AI slump revives Asia’s forgotten trades from China to India

Asia has been among the hardest hit by the market fallout from the Democrats’ sweep of Congress.

NEW YORK – The unravelling of the AI trade after the US midterm elections is forcing investors to rethink their Asia playbook, reviving demand for out-of-favour Chinese and Indian stocks as well as companies poised to benefit from easing inflation and trade tensions.

Aberdeen Investments favours markets powered by stronger domestic growth, including India and Vietnam, and sees upside in Chinese technology firms. Hedge fund Lotus Asset Management is long Hong Kong equity futures, while Allianz Global Investors is looking at healthcare and consumer companies.

Asia has been among the hardest hit by the market fallout from the Democrats’ sweep of Congress. Many of the region’s biggest stocks – from Samsung Electronics and SK Hynix to Taiwan Semiconductor Manufacturing – are critical suppliers to the global AI build-out, leaving local markets especially exposed as investors brace for greater scrutiny of the industry and question whether massive spending on computing infrastructure will generate sufficient returns.

“I expect investors to diversify more broadly and reduce their concentration in the AI trade,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA. “This should be supportive of China and other markets where valuations are less demanding.”

India could also benefit, although its dependence on imported energy remains a headwind, he added.

Hao Hong, chief investment officer at Lotus, said he is betting against oil and petrochemical firms and going long precious metals and Hong Kong equity futures.

A Hong Kong gauge tracking mainland companies gained 5.2% last week, its best performance since March 2025.

Meanwhile, some global investors are interested in using China’s onshore market exposure as a diversifier to their AI-heavy portfolio, according to Jason Lui, head of Asia-Pacific equity and derivatives strategy at BNP Paribas SA.

India’s appeal, meanwhile, has grown as oil prices declined on expectations of an earlier end to the Iran war, easing a key pressure point for the energy-importing economy. The market’s lack of AI exposure is also now seen as an advantage.

LOGOS Asset Management’s chief investment officer Charlie Hong said he sold his shares in SK Hynix, Samsung Electronics, Intel Corp. and Lumentum Holdings in October and has since boosted his Indian holdings with shares of new-age tech companies, financial firms and contract drug manufacturers.

India’s benchmark Nifty 50 gained 8.6% last week. registering its best week since 2021, as overseas investors returned in force. Foreign funds poured a net US$1.9 billion (S$2.4 billion) into local shares last week through Nov 4.