Amid Global Optimism and AI Hype, Japanese and Taiwanese Markets Stand Out
Asian stocks demonstrated a marginally positive performance during the first quarter of 2024, riding on the wave of optimism generated by record highs on Wall Street and the buzz surrounding artificial intelligence. However, this optimism was tempered by lingering concerns regarding sustained higher U.S. interest rates amidst persistent inflationary pressures.
Despite these challenges, two Asian markets notably outshone their counterparts in the region throughout the quarter, driven by a combination of accommodating monetary policies, economic resilience, and stellar performances in key technology sectors.
Japan’s Nikkei 225: Leading the Pack in Q1
The Nikkei 225 emerged as the standout performer in Asia for the first quarter, continuing its trend from the previous year where it had outpaced other indices. The index soared to a record high, surpassing 41,000 points in March.
With a remarkable gain of over 21% for Q1, the Nikkei outstripped the S&P 500 and the NASDAQ Composite by nearly double the percentage. The surge in the Nikkei was predominantly propelled by the Bank of Japan’s dovish stance, maintaining negative interest rates and yield control policies throughout most of the quarter.
Although the BOJ initiated its first interest rate hike in 17 years in March, indications from BOJ officials suggest a continued accommodative monetary policy stance in the foreseeable future. Additionally, robust corporate profits in Japan during 2023, particularly among major exporters benefiting from a weakened yen, set a positive trajectory for 2024.
However, some analysts caution that the Nikkei’s momentum may wane, particularly if the BOJ opts for further policy tightening in 2024. Analysts at Citi anticipate a range-bound trading pattern for the Nikkei after its ascent to 41,000 points.
Taiwan’s Tech-Fueled Surge
Following closely behind, Taiwan’s Weighted index emerged as the second-best performer in Asia for Q1, recording an impressive gain of about 11% and reaching a record high in March.
The stellar performance of the index was largely attributed to Taiwan Semiconductor Manufacturing Corp (TSMC), the dominant player on the index. TSMC experienced a remarkable 30% surge during Q1, driven by growing optimism surrounding artificial intelligence.
As the primary supplier to AI giant NVIDIA Corporation, TSMC anticipates heightened demand for its high-end chips amidst the burgeoning AI development landscape. This AI-driven optimism also buoyed other Taiwanese tech heavyweights, including Foxconn (Hon Hai Precision Industry Co Ltd), which witnessed robust earnings fueled by increased demand for servers from the AI sector.
Foxconn, trading at record highs, registered a substantial gain of nearly 27% for Q1. Similarly, South Korean chipmaker SK Hynix Inc experienced a 27% surge, fueled by strong demand for its cutting-edge memory chips driven by the AI industry.
Mixed Performance Across Broader Asian Markets
While Japan and Taiwan shone brightly, broader Asian markets experienced a mixed performance in Q1. India’s Nifty 50 index saw a modest 2% increase, while China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes posted gains of 2% and 4% respectively, buoyed by optimism surrounding potential stimulus measures from Beijing.
However, Hong Kong’s Hang Seng index struggled, facing a nearly 1% loss for Q1. Australia’s ASX 200 index managed a 3.5% rise, supported primarily by technology and banking stocks, although declines in mining stocks due to falling iron ore prices limited overall gains.
As the quarter draws to a close, Asian markets remain poised for continued volatility amid global economic uncertainties and evolving monetary policies.