--- title: "AI Chip Stock Rally Distorts Asian Benchmark Indices, Active Funds Trapped in \"Sell as They Rise\" Cycle" type: "News" locale: "en" url: "https://longbridge.com/en/news/289016040.md" description: "The surge in Taiwan Semiconductor, Samsung Electronics, and SK Hynix has caused two flagship indices to devolve into tools for betting on individual stocks, accounting for nearly one-third of the MSCI Asia Pacific (ex-Japan) Index. This has led active fund managers to hit position limits, forcing them into a passive reduction cycle of \"selling as prices rise,\" and accelerating the flow of tens of billions in capital into passive funds that are not subject to such restrictions" datetime: "2026-06-08T07:22:29.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/289016040.md) - [en](https://longbridge.com/en/news/289016040.md) - [zh-HK](https://longbridge.com/zh-HK/news/289016040.md) --- # AI Chip Stock Rally Distorts Asian Benchmark Indices, Active Funds Trapped in "Sell as They Rise" Cycle Taiwan Semiconductor, Samsung Electronics, and SK Hynix, the three major AI chip stocks, collectively account for nearly one-third of the weight in the MSCI Asia Pacific (ex-Japan) Index. The resulting concentration risk is forcing active fund managers to passively reduce holdings after hitting position limits, creating a vicious cycle of "selling as they rise," and severely distorting Asian benchmark stock indices. Sam Konrad, Investment Manager for Asian Equity Income at Jupiter Asset Management, admitted that **his fund has been "forced to sell" Taiwan Semiconductor, Samsung Electronics, and MediaTek—these three stocks have risen by 52%, 159%, and 184% respectively year-to-date.** Taiwan Semiconductor accounts for a staggering 41.5% of the Taiwan Weighted Index, while Samsung Electronics and SK Hynix together make up about 55% of the KOSPI Composite Index, causing the two flagship indices to effectively devolve into tools for betting on one or two individual stocks, losing the diversification significance that benchmark indices should possess. According to HSBC research, Taiwan Semiconductor is currently the single most underweight holding in Asian and global emerging market funds. Herald Van der Linde, Head of Asia Pacific Equity Strategy at HSBC, pointed out in a research report that this concentration creates a "structural challenge." As the stocks continue to outperform, it will become increasingly difficult for funds to increase exposure, and the "cycle of forced selling" will be continuously reinforced. The double-edged sword effect of concentration risk was evident in the recent decline—over the last three trading days from historical highs, the South Korean stock market fell 12%, and the Taiwanese stock market fell 6%. According to exchange data, foreign portfolio rebalancing operations drove a record monthly net outflow of $27.9 billion from the South Korean stock market in May, and the forced de-risking by active funds also exerted additional downward pressure on the already stressed Korean won exchange rate. ## The Cycle of Forced Reduction Is Hard to Break Expectations of explosive profit growth for chip companies have pushed Taiwan Semiconductor, Samsung Electronics, and SK Hynix to dominant positions in their respective benchmark indices, leaving active fund managers in a dilemma: avoiding these stocks makes it difficult to outperform the benchmark, while heavy holdings trigger internal concentration limits, forcing reductions. Herald Van der Linde wrote in his research report: "As stocks continue to outperform, funds will find it increasingly difficult to increase exposure, which reinforces the cycle of forced selling and continues to expand underweight positions against a backdrop of strong fundamentals." To make matters worse, the best-performing alternative targets outside of these three stocks are still highly linked to the AI theme, making industry diversification strategies difficult to deliver substantial yield improvements. According to Goldman Sachs statistics, the information technology sector is leading the Asia Pacific region with explosive gains, while sectors such as consumer staples and healthcare are lagging significantly, leaving very limited room for industry rotation. According to Goldman Sachs data, the MSCI Asia Pacific (ex-Japan) Index