A story about two Asias where currencies decline and stock markets rise

While some Asian economies are thriving, others are suffering greatly as a result of the war with Iran

What causes the inconsistencies?

The best and worst times are both present in Asia. Even though some parts of the region are emerging as the main beneficiaries of the AI frenzy, the Strait of Hormuz crisis is severely hurting energy importers. In the first five months of the year, this caused the MSCI Emerging Markets Asia index to rise by 15%.

On currency markets, however, the situation is dire. The 1997 Asian financial crisis is being discussed, according to Swati Pandey and Claire Jiao on Bloomberg, when significant trade deficits caused investor confidence to "evaporate within months," leading to "deep recessions" and political unrest. India, the Philippines, and Indonesia appear to be particularly susceptible to capital flight. Over the past 12 months, their respective currencies have lost 8.5%, 9.5%, and 10.5% of their value relative to the US dollar.

Daniel Moss, also on Bloomberg, claims that the once-promising Philippines has been particularly hard hit. In the 2010s, the nation was a growth star in Southeast Asia. Inflation is currently at 7% and on the verge of double digits, a significant increase from 2% in January. The last three months have seen a 5.6% decline in the local PSEi share index. The challenges facing the Philippines may be a sign of things to come elsewhere.

However, South Korea has more contradictions than any other place in Asia. According to William Sandlund and Daniel Tudor in the Financial Times, the won is currently trading at its lowest level against the dollar since the 2008 financial crisis. Surprisingly, though, Korea is experiencing a record trade surplus due to the unquenchable demand for its computer chips. Instead of weakening the won, an export boom should strengthen it.

Ironically, the explosive growth of the Asian stock market could be one reason. Due to significant runs at chip specialists Samsung and SK Hynix, the Kospi index has doubled since the beginning of the year. Due to this, foreign investors have sold a record £79 billion worth of local stocks this year, forcing fund managers to sell in order to avoid overexposure.

This year, Taiwan's Taiex index has increased by 58%, making it the world's fifth-largest stock market after surpassing India. Taiwan's TSMC produces nearly all of the world's high-end chips. The island now makes up nearly 25% of the MSCI Emerging Markets index, despite being only marginally bigger than Belgium.

Asian investors ought to purchase the shovels.

According to Joseph on Substack, it's beneficial if 30% of your economy is "based on shovel manufacturing" during a gold rush. In the last quarter of 2025, the GDP of Taiwan increased at an annualized rate of 23.6%. Since the late 2022 launch of ChatGPT, GDP has increased by nearly 25%. The boom isn't helping everyone; exporters are prospering while everyone else is struggling. However, this "miracle" of modern growth cannot be disputed.