and a prayer. Equally, we must beware the circular round of funding demonstrated by chip designers led by Nvidia (NVDA) , AI operators such as OpenAI, and hyperscalers such as Amazon.com (AMZN) , Facebook (META) , Google (GOOGL) and Microsoft (MSFT) .
Asia has its counterparts in the form of Alibaba Group Holding (BABA) (HK:9988), up 5.6% so far in 2026, Tencent Holdings (TCEHY) (HK:0700), up 5.7%, and unlisted Huawei Technologies.
Exposure to markets in Japan and Hong Kong does at least offer diversification beyond AI, into the major exporters of “Japan Inc.” and the strong China plays listed in offshore Hong Kong. The early showing suggests an allocation there could offset any setback in the chip sector, even if South Korea and Taiwan are likely to continue their bull run so long as the AI play continues its momentum.
At the time of publication, McMillan had long positions in TSM and BABA.