has risen 27% year-to-date, but if South Korea and Taiwan are excluded, the index has actually fallen 4%—the gap between the two clearly reveals the essence of this rally being highly concentrated in a few markets and a few individual stocks. Rupal Agarwal, Asian Quantitative Strategist at Bernstein, stated: "The continuous rise since April has pushed the concentration risk in Asian stock markets to unprecedented levels." Compared to the historical precedent where Baidu, Alibaba, and Tencent collectively accounted for 37.14% of the MSCI China Index weight during the peak in October 2020, the current concentration risk in Asia is more severe and expanding faster. ## Passive Funds Accelerate Erosion of Active Management Scale The highly concentrated market structure has further accelerated the large-scale migration of capital from active to passive funds. According to BNP Paribas' analysis of EPFR data, over the past five years, Asian active funds have seen cumulative net outflows of $269 billion, while passive funds have seen net inflows of $510 billion, with one-quarter of that occurring in just the last six months. William Bratton, Head of Asia Pacific Equity Research at BNP Paribas Securities, stated that the scale of recent inflows into passive funds in the region is "unprecedented in the past 10 years." Data tracked by Nomura Securities shows that US-registered funds have also reached a record $20.4 billion in inflows into the South Korean and Taiwanese stock markets year-to-date. Faced with continuously distorted benchmark indices, some active fund managers are beginning to explore new paths—extending downstream along the AI industrial chain to layout small and mid-cap supporting suppliers, while emphasizing the differentiated advantages of active stock selection strategies relative to passively tracking imbalanced indices. ### Related Stocks - [SSNGY.US](https://longbridge.com/en/quote/SSNGY.US.md) - [SMSN.UK](https://longbridge.com/en/quote/SMSN.UK.md) - [TSM.US](https://longbridge.com/en/quote/TSM.US.md) - [TSMG.US](https://longbridge.com/en/quote/TSMG.US.md) - [TSMZ.US](https://longbridge.com/en/quote/TSMZ.US.md) - [07747.HK](https://longbridge.com/en/quote/07747.HK.md) - [07709.HK](https://longbridge.com/en/quote/07709.HK.md) - [TSMX.US](https://longbridge.com/en/quote/TSMX.US.md) - [TSMU.US](https://longbridge.com/en/quote/TSMU.US.md) - [09747.HK](https://longbridge.com/en/quote/09747.HK.md) - [JUP.UK](https://longbridge.com/en/quote/JUP.UK.md) - [00005.HK](https://longbridge.com/en/quote/00005.HK.md) - [HSBC.US](https://longbridge.com/en/quote/HSBC.US.md) - [HSBA.UK](https://longbridge.com/en/quote/HSBA.UK.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [AB.US](https://longbridge.com/en/quote/AB.US.md) - [09888.HK](https://longbridge.com/en/quote/09888.HK.md) - [BIDU.US](https://longbridge.com/en/quote/BIDU.US.md) - [09988.HK](https://longbridge.com/en/quote/09988.HK.md) - [BABA.US](https://longbridge.com/en/quote/BABA.US.md) - [00700.HK](https://longbridge.com/en/quote/00700.HK.md) - [TCEHY.US](https://longbridge.com/en/quote/TCEHY.US.md) - [BNPQY.US](https://longbridge.com/en/quote/BNPQY.US.md) - [8604.JP](https://longbridge.com/en/quote/8604.JP.md) - [NMR.US](https://longbridge.com/en/quote/NMR.US.md) - [DTIW.SG](https://longbridge.com/en/quote/DTIW.SG.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) - [89888.HK](https://longbridge.com/en/quote/89888.HK.md) - [89988.HK](https://longbridge.com/en/quote/89988.HK.md) - [HBBD.SG](https://longbridge.com/en/quote/HBBD.SG.md) - [80700.HK](https://longbridge.com/en/quote/80700.HK.md) - [HTCD.SG](https://longbridge.com/en/quote/HTCD.SG.md) - [TCTZF.US](https://longbridge.com/en/quote/TCTZF.US.md) ## Related News & Research - [Is Taiwan Semiconductor stock a buy before July?](https://longbridge.com/en/news/288914371.md) - [Key facts: Samsung +10% HBM4E; union pact ends strike; 4% 2026 drop](https://longbridge.com/en/news/288340681.md) - [SK Hynix tells investors its US listing plan wins their strong backing, source says](https://longbridge.com/en/news/288678211.md) - [SK Hynix plans to double capacity to ease memory crunch](https://longbridge.com/en/news/288454795.md) - [South Korea secures access to Anthropic's Mythos AI model, Science Ministry says](https://longbridge.com/en/news/288495473.md)