EMERGING MARKETS-Asian stocks at five-year highs as AI demand eclipses Venezuela shock

By Shivangi Lahiri

Jan 5 (Reuters) - Emerging Asian equities held firm near a five-year high in afternoon trading on Monday, led by records in Taiwan and South Korea, as investors piled into AI-linked assets while largely brushing off the U.S. military action in Venezuela.

The MSCI index of emerging Asia equities .MIMS00000PUS rose about 2% to its highest since late February 2021 and a gauge of ASEAN stocks .MISU00000PUS touched its highest level since January 30, 2020.

A broader index of global EM equities .MSCIEF extended gains into a seventh consecutive session, and was trading just a few points shy of its lifetime high touched earlier in the day.

Global markets shrugged off the U.S. capture of Venezuelan President Nicolas Maduro and warnings of further strikes on Venezuela, as well as the threats of military action in Colombia and Mexico.

However, the geopolitical jolt has injected fresh risks into global financial markets, particularly oil, as Maduro's capture could unlock Venezuela's vast oil reserves and worsen a supply glut.

Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank, said the sanctions on Venezuela 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, Taiwan's benchmark index .TWII finished the day 2.6% higher at a record closing level of 30,105.04 points, driven by a 5.4% surge in TSMC 2330.TW, the world's largest contract chipmaker.

South Korea's KOSPI index .KS11 shot up 3.4% to settle at its lifetime peak and highest closing level of 4,457.52 points.

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. AI 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."

Stocks in Singapore .STI and Indonesia .JKSE also traded around their all-time highs, advancing 0.7% and 1%, respectively.

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

The Malaysian ringgit MYR= fell around 0.5% and the South Korean won KRW=KFTC slipped 0.2%.

South Korea's policymakers pledged to steady the won by tackling structural foreign exchange imbalances, as Finance Minister Koo Yun-cheol added that the government will offer tax incentives for long-term domestic stock investment.

Thailand's baht THB=TH jumped 0.4% to 31.36 per U.S. dollar, potentially resuming its uptrend after weakening as much as 2% during the year-end holiday lull.

HIGHLIGHTS:

*Yield on India's 10-year sovereign bond IN10YT=RR jumps to 6.643%

Indonesia trade surplus less than forecast, inflation quickens

Japan's bond yields hit near 30-year highs on BOJ rate-hike bets

Philippines 2026 growth seen at 5.0 to 6.0%, says minister

EXPLAINER-Venezuela's billions in distressed debt: Who is in line to collect?