Asian stocks post best quarter in 17 years, with Japan identified as a key laggard poised for gains amid AI rally rotation.
Asian equities surged in their strongest quarter in 17 years, driven by AI enthusiasm and sector rotation. Japan emerged as a top catch-up candidate, with strategists highlighting its relative underperformance compared to regional leaders like Taiwan and Malaysia.
The region’s rally was led by narrow AI-linked gains, including a 60% year-to-date rise in China’s Star 50 index, while broader consumer sectors lagged. South Korea’s Kospi declined on foreign outflows and memory-chip margin pressures, contrasting with Taiwan’s triple-digit gains in niche supply-chain stocks.
A weakening yen near 163 USD/JPY raises intervention risks, potentially triggering a carry-trade unwind that could reprice Japanese equities in dollar terms. Strategists note Japan’s valuation gap and policy backdrop as catalysts for a potential catch-up phase.