Foreign Investors Dump Asian Stocks Over Crowded AI Winners

Reuters reported that foreign investors sold Asian equities at the fastest pace in at least 16 years in the first half of 2026, pulling a net $137.36 billion from shares across South Korea, Taiwan, India, Indonesia, Thailand, Vietnam, and the Philippines, the fastest six-month outflow in LSEG data going back to 2010 (Reuters, via MarketScreener). South Korea and Taiwan accounted for the bulk of the selling, at $70.8 billion and $29.6 billion respectively, as the KOSPI nearly doubled and Taiwan's market rose 62% over the period, driven largely by three major chipmakers: TSMC, Samsung, and SK Hynix. In June alone, foreign investors sold $27.08 billion of regional equities, including $12.63 billion from South Korea, $8 billion from Taiwan, and $5.91 billion from India. Bank of New York Mellon's breakdown of the South Korean selling showed mutual funds accounted for $7.50 billion, pension funds $4.35 billion, and hedge funds $1.87 billion.

Reuters quoted Joshua Crabb, head of Asia-Pacific equities at Robeco, saying that with "only two markets and one sector" outperforming, investors "have to get your balance right," and Kerry Craig, global market strategist at J.P. Morgan Asset Management, said investors were reassessing whether they had too much technology exposure while looking at themes such as defense, renewables, and broader diversification. BNY Mellon's analysis characterized the South Korean selling as rebalancing and profit-taking by long-only funds rather than a broad rejection of the market.

The outflows are not, per the cited analysts, primarily a signal that the AI infrastructure buildout itself is slowing; index and benchmark rebalancing, currency hedging, and concentration-risk management appear to be larger drivers than a fundamental reassessment of AI demand. Still, the speed of the reversal is a useful data point for anyone modeling how equity-market sentiment toward AI-exposed chip and memory names can swing even while underlying capital expenditure on AI infrastructure remains strong.

Whether fund flows stabilize or continue rotating toward "cheaper, under-the-radar" markets in Southeast Asia, as Crabb suggested, and whether a valuation reset in South Korean and Taiwanese chip stocks draws foreign capital back, as some analysts cited by Reuters expect is possible.