Jupiter forced to sell TSMC, Samsung, MediaTek over AI rally concentration risk
In brief
- Jupiter fund forced to sell TSMC, Samsung, and MediaTek due to concentration limits.
- TSMC, Samsung, SK Hynix comprise nearly one-third of MSCI Asia Pacific ex-Japan Index.
- Year-to-date gains: TSMC +52%, Samsung +159%, MediaTek +184%.
- Passive funds drive concentration; active managers become forced sellers at limit breaches.
- Semiconductor concentration poses systemic risk if chip cycle corrects.
The forced sellers
Konrad's fund strategy allocates nearly half of its assets to Taiwan and South Korea, with MediaTek previously serving as the largest position. Yet the mechanical reality of portfolio rules left no choice. "We have been forced sellers of TSMC, Samsung and MediaTek" Konrad said. The selling was mechanical, not philosophical — a constraint imposed by risk management, not conviction.
The numbers explain why. Year-to-date, TSMC was up 52%, Samsung surged 159%, and MediaTek climbed 184%. Those gains concentrated the stocks within regional benchmarks to levels that triggered fund restrictions. TSMC, Samsung, and SK Hynix now comprise almost one-third of the MSCI Asia Pacific ex-Japan Index. In Taiwan alone, TSMC accounts for 41.5% of the TAIEX index. South Korea's situation mirrors this: Samsung and SK Hynix together represent 55% of the KOSPI.
A structural problem
Asia is experiencing a structural issue similar to the "Magnificent 7" phenomenon in US markets, concentrated almost entirely in the semiconductor supply chain. Approximately $510 billion has flowed into Asian markets over the past five years, with roughly $127.5 billion arriving in just the last six months. Not all of that capital is chasing the same names, but passive funds have been a major driver of this concentration spiral.
Here's the trap: active managers constrained by portfolio rules become natural sellers of the most popular stocks at precisely the moment when passive flows are pushing those same stocks higher. The selling pressure compounds as more funds breach their limits. South Korean equities have experienced significant outflows as investors reassess the risks of holding positions in markets where two companies account for more than half the benchmark weight.
The risk is asymmetric. When three companies account for a third of a major regional index, any correction in the semiconductor cycle would hit the benchmark with disproportionate force. Active managers are increasingly looking at smaller AI-adjacent companies further down the supply chain, including packaging firms, testing equipment makers, and component suppliers. That reallocation may cushion the blow if the AI rally falters. But the structural concentration remains real.
