Zhao Yaoting, global market strategist for Invesco in the Asia-Pacific region, said that over the next 10 years, generative AI is expected to contribute $7 trillion to the global economy and drive annual growth of 1.5 percentage points. Despite the significant rise in US AI stocks, the momentum in the South Korean and Taiwanese markets remains strong, given the high proportion of AI in their market capitalization. About 63% of the market capitalization in Taiwan is related to AI, the highest in the Asia-Pacific region, followed closely by the South Korean market at around 44%. The valuations of Asian AI stocks and related beneficiaries are lower than their US counterparts. Benefiting from cyclical profit recovery, the upward trend in the AI industry, and corporate governance reforms, South Korean stocks are currently very attractive. Although the market has been volatile at the beginning of the year, investors should look out for potential rebounds in South Korean stocks later this year. Historically, the improvement in semiconductor sales cycles is closely related to the returns of the MSCI South Korea Index. After a significant inventory correction, global semiconductor sales declined in 2023, but revenue growth expectations for 2024 are as high as 22%. The long-term price-to-earnings ratio for South Korean stocks is around 7.5 times, 34% lower than their emerging market counterparts. Since 2001, South Korean stocks have only traded at this level for 3% of the time. Zhao Yaoting also has a positive outlook on Taiwanese stocks, but not as strong as for South Korean stocks, as the valuations of Taiwanese stocks are higher. Benefiting from the strong gains in the technology sector (rising over 35% since the fourth quarter of 2023), Taiwanese stocks have repeatedly reached new highs. As of now, the market has been mainly driven by domestic funds in Taiwan. During the period from 2020 to 2022, foreign investment accounted for only about 25% of the total investment. Therefore, there is still room for foreign net inflows. While large-cap stocks, semiconductor, and data center stocks have risen significantly, the uptrend in Taiwanese stocks has been quite concentrated. Future market gains may expand to small and medium-sized AI and related component stocks, including power grids and power suppliers that meet the demand for AI-related electricity. Zhao Yaoting pointed out that the strong tech exports in the South Korean market and the rebound in tech production in the Taiwanese market indicate that the semiconductor industry in North Asia has entered an upturn cycle driven by the recent AI boom. Although still optimistic about emerging market stocks, the market is not expected to see growth until the second half of 2024, as investors are still waiting for more clear signals from the US Federal Reserve and the possible landing scenario for the US economy. From a deployment perspective, it is believed that stocks in North Asian markets will lead emerging markets this year due to the Fed's rate cut cycle and the recovery in the tech cycle.