Why will the Asian market take over as the global leader in 2026?

Since 2026, the Asian equity markets have performed strongly overall, significantly outperforming the US and European markets. The MSCI Emerging Markets Index has risen 11.9% year-to-date, with Asian stock markets reaching new highs for the period.

This divergence is even more pronounced at the sector level. Asian advantages are concentrated in technology hardware and semiconductors—fundamentals of AI infrastructure. Benefiting from upward revisions in AI hardware and semiconductor profits, the Korean market has performed particularly well, continuing last year’s strong rally. The KOSPI index broke through 5,000 points and continued to rise, with a year-to-date increase of 37.8%, once again ranking first among major global markets. After Prime Minister Yoshihide Suga was re-elected, political stability, corporate reforms, and expectations of fiscal support have driven Japan’s stock market to continue its strength.

In contrast, the S&P 500 and Europe’s Stoxx 600 have performed relatively flat, even experiencing some declines at times. US tech stocks are highly differentiated internally; concerns over AI disrupting traditional SaaS business models have led to nearly 30% declines in US software sectors from previous highs. The MSCI Europe Software & Services Index underperformed the broader market by 17% in a single month, prompting a reassessment of valuation systems. Since the software sector was hit, AI panic trading has continued to spread, gradually impacting insurance, wealth management, real estate services, and logistics industries. European software sectors are under valuation pressure amid AI disruptions (see February 13, “Gold, Silver, and US Stocks Plunge! The Underlying Pricing Logic Switch Continues to Squeeze Double Bubbles”).

It is noteworthy that this round of Asian market gains is not merely valuation repair but a systemic improvement driven by earnings. Unlike some markets in 2025 that relied on valuation expansion, the rise since 2026 has been primarily driven by upward revisions in earnings per share. Technology hardware, semiconductors, industrials, and materials have been the main sources of profit revisions, reflecting broad-based fundamental improvements. In our January 4 article, “Which Equity Markets Globally Are Worth Watching in 2026?”, we noted that “the rise in the Korean stock market is mainly driven by chips, defense, AI, and Korean cosmetics stocks. Although the market size is relatively small, the high concentration of AI industry chains and the weight of tech stocks suggest that the strong earnings outlook in 2026 could continue to reinforce last year’s rally.”