Asian Fund Managers Favor Japan, Taiwan, and South Korea for 2026 Amid AI and Chip Boom

Asian fund managers are growing increasingly bullish on Japan, Taiwan, and South Korea, while sentiment toward India has turned negative, according to Bank of America’s January fund manager survey. The shift reflects expectations of a strong semiconductor cycle and sustained artificial intelligence investment, which are seen as key growth drivers across Asia’s leading equity markets.

Japan remained the top preferred market among investors, with optimism centered on new Prime Minister Sanae Takaichi and her proposed policies focused on increased fiscal spending and tax cuts. These measures are expected to support domestic growth and corporate profitability. Investors appeared less concerned about near-term monetary tightening, with most anticipating the Bank of Japan’s next interest rate hike only around June 2026. In Japanese equities, chips, artificial intelligence, and banking stocks continued to be the most favored investment themes.

South Korea and Taiwan also benefited from strong confidence in the global semiconductor and AI supply chain. South Korea’s KOSPI emerged as Asia’s top-performing index in 2025, posting a massive 75% gain, largely driven by heavyweight chipmakers. Taiwan’s Taiwan Weighted Index and Japan’s Nikkei 225 each gained around 26%, underscoring sustained investor demand for technology-linked markets. By comparison, India’s Nifty 50 rose 20% in 2025 but has since lost favor among fund managers.

Broader global growth expectations improved notably, with investors expecting most Asian central banks to maintain dovish policy stances. Bank of America noted that global growth expectations reached their highest level since October 2021. Confidence also improved toward China’s economic recovery, with signs that household risk appetite is gradually returning and the long-term structural outlook becoming less pessimistic. AI and semiconductor stocks remain dominant themes within Chinese markets as well.

India, however, saw investors turn underweight after reversing positions from the previous month. Growing uncertainty around a potential U.S.-India trade deal weighed on sentiment, as India continues to face a 50% tariff on exports to the United States. Ongoing purchases of Russian oil remain a key point of tension with Washington, adding pressure to India’s economic outlook.

The Bank of America survey polled 227 participants managing a combined $575 billion in assets, offering a broad snapshot of Asian market sentiment heading into 2026.