Taiwan overtakes India as the world’s fifth-largest stock market

TAIWAN has overtaken India in stock market value, powered mainly by a breakneck rally in the world’s largest chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC).

The island’s market capitalisation climbed to US$4.95 trillion on Monday (May 25), data compiled by Bloomberg showed. India’s value dropped to US$4.92 trillion.

Taiwan’s stock market is now the fifth-largest in the world, behind only the US, mainland China, Japan and Hong Kong.

Its ascent through the global equity rankings has been largely driven by TSMC, which now accounts for about 42 per cent of the benchmark index, representing intense market concentration.

The chipmaker’s shares have rallied 46 per cent in 2026 as it has benefited from the artificial intelligence trade, in which its semiconductors have a dominant market position.

The surge in the island’s market value highlights that the intense optimism in AI that is triggering a global rally in tech shares, disproportionately benefiting manufacturing hubs such as Taiwan and South Korea.

India, on the other hand, is grappling with surging energy costs, slowing corporate earnings growth and the lack of companies directly linked to the AI buildout.

“Taiwan’s rising market capitalisation is fundamentally a reflection of its heavy concentration in tech hardware, which is currently at the centre of the AI investment cycle,” said Yi Ping Liao, a fund manager at Franklin Templeton.

“Markets with limited exposure to tech hardware are increasingly being overshadowed by tech hardware – heavy markets such as Taiwan and Korea.”

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The Taiex Index fell 0.3 per cent on Tuesday. The gauge remains among the world’s best performers this year, having risen more than 50 per cent. TSMC shares closed 1.7 per cent lower.

Benefiting from the rules

New regulations are in TSMC’s favour.

Taiwan’s financial regulator in April increased the limit that domestic funds can invest in a single stock. Under the new guideline, funds that invest solely in Taiwanese stocks can hold up to 25 per cent of their net assets in any listed company whose weighting exceeds 10 per cent on the Taiwan Stock Exchange, up from a previous limit of 10 per cent.

Currently, only TSMC meets the criterion. The change may help it lure in more than US$6 billion of inflows, JPMorgan Chase said in a note.

While Taiwan has overtaken in market value, India’s US$4.15 trillion economy – among the fastest-growing in the world – still trumps the island’s US$977 billion gross domestic product, International Monetary Fund estimates showed.

Indian stocks have fallen this year amid record foreign outflows, driven by elevated valuations and a weakening rupee. Higher energy costs have also stoked inflation concerns and clouded growth prospects. 

Global funds have sold nearly US$24 billion of local equities so far this year as they chased the AI boom in Taiwan and South Korea. India’s gauge is down 8 per cent, heading for its first annual drop after a decade of gains.

India’s weight in the MSCI Emerging Markets Index has also fallen to about 12 per cent from 19 per cent last year.

“India has been quite ignored for the better part of two years,” Alison Shimada, portfolio manager at Allspring Global Investments, told Bloomberg TV on Monday.

“It is an expensive market, so one has to be selective, but I think in terms of financialisation of savings, it is very prominent in India and people are moving into financial assets.” BLOOMBERG