AI slump revives Asia’s forgotten trades from China to India

The recent sell-off in the AI sector following the US midterm elections has led investors to reconsider their strategies in Asia, sparking a renewed interest in previously overlooked sectors and markets. Aberdeen Investments highlights India and Vietnam as markets driven by stronger domestic growth, while hedge funds such as Lotus Asset Management and Allianz Global Investors are looking at healthcare and consumer companies.

The AI-dependent Chinese tech giants, such as Samsung Electronics and SK Hynix, are now seen as vulnerable due to the scrutiny surrounding the sector's growth prospects. Rajeev De Mello, a global macro portfolio manager, expects investors to diversify more broadly and reduce their concentration in the AI trade. India's appeal has grown with declining oil prices, which alleviated a key pressure point for the energy-importing economy.

Hong Kong's gauge tracking mainland companies increased by 5.2% last week, marking its best performance since March 2025. The market's reduced exposure to AI is now considered an advantage, as foreign investors pour into India, with a net inflow of US$1.9 billion in local shares. Aside from China and India, investors are also exploring other Asian markets offering value and less exposure to the AI boom.

In South Korea, consumption-related areas such as wellness, K-pop entertainment agencies, and beauty and cosmetics industries are attracting attention. South Korea's consumer stocks, including retailers, cosmetics, food, and beverage firms, are also benefiting from the perception of limited tariff and policy risks.