Shanghai Composite Index Falls 3.6% in May
Semiconductor Stocks: Korea and Taiwan Up 3%, 6.4%
Warren Buffett's 'Pick' Japanese Market Jumps 7%
Due to the disappointing effects of China's 'reopening' (resumption of economic activities) and the intensifying US-China decoupling, global investors' funds are flowing from China into the markets of South Korea, Japan, and Taiwan.
According to major global stock markets on the 1st, the Shanghai Composite Index fell 3.6% last month. The Chinese stock market rose 9.8% until April 18, when it hit the year's highest point, but then gave back the gains and dropped 5.6% over the following month and a half.
Amid China's economic contraction and the overlapping US-China conflicts, investors feeling uneasy are gradually withdrawing. The Manufacturing Purchasing Managers' Index (PMI) for China, released the previous day for May, was 48.8, continuing the contraction phase for two consecutive months. Since the manufacturing PMI is a leading indicator that gauges future manufacturing conditions, this shows that China's economy is rapidly shrinking.
Funds exiting China are flowing into South Korea and Taiwan, home to global semiconductor companies, and Japan, where inflation is expected to rise. According to HSBC Holdings, foreign investment inflows into South Korea and Taiwan have each reached $9.1 billion so far this year. Japan has also seen seven consecutive weeks of net foreign capital inflows through mid-May. Notably, Japanese stocks are attracting attention as Warren Buffett, chairman of Berkshire Hathaway and known as the 'investment genius,' is actively buying them.
Accordingly, South Korea's KOSPI index rose 3.0% in May, and Japan's Nikkei index increased by 7.0%. In particular, the Japanese stock market hit its highest point in 33 years at the beginning of last month. The South Korean stock market also recorded its highest intraday level of the year the previous day. Taiwan's TAIEX index jumped 6.4%. Christina Woon, Asia equity investment director at Aberdeen Asset Management, said, "There are absolutely many opportunities in Asian regions outside China," adding, "South Korea has numerous companies within the battery and technology supply chains, Taiwan is the home country of TSMC, and Japan offers access to global leading companies."
The market expects the upward trend in Asian stock markets outside China to continue for the time being. BNY Mellon Investment Management adjusted Chinese stocks to 'neutral' last week, while expecting countries like South Korea, Thailand, and Singapore to benefit from expanded Chinese consumption. Citigroup downgraded its investment rating on Chinese stocks from 'overweight' to 'neutral' last week, citing insufficient economic stimulus measures in China. Conversely, it upgraded investment ratings for other Asian regional stocks based on the strength of technology stocks.
Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs Group, analyzed, "There is much skepticism about China's long-term outlook," and "Investment appetite for China will remain sluggish in the short term." He added, "Investing in China now requires being much more specific than before."
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