“Sell in May and go away” is a classic Wall Street cliché, but Asia elevates this seasonal market adage to almost an art form. The maxim here is more specific and poetic: “May is poor, June is bleak and July will turn around”. So far this summer, global equities seem to have followed this pattern, with the MSCI All Country World Index buckling under a 4% intra-month drawdown in June. This raises the key question of whether July will deliver a turnaround.

Global equities were whipsawed in the first two weeks of July by the re-escalation of conflict in the Middle East and renewed concerns over AI capex returns, though this was cushioned by moderating June US inflation data. The ongoing Q2 earnings season is key to confirming our expectations of continued strong AI capex growth guidance and improved monetisation. Against this backdrop, we view the recent market volatility as a golden opportunity to rotate out of crowded or cyclical exposures into higher-quality stocks across geographies, both within and beyond the technology sector.

Why North Asia laggards are worth re-visiting

Geographically, we favour US and Asia ex-Japan equities, with a tilt towards China, India and Taiwan. This preference has begun to play out since the end of June, with China and India outperforming their Asian peers. In China, despite market concerns regarding the weak Q2 GDP, retail sales encouragingly resumed growth in June. In addition, as a positive technical indicator, net weekly fund flows into China equities recently swung into positive territory, after consecutive months of net outflows that had amassed a staggering total outflow in excess of USD 230bn since the start of the year. 

Most notably, the mid-July emergence of Moonshot AI’s ‘Kimi K3’ 2.8 trillion-parameter open-weight AI model marked another ‘Deepseek moment’, reinvigorating interest in the Chinese internet giants slated to benefit from an additional frontier open-weight model made in China. (For the detailed rationale behind why China technology is a good catch-up trade, please refer to my prior article, “Demystifying Chinese tech equities’ lagging performance”, dated 4 June 2026.)

Turning to India, we have a positive view on the Modi administration’s recent measures to attract foreign capital by removing the 12.5% long-term capital gains tax and 20% withholding tax on interest income while increasing the investment limits for non-resident Indians and overseas individual investors to invest directly in domestic Indian equities. 

Navigating the outperforming Asian markets

Within the AI-laden Asian markets that outperformed notably in the first half of this year, South Korea and Taiwan, we adopt a more prudent lens moving forward. Taiwan’s high-profile, heavyweight semiconductor foundry stock has overshadowed the diversification benefits of Taiwanese equities. A look at the MSCI Taiwan top 10 constituents reveals a complete, vertical AI ecosystem, ranging from chip resistors and advanced printed circuit boards to liquid cooling, power management and integrated circuit design. This presents a stark contrast to the South Korean market, which is heavily concentrated in two memory chipmakers. The surge in global retail investor interest in these Korean chip stocks and related leveraged exchange-traded funds has spurred equity market volatility and, consequently, notable drawdowns of late. 

That said, we take heart that South Korean memory chipmakers’ earnings fundamentals remain resilient, and high-bandwidth memory chip supply remains constrained. Given this, we would add on pullbacks as positioning becomes less crowded. After all, we prefer maintaining balanced exposures to avoid excessive concentration in any particular sector and/or market. The endgame remains an economic soft landing, supported by the latest trends. This is the bedrock of our positive equity view. In a regime where policy uncertainty and crowded positioning keep volatility elevated – and where the correlation between equities and bonds remains positive – the conventional 60/40 portfolio is no longer an all-weather shelter. Diversification must now extend into alternatives and gold to build a resilient foundation portfolio.