Asian stocks hit early 2021 highs as AI optimism outweighs Venezuela risks

By Shivangi Lahiri

Jan 5 (Reuters) - Emerging Asian equities rose to the highest point in nearly five years on Monday, led by record gains in Taiwan, South Korea, Singapore, and Indonesia, as investors stayed focused on AI-linked assets, unfazed by U.S. military action in Venezuela.

Equities kicked off the year on a strong note: the MSCI index of emerging Asia equities .MIMS00000PUS jumped 2% to its highest since late February 2021, while a gauge of ASEAN stocks .MISU00000PUS touched its highest level since late January 2020.

A broader index of global emerging market equities .MSCIEF extended gains into a seventh consecutive session to scale a lifetime high.

The U.S. capture of Venezuelan President Nicolas Maduro over the weekend added a fresh wave of geopolitical risk to global financial markets. Yet, traders largely shrugged off the shock, with little panic or volatility.

"Markets seem to remain rather calm in early Asia, and the only tell-tale sign of a reaction was the move higher in the USD (against most currencies) as well as other safe havens such as gold," Maybank analysts wrote.

Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank, said sanctions on the South American nation and its heavy dependence on oil exports mean the impact of regime change through trade or investment channels is "limited and ring-fenced".

In EM Asia, benchmark indexes in South Korea .KS11 and Taiwan .TWII shot up more than 3% each to their record levels, with the latter surging past the psychologically key milestone of 30,000 points with ease.

Taiwan's benchmark gauge jumped as much as 3.2% to a record 30,339 points, owing to strong inflows in TSMC 2330.TW, the world's largest contract chipmaker, which surged about 7% to a lifetime high.

The relative strength index (RSI) for both Taiwan and South Korea surged past 70 for the first time since early November, a threshold market participants consider indicative of an "overbought" market.

Taiwan and South Korean equities were the top beneficiaries of the AI-trade in 2025 and are set to remain in favour as investors continue to ride AI optimism.

"U.S. artificial intelligence capex should remain a meaningful driver for Asia tech, but the market is shifting from 'bigger spend' to 'better returns'," said Song Zhe, a senior investment specialist at BNP Paribas in Hong Kong.

"We still see a multi-year build-out: hyperscalers are in a competitive arms race and power, networking and memory constraints tend to stretch cycles rather than stop them."

Equity benchmark indexes in Singapore .STI and Indonesia .JKSE advanced around 0.7% to scale record highs, with the former bolstered by its top banks.

Stocks in Manila .PSI gained 1.7% to 15-week high, while those in Kuala Lumpur .KLSE rose up to 0.7%.

Currencies in emerging Asia were on the back-foot against a firmer dollar, with the index =USD jumping to an over three-week high against a basket of major currencies.

Mitul Kotecha, head of FX & EM macro strategy for Asia at Barclays in Singapore, expects regional currencies to be weaker into the first quarter of the year, with any sort of gains from 2025 to be retraced.

The Malaysian ringgit MYR= fell around 0.5%, while the Singapore dollar SGD= was down as much as 0.2% to its weakest since December 22.

In Thailand, the baht THB=TH rose 0.5%, while stocks .SETI were up 1.9%.

Thailand's monetary policy committee said policy could turn more accommodative as growth slows and risks rise, minutes of the central bank's December meeting showed.

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