AUGUSTASIA BUSINESS OUTLOOK9Investors are ignoring geopolitical tensions to pile into Taiwan stocks, with foreign inflows reaching their highest level in years as a result of soaring artificial intelligence and chipmaking stocks. The wave of enthusiasm, which has also helped the tech-heavy Nasdaq to its best first half in 40 years, is raging as top firms all along the computer hardware and software supply chains dominate the market like no other.Net foreign buying of $12 billion in the six months to June is the highest since the first half of 2008, and Taiwan's benchmark index performance is the best in Asia, up 20 percent in US dollar terms this year.The gleaming rally has been unaffected by Taiwan's slowing economy, repeated displays of force by the Chinese military, or the war in Ukraine, which highlights what is at stake in the Taiwan Strait.Rather, investors say it's stronger because the stalemate deters Chinese action and risks can be managed by keeping positions liquid with an eye on a possible quick exit. Market observers believe the AI rally will continue."What we are seeing now is a tactical trade, which tends to be based on a shorter-term investment horizon before the tech sector's valuation peak," explained Carlos Casanova, Asia senior economist at Union Bancaire Privee."A potential escalation of events in the Taiwan Strait down the line is less relevant for these investors," he said. China claims democratically governed Taiwan as its own territory, a view strongly contested by the government in Taipei. As reported by HSBC, foreign direct investment (FDI) continues to pour into Asia, with much of it focused on manufacturing, cementing the region's position as the centre of global trade. Inflows are especially large relative to the size of economies in Vietnam, Malaysia, Australia, and New Zealand, but far less so in South Korea, mainland China, and Japan, according to the report.According to a recent HSBC report, the Association of Southeast Asian Nations (ASEAN) has surpassed mainland China for the second year in a row, particularly in terms of new, rather than repeat, investment.Meanwhile, mainland Chinese manufacturers are increasingly investing in other economies, particularly ASEAN, according to the report.The pandemic has had little impact on Asian FDI flows, and the continent remains a good place to invest, according to the bank.FDI inflows exceed two percent of GDP in Vietnam, Malaysia, New Zealand, Australia, and the Philippines, compared to one percent in South Korea, Japan, mainland China, and Bangladesh.In the first half of this year, total disbursed FDI volume in Vietnam reached $10.02 billion, a 0.5 percent increase year on year. According to the Ministry of Planning and Investment, FDI inflows into the country totaled $13.43 billion in the first half, a 4.3 percent decrease year on year. INVESTORS INVESTING HEAVILY IN TAIWAN POST AI & SEMICONDUCTOR MANUFACTURING SURGEASIA CONTINUES TO BE A LUCRATIVE DESTINATION FOR FDI, SAYS HSBC'S NEW REPORTNEWSROOM
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