Emerging Asian stock markets found solid ground on Monday, with Taiwan and South Korea leading sharp gains driven by artificial intelligence enthusiasm, even as regional currencies faced renewed pressure amid lingering uncertainty over the U.S.-Iran peace process.
The MSCI Emerging Markets Asia index climbed more than 1.5%, hitting a fresh record high. The advance was powered largely by heavyweights in the semiconductor and technology space, which together make up roughly 60% of the gauge. Taiwan’s benchmark index surged over 3% to a new all-time high of 47,871.190 points, extending its winning streak to six sessions. South Korea’s KOSPI rose more than 2%, coming close to its own record peak set just last week.
“Today’s equity trading shows that AI remains the strongest counterweight to geopolitics and higher rates,” said Glenn Yin, director of research at brokerage ACCM. “Korea and Taiwan are being treated as direct beneficiaries of the semiconductor and AI capex cycle, while Japan is getting an extra boost through large tech and AI-linked names.”
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The resilience in these two markets underscores a clear divergence playing out across emerging Asia. While broader investor sentiment remains clouded by developments in the Middle East, money continues to flow into the region’s most direct plays on the global AI boom. Both Taiwan and South Korea have become epicenters of the semiconductor supply chain critical to powering advanced AI models, attracting sustained foreign inflows even as geopolitical risks linger.
In contrast to the equity strength, most Asian currencies struggled. The MSCI Emerging Markets currencies index slipped 0.3% for a third straight session, reflecting caution over the U.S.-Iran situation. A statement from mediators indicated that Washington and Tehran had agreed to a 60-day roadmap toward a final deal, but fresh comments from both sides — including Tehran’s announcement that it had again closed the Strait of Hormuz and President Donald Trump’s renewed threats — kept markets on edge.
The Indonesian rupiah weakened to 17,818 per dollar, while the Indian rupee snapped a six-session winning streak, sliding to 94.405. The South Korean won fell 0.5% to 1,538.8, hovering near a two-week low, and the Philippine peso touched its weakest level since June 12. A stronger U.S. dollar added to the pressure across the region.
With the peace process still fluid and potential for renewed volatility around energy markets, investors appeared reluctant to increase allocations to emerging market assets.
For Indonesia, the week brings a particularly high-stakes event. MSCI is set to deliver its verdict on the country’s emerging markets status in a report due early Wednesday. A downgrade could intensify capital outflows and heighten risk aversion for Southeast Asia’s largest economy.
“A downgrade would likely exacerbate capital outflows and could reinforce risk aversion, and open the door to even more downside risk for the country’s equity and currency,” Yin added.
AI as the Dominant Narrative
The outperformance in Taiwan and South Korea highlights how the AI investment theme has become a powerful force capable of overriding near-term geopolitical and macro concerns. Semiconductor heavyweights in both markets have benefited enormously from global hyperscaler spending on AI infrastructure, creating a virtuous cycle of earnings upgrades, foreign inflows, and valuation expansion.
This dynamic stands in contrast to other parts of emerging Asia, where currencies and equities remain more exposed to traditional risk factors such as U.S. dollar strength, energy prices, and trade uncertainties.
The broader picture in the region indicates that the market is increasingly bifurcated: AI-linked technology names and their supporting ecosystems continue to draw capital, while more traditional or domestically focused segments grapple with higher borrowing costs, geopolitical overhang, and uneven recovery in domestic demand.
Key Developments Across the Region
Several notable moves rounded out the session. SK Hynix surpassed Samsung Electronics to become South Korea’s most valuable company, extending its remarkable run fueled by its dominant position in high-bandwidth memory chips essential for AI servers.
In Japan, the finance minister reiterated readiness to act on the yen at any time, as the currency continues to face pressure despite recent interventions and policy tightening. Meanwhile, China kept its lending benchmark rates unchanged for the 13th consecutive month, a sign that Beijing remains measured in its policy response amid ongoing economic restructuring and subdued domestic demand.
These developments bolster the theme that while AI is driving exceptional performance in select markets and sectors, the broader emerging Asia story remains complex, shaped by divergent policy paths, geopolitical risks, and structural shifts in global capital flows.