May 27 (Asia Today) — Taiwan has overtaken India to become the world’s fifth-largest stock market, as shares of Taiwan Semiconductor Manufacturing Co. surged on demand linked to artificial intelligence.

Taiwan’s stock market capitalization reached $4.95 trillion at Monday’s close, surpassing India’s $4.92 trillion by about $30 billion.

TSMC has been the main driver of Taiwan’s rise. Shares of the world’s largest contract chipmaker have climbed about 46% this year, helping lift Taiwan’s Taiex index by more than 50%.

TSMC alone accounts for about 42% of the Taiex’s total market capitalization, showing the market’s heavy concentration in one company. On Monday, TSMC fell 1.7% and the Taiex slipped 0.3%, but the broader trend this year has remained strong.

Taiwanese financial regulators have also opened the door for more money to flow into TSMC. Since last month, Taiwan stock funds have been allowed to hold up to 25% of their net assets in a single stock if that company accounts for more than 10% of the Taiwan Stock Exchange’s total market value. The previous limit was 10%.

TSMC is currently the only company that meets that threshold. JPMorgan Chase estimated the rule change could bring more than $6 billion in additional inflows into TSMC.

India’s stock market, by contrast, has been hit by a record outflow of foreign capital. Global funds have sold about $24 billion in Indian shares this year and shifted money into Taiwan and South Korea, which are seen as beneficiaries of the AI boom.

India’s benchmark stock index has fallen about 8% this year and could post its first annual decline in a decade. India’s weighting in the MSCI Emerging Markets Index has also dropped to 12% from 19% last year.

The shift is striking because India’s economy is far larger than Taiwan’s. The International Monetary Fund estimates India’s gross domestic product at $4.15 trillion, more than four times Taiwan’s $977 billion economy.

That means Taiwan, with an economy less than one-fourth the size of India’s, has surpassed India in stock market value.

Analysts said the reversal reflects the strength of the AI investment cycle.

“Taiwan’s rise in market capitalization essentially reflects its concentration in technology hardware, which is at the center of the current AI investment cycle,” Franklin Templeton fund manager Yi Ping Liao said. “Markets with limited exposure to technology hardware are increasingly being overshadowed by hardware-centered markets such as Taiwan and South Korea.”

Some investors still see opportunities in India.

“India is a market that has been ignored for nearly two years,” Alison Shimada, portfolio manager at Allspring Global Investments, told Bloomberg TV. “It is an expensive market, so investors need to be selective, but India still stands out in terms of the shift of household savings into financial assets.”

— Reported by Asia Today; translated by UPI

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