When Samsung and SK Hynix fell sharply from late June, the three stocks were similarly responsible for a large share of the index\u2019s 6.8% decline. Chip stocks have remained volatile over the past month, with a sharp drop on Monday.<\/p>\n
On Stocktwits, retail sentiment was \u2018bearish\u2019 for SKHY and \u2018extremely bearish\u2019 for TSM on Monday.<\/p>\n
Emerging Markets Concentration Risks<\/p>\n
The concentration has grown rapidly as the stocks have surged on expectations of sustained AI-related demand. TSMC has\u00a0jumped 96% over the past year, while Samsung has\u00a0soared 258% and SK Hynix has\u00a0rocketed 456%.<\/p>\n
The net result is that investors seeking broad exposure to developing economies are increasingly being exposed to the same AI trade driving U.S. markets, according to Morningstar.<\/p>\n
\u201cInvestors may think they are getting broad exposure to the developing world, but in practice, they are getting a very large allocation to Taiwan, China, South Korea, and India, with a huge semiconductor engine inside it,\u201d Paul Choi, a non-US equity investment consultant at Callan, said. \u201cThat is a double layer of concentration.\u201d<\/p>\n
Morningstar research analyst Michael Born said the shift marks a sharp change from five years ago, when AI capital expenditure stocks were near the bottom of the market, and returns were driven largely by consumer electronics such as PCs, smartphones and gaming.<\/p>\n
The\u00a0Direxion Daily South Korea Bull 3X Shares<\/a> (KORU), a three-times leveraged ETF tracking South Korea\u2019s largest stocks, is up 357% in the past year and has seen increased interest from retail traders. On Stocktwits, message volume for KORU has increased by more than 1,000% in this period.<\/p>\n Non-AI Trades: Easiest Way To De-risk?<\/p>\n The report said the current concentration is also more extreme than previous emerging-market rallies. The top 10 stocks in the MSCI Emerging Markets Index accounted for 39% of the benchmark as of early June, compared with 28% during the 2020-21 China tech boom.<\/p>\n The\u00a0iShares MSCI Emerging Markets ETF (EEM)<\/a>, the fund tracking the index, has gained 31% year to date. The\u00a0iShares MSCI South Korea ETF (EWY)<\/a> and\u00a0iShares MSCI Hong Kong ETF (EWH)<\/a>, South Korea and Hong Kong stocks respectively, have gained 138% and 8.2% in the past 12 months.<\/p>\n Some investors are therefore looking beyond the AI trade. Matthews Asia executive chairman Mark Headley was quoted in the Morningstar report as saying, \u201cIt\u2019s time to dampen concentration risk,\u201d pointing to cheaper Chinese financials and opportunities across ASEAN, India, South Korea and other overlooked parts of emerging markets.<\/p>\n For updates and corrections, email newsroom[at]stocktwits[dot]com.<\/p>\n Read Next:\u00a0NVDA Stock\u2019s 7-Day Losing Streak Sets Up Make-Or-Break AI Earnings Test: Retail Expects Yet Another Beat<\/a><\/p>\n \u00a0<\/p>\n
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