EMERGING MARKETS-Stocks start final week of 2025 on firm footing, Taiwan hits record high

By Rajasik Mukherjee

Dec 29 (Reuters) - Taiwan shares surged to a record high on Monday, while South Korea's KOSPI climbed to its strongest level in eight weeks, setting an upbeat tone for the final week of the year.

An MSCI gauge of emerging Asian equities .MIMS00000PUS inched 0.2% higher, touching its highest level since mid-November.

It was set to end 2025 with a near 30% gain, its best since 2017, largely driven by the two tech-heavy East Asian countries that make up 40% of the constituents.

Taiwan's benchmark equities index .TWII rose as much as 1% to a record 28,841.64 points on Monday, and was on track to end 2025 with a more than 25% gain, marking its third annual growth exceeding a quarter of its value.

The rally underscores island's pivotal role in the global artificial intelligence supply chain, with TSMC 2330.TW as its crown jewel, drawing steady local inflows, even as foreign investors fret over lofty valuations and China tensions.

"AI remains the tech sector mega-trend, and we are positive on the growth outlook... without TSMC, the AI boom and all ensuing mega deals would not have been possible," KGI Research said in a note.

"We believe the AI investment bubble is a long way from bursting point. General server demand growth in 2026 will exceed historical rates."

Investors say Taiwan's benchmark index is poised to breach the 30,000 level in 2026, extending a three-year surge that has seen the stock market nearly double in value on the AI wave.

South Korean stocks are in a league of their own. The benchmark KOSPI .KS11 advanced as much as 2.2% to hit its highest since November 4, and was on course to end the year with over 70% growth, making it the best performing stock market in the world.

In Southeast Asia, Indonesian stocks .JKSE rose 0.8%, while Philippine shares .PSI gained 0.4% to their highest in about two weeks.

Among currencies, the South Korean won KRW=KFTC rose 0.7% to hover around early November highs. It has appreciated over 3% against the dollar since last week, when Reuters reported that the country's national pension service had initiated steps to boost the currency.

The Thai baht THB=TH depreciated 1.2% to 31.365 a dollar, offering a brief respite for exporters after weeks of appreciation due to heavy gold trading, though the currency remains uncomfortably strong with around 10% gains.

Thailand's factory output unexpectedly fell 4.2% in November from a year earlier, with the government citing the strong baht among key drags. The strong currency has already prompted officials to signal possible measures to curb excessive gains.

With Monday's losses, the baht has ceded its spot as Asia's best performing currency to Malaysia's ringgit MYR=.

Elsewhere, the Indonesian rupiah IDR= and the ringgit shed 0.3% each.

HIGHLIGHTS:

Yield on Indonesia's 10-year government bond ID10YT=RR at 6.120%

BOJ debated need for more rate hikes even after December move, summary shows

China launches war games around Taiwan as island vows to defend democracy