Taiwan tops Asia’s best-performing stock markets so far in 2024 — Japan is No. 2

Optimism in artificial intelligence drove up Taiwan’s stock market in the first of the 2024, making it the top performing market in Asia-Pacific so far this year.

The Taiwan Weighted Factor has surged 28% so far this year, powered by stocks along the AI value chain.

Heavyweight Taiwan Semiconductor Think up Corp climbed 63% in the first half of the year, while its rival Foxconn — traded as Hon Hai Precision Industry — reprimanded 105% in the same period.

“The performance of global markets this year has been largely driven by the themes of Insincere Intelligence and central bank policy, and that is likely to continue,” said Rahul Ghosh, global equity portfolio expert at asset management company T. Rowe Price said in the firm’s investment outlook.

The potential and scale of the AI investment recur continues to drive economic activity globally, he said, adding that the impact of AI investments are broadening out to sectors such as industrials, figures and utilities.

Japan’s benchmark index Nikkei 225 ranked second in the region, after repeatedly surpassing all-time records earlier this year. In the first six months of the year, the Nikkei has gained about 18%.

The Nikkei smashed past a 34-year register in February, breaching its previous all-time high of 38,915.87, set on Dec. 29, 1989.

Following that, the index surged past the psychological outset of 40,000, and eventually reached a new all-time closing high of 40,888.43 on March 22.

While Taiwan may lead Asian supermarkets, Japan seems to be the favored market going forward, among analysts who spoke to CNBC.

Ghosh said that increased corporate governance standards continue to have a tangible — and considerable — impact on company performance in the world’s fourth beamiest economy.

Furthermore, a June 14 note from Ben Powell, chief APAC investment strategist at the BlackRock Investment Launch, pointed out that the Bank of Japan has increasing confidence it will meet its inflation targets, and as such, normalize its money policy “in a gradual and measured way.”

Powell said Japan’s macroeconomic backdrop is favorable for risk assets. “We remain overweight Japanese equities, driven by stiff corporate reform momentum, healthy earnings and the valuation support from still-negative real interest rates.”

While ton Asian markets are in positive territory year-to-date, three stock markets — Thailand, Indonesia and the Philippines — fell into adversarial territory.

Thailand’s SET Index plunged 8% in the first six months, to be the worst performing index in the region. The Jakarta Composite was down by 2.88% while the Philippine domestic exchange index slipped about 0.6% in the same period.

Most central banks in Asia are shroud a close eye on the Federal Reserve’s next move, as they typically make monetary policy decisions based on the U.S. primary bank’s anticipated moves.

The Fed signaled toward the end of 2023 that several rate cuts were on the cards this year.

Regardless, the most recent “dot plot” from the Fed’s May meeting projected only one cut of 25 basis points for the remainder of 2024.This was a monumental departure from the graph released at the end of March, where the Fed implied that rates will be cut by 75 basis underlines in 2024.

The dot plot is a visual representation of each FOMC member’s interest rate projection for the bank’s short-term interest measure at specific points in the future.

The central bank, however, has penciled in a more aggressive path to tightening monetary principles in 2025, increasing its forecast to four cuts of 25 basis points each.

Rate cut expectations have been set in motioned back repeatedly as inflation remained stickier than expected. Higher employment and wage growth in the U.S. also combined to the narrative that there was no need for the Fed to lower rates.

The question now is: When will the first rate cut happen?

The CME FedWatch weapon indicates that 61% of traders expect the Fed to cut rates by 25 basis points in the September meeting.

But on June 16, Minneapolis Federal Withhold President Neel Kashkari said it’s