Taiwan Overtakes India To Become World's Fifth-Largest Stock Market, Powered By TSMC's AI Rally

Taiwan has displaced India to claim fifth place in global stock market rankings by market capitalisation, in what marks a first for Asian equity markets. Taiwan's market cap climbed to $4.95 trillion as of Monday, nudging past India's $4.92 trillion, according to Bloomberg data. The United States leads globally at $77.96 trillion, followed by China at $15.57 trillion, Japan at $8.67 trillion, and Hong Kong at $7.26 trillion.

One Stock Driving The Surge

Taiwan's rise is almost entirely the story of one company. Taiwan Semiconductor Manufacturing Company (TSMC) now accounts for over 42% of Taiwan's benchmark index, a level of market concentration that is unusual even by global standards.

TSMC shares have rallied 49% so far this year, riding a wave of demand for its semiconductors that sit at the heart of the global artificial intelligence (AI) buildout. The chipmaker's dominant position in AI chip manufacturing has made it one of the biggest beneficiaries of the technology-driven rally sweeping global markets.

New regulations have also worked in TSMC's favour. Taiwan's financial regulator last month raised the limit that domestic funds can invest in a single stock. Funds investing solely in Taiwanese stocks can now hold up to 25% of their net assets in any listed company whose index weighting exceeds 10%, up from a previous cap of 10%. Currently only TSMC meets this threshold.

Why India Has Fallen Behind

India's slide to sixth place reflects a combination of pressures that have built up over the past several months. Global funds have sold nearly $24 billion of Indian equities so far this year, chasing the AI-driven rally in Taiwan and South Korea instead.

India's benchmark indices are down around 8% this year, on course for their first annual decline after a decade of gains. India's weight in the MSCI emerging markets index has also dropped to about 12% from 19% last year.

The factors weighing on India include elevated energy costs from the West Asia conflict, a weakening rupee, stretched valuations, subdued corporate earnings growth, and persistent foreign institutional investor outflows. The Iran conflict pushing crude oil higher has stoked inflation concerns and added to fiscal worries, further dampening investor confidence.

Crucially, India's index heavyweights have little direct exposure to the AI buildout that is driving markets in Taiwan and South Korea. The absence of AI-linked stocks among India's top companies has kept it largely on the sidelines of the global technology rally.

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Economy Vs Market

While India’s economic size still comfortably outstrips Taiwan’s, India has lost some ground in market cap. For context, the IMF estimates India’s $4.15 trillion GDP is among the fastest-growing in the world, compared to Taiwan’s $977 billion. The divergence in market cap, in this sense, is more reflective of near-term sentiment and sectoral positioning than a structural change in economic standing.

Sources:

Business Standard

Moneycontrol