Beyond the Magnificent 7: Why investors are flocking to Asia’s tech sector

Tamara Haban-Beer Stats | BlackRock

As US equities face challenges this year on the back of trade policy uncertainty, Asian markets including China and South Korea have boomed, fuelled by advances in AI technology and supportive domestic economic policies.

In 2025 to date, the FTSE China 50 Index has returned almost 20%, far head of its annual average of 7% since inception. The S&P Asia 50 Index, comprised of the 50 largest companies in Asia ex-Japan, has returned 17% year to date, compared to 8% annually since inception.^[2]

Investors have taken notice, with the iShares FTSE China 50 ETF (IZZ) taking in more than AU$80 million from Australian investors in 2025 to date, versus AU$29 million of outflows last year.^[3]

Other iShares funds focused on Asian stocks are seeing similar trends. The iShares Asia 50 ETF (IAA) has seen AU$60 million in flows so far this year, versus AU$42 million outflows in 2024, while the iShares MSCI Emerging Markets ex China ETF (EMXC) - offering significant weightings to Taiwan and South Korea - has attracted more than AU$255 million since its inception in June 2024.^[4]

Globally, we’ve also seen ETF investors embrace China in particular as a complementary exposure to US tech. Globally, China tech ETFs have gathered almost US$22 billion so far this year, outstripping US tech ETFs with around US$18 billion of flows.^[5]

This is perhaps no surprise as US equities now represent as much as 70% of global equity market indices, and tech and communications make up 35% - a threshold last crossed just prior to the dot-com bubble of the early 2000s.^[6]

Asia sales/earnings growth estimates are above many developed markets^[7]

Source: LSEG Datastream/MSCI, as of 14 July 2025

Why some of Asia’s key markets are thriving

Chinese stocks have surged this year as investors bet on a domestic economic recovery and get excited about the country's latest advances in AI, particularly after DeepSeek released its new model in early 2025.

Since the announcement of a comprehensive stimulus package in late 2024, China’s government has stepped up efforts to pull the economy out of deflation and address oversupply in key sectors that has seen growth falter. A recent focus has been on reducing excessive competition between businesses that has led to falling prices and slowed growth.

Similarly to the US, China’s equity market is also skewed towards tech, which has helped it benefit from the AI boom. The biggest companies in the FTSE China 50 are leading the way in adopting AI, with social media giant Tencent – the largest weighting in the index - having recently launched its DeepSeek rival AI model that can personalise content recommendations and moderate content on its WeChat platform.

South Korea’s stock market has performed strongly in 2025, helped by local economic support and AI growth. Reforms enacted by new president Lee Jae Myung aim to make the domestic equity market more shareholder friendly and reduce the control of South Korea’s chaebols, or family-controlled conglomerates.

Semiconductors are South Korea’s top export and, similar to export ‘front-loading’ effects seen in China, have been growing at a rapid rate as importers seek to circumvent US tariffs^[8] – though South Korea was recently granted a 15% tariff rate rather than the initial 25% proposed by the US administration.

Taiwan is another key market of focus for investors interested in the AI buildout. TSMC – the world’s largest chipmaker and Taiwan’s biggest company by market cap^[9] – has seen soaring demand for its chips, which are exempt from US tariffs on semiconductor imports, thanks to a deal to expand its factories in the US.^[10]

In July 2025, Taiwan broke its record for annual trade surplus with the US just seven months into the year^[11], illustrating the strength of demand for advanced chips as megacap tech companies continue to step up spending.

Ways to trade the AI mega force in Asia

ETFs offering exposure across Asia and emerging markets allow investors to dynamically slice their allocations depending on their market views. For those wishing to tap into potential further recovery in China, IZZ offers access to the 50 largest offshore Chinese stocks, with significant weightings to sectors like consumer discretionary and financials that could benefit from economic expansion.

For broader Asia market exposure with a technology tilt, investors could consider IAA. Currently the lowest cost Asian equities ETF on the ASX^[12], IAA offers a 44% weighting to technology and 17% to communication, with TSMC, Tencent and Alibaba among its top holdings.^[13]

Investors interested in broader exposure to emerging markets that could benefit from mega forces outside AI may wish to implement their views using EMXC. With a 30% weighting to technology through key holdings such as TSMC and Samsung,^[14] the fund also offers access to other emerging markets like India and Brazil, that are set to benefit from longer-term trends such as reshoring and demographic change.

By making use of one or multiple exposures, investors can tap into the positive fundamentals, supportive domestic tailwinds and tech-driven momentum of some of Asia’s leading economies.