Jefferies Raises India Allocation to 14% While Trimming South Korea and Taiwan Over AI Peak Fears
Global brokerage Jefferies has raised India’s allocation in its Asia-Pacific ex-Japan relative-return portfolio by two percentage points to 14%, reinforcing its overweight stance on the country. Simultaneously, the firm reduced its exposure to technology and semiconductor-heavy hubs South Korea and Taiwan by one percentage point each.
Authored by Christopher Wood, Global Head of Equity Strategy at Jefferies, in his signature GREED & fear report, the portfolio rebalancing comes against the backdrop of growing apprehension that the multi-year capital expenditure wave powering the global artificial intelligence (AI) trade is nearing a peak or entering a sharp mid-cycle correction.
Rebalancing the Regional Portfolio
Following the adjustments, India’s weighting stands at 14%, giving the market a two-percentage-point overweight position against its regional benchmark weighting of 12% in the MSCI AC Asia Pacific ex-Japan index.
In contrast, Jefferies reduced South Korea’s allocation from 19% to 18% and trimmed Taiwan’s weighting from 25% to 24%, maintaining underweight stances on both export-driven North Asian markets.
Key portfolio shifts by Jefferies:
- India: Allocation raised by 200 basis points from 12% to 14% (Overweight).
- South Korea: Allocation reduced by 100 basis points to 18% (Underweight).
- Taiwan: Allocation reduced by 100 basis points to 24% (Underweight).
AI Capex Fatigue and Financing Pressures
The strategic shift away from North Asian chipmaking giants follows increasing stress in the technology financing ecosystem. Heavyweights Microsoft, Amazon, Alphabet, and Meta drove combined capital expenditures up by 108% year-on-year to $202 billion in the third quarter alone, with combined projections for next year exceeding $1 trillion.
However, Jefferies noted that financial markets are displaying growing reluctance to underwrite this level of spending indefinitely. Widening bond yield spreads for major hyperscalers, sharp rises in credit default swap (CDS) spreads for leveraged infrastructure plays like CoreWeave and Oracle, and slowing earnings momentum across the broader AI hardware supply chain have raised questions over return on investment (ROI) timelines.
Because benchmark indices in Taiwan and South Korea are heavily dominated by semiconductor makers and hardware suppliers—such as TSMC, Samsung Electronics, and SK Hynix—any cooling in AI capital outlays disproportionately impacts these equity markets.
Why India Stands Out as a Diversifier
As global asset allocators seek insulation from tech volatility, India’s equity market is increasingly positioned as a reliable structural hedge.
Unlike its export-oriented East Asian peers, India’s corporate earnings profile is primarily underpinned by domestic demand, structural infrastructure buildouts, robust banking credit growth, and secular consumption trends that operate largely independently of global hardware replacement cycles.
Furthermore, broader macroeconomic indicators continue to favor Indian assets. Softer global crude oil prices have helped curb India's import bill and narrowed the current account deficit, while supportive domestic banking liquidity provides flexibility for monetary transmission and credit expansion.
Jefferies’ move signals that while foreign portfolio investors (FPIs) took profits and reallocated funds toward cheaper East Asian pockets earlier in the cycle, India's resilience and domestic-driven earnings outlook are reasserting their appeal in global emerging market portfolios.
