Asia-Pacific Fund Managers Shift From Growth Concerns to AI and Semiconductor Conviction

Overview

This report summarizes BofA's May 2026 Asia Fund Manager Survey. The core theme is a shift in investor sentiment from growth concerns toward greater confidence in the AI cycle, the semiconductor cycle, and North Asia markets. The survey covered 200 participants with a combined US$517 billion in AUM, of whom 170 answered the global FMS questions and 92 answered the regional FMS questions. The results show that Asia-Pacific macro expectations are still not fully positive, but they have improved materially from the prior month; inflation expectations remain elevated; and confidence in earnings, returns, and AI-related themes has strengthened in tandem.

Core views

The core views are: first, the rebound in Asia-Pacific equities is being driven by AI-exposed markets, with Japan, Taiwan, and Korea becoming the three most preferred markets; second, corporate earnings expectations have clearly turned more positive, reinforcing support for equities; third, AI and semiconductors remain the main themes for China and North Asia investors, and Taiwan is seen as the clearest beneficiary of the next phase of the AI cycle; fourth, Japanese equities continue to attract capital on the back of earnings, record expected returns, and the potential path of BoJ rate hikes; and fifth, if global growth keeps weakening, India may become the first market in the region to be de-rated.

Analysis framework

The report is based on cross-sectional and historical percentile analysis from the BofA Fund Manager Survey, comparing net changes in investor expectations for growth, inflation, corporate profits, expected returns, thematic preferences, and regional/sector positioning. The focus is not on company fundamental valuation, but on the marginal changes in fund managers' expectations and positioning preferences, and what those changes imply for Asia-Pacific equities, the AI chain, the semiconductor chain, and regional allocation.

Methodology notes

• Investor surveyBofA Fund Manager Survey

  Uses fund manager questionnaires to gauge market expectations and allocation preferences

  The report uses FMS participants' responses on growth, inflation, profits, themes, and positioning to observe changes in investor sentiment and asset allocation direction. The sample includes 200 participants and US$517 billion in AUM.

• Sentiment indicatorNet Percentage

  Net % equals the bullish or overweight percentage minus the bearish or underweight percentage

  The report uses net percentages in multiple places to measure expectations or positioning, such as net 33% expecting stronger Asia-Pacific ex-Japan corporate profits, net 81% expecting higher inflation, and net 71% expecting a stronger Korea/Taiwan semiconductor cycle.

• Historical comparisonHistorical Percentile

  Evaluates the strength or weakness of the current survey result within the long-term historical distribution

  The Korea/Taiwan semiconductor cycle expectation reached the 91st historical percentile, indicating that investors' confidence in the semiconductor cycle is at a historically high level.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Japan equities

  Benefiting asset

  Strengths

  Investor preference remains a leader, 12-month expected returns have risen to a historical high of 6.9%, and 38% of investors cite earnings as the main driver.

  Weaknesses

  Growth expectations have rebounded but remain below the year-to-date peak, and a potential BoJ rate hike could affect valuations and funding costs.

  Comparison

  Compared with other Asia-Pacific markets, Japan, together with Taiwan and Korea, remains one of the three most preferred markets.

  Risks

  A more hawkish-than-expected inflation and rate path, earnings misses, and fluctuations in the yen or global risk appetite.

• Taiwan equities and AI supply chain

  Core beneficiary asset

  Strengths

  The report identifies Taiwan as the clearest beneficiary of the next phase of the AI cycle, with AI exposure driving stronger market preference.

  Weaknesses

  It is highly dependent on AI capex and the semiconductor cycle, and thematic crowding may increase.

  Comparison

  Alongside Japan and Korea, Taiwan ranks among the most preferred markets in the FMS.

  Risks

  A cooling in AI demand expectations, a downturn in the semiconductor export cycle, and geopolitical and valuation risks.

• Korea equities and semiconductor cycle

  Benefiting asset

  Strengths

  Investor confidence in the Korea/Taiwan semiconductor export cycle has strengthened markedly, with net 71% expecting the cycle to improve over the next 12 months.

  Weaknesses

  Earnings are sensitive to memory and semiconductor price cycles.

  Comparison

  The semiconductor cycle expectation is in the 91st historical percentile, indicating relative strength but also high expectations.

  Risks

  A weakening global growth backdrop, AI hardware demand falling short of expectations, and cyclical inventory adjustments.

• Asia-Pacific ex-Japan equities

  Broadly benefiting asset

  Strengths

  Expected 12-month returns rebounded to 6.0%, and earnings expectations turned to net 33% bullish.

  Weaknesses

  Growth expectations are still net 5% bearish, so the macro recovery has not yet been fully confirmed.

  Comparison

  The overall improvement is less concentrated than in the North Asia markets with higher AI exposure.

  Risks

  Elevated inflation, USD and rate volatility, and a further slowdown in global growth.

• India equities

  Potential de-risking asset

  Strengths

  India remains an important Asia-Pacific market, but it is not among the most favored add-to positions in this survey.

  Weaknesses

  If global growth weakens further, India is viewed as the market most likely to be cut in the Asia-Pacific region.

  Comparison

  Relative to Japan, Taiwan, and Korea, India's marginal preference in this survey is weaker.

  Risks

  Valuation pressure, foreign outflows, and lower global risk appetite.

• China AI/semiconductor and internet themes

  Thematic opportunity

  Strengths

  Within China, AI/semiconductors remain one of the themes investors focus on most, and preference for internet names improved from last month.

  Weaknesses

  The report does not show China overall market preference leading the North Asia AI exposure markets.

  Comparison

  Together with buybacks/dividends, these remain key themes for Chinese investors, while internet is an area of marginal improvement.

  Risks

  Policy, earnings delivery, commercialization of the AI value chain, and valuation volatility.

Key data

• Survey period2026-05-08 to 2026-05-14The report date was 2026-05-19.
• Survey sample200 participants, US$517 billion in total AUM170 participants with US$461 billion in AUM answered the global FMS questions; 92 participants with US$209 billion in AUM answered the regional FMS questions.
• MSCI Asia Pacific Index reboundUp 17.6% from the March lowThe index rose to a record high, mainly driven by optimism in AI-exposed markets such as Japan, Taiwan, and Korea.
• Asia-Pacific ex-Japan growth expectationsFrom net 55% bearish to net 5% bearishGrowth expectations remain negative, but month-over-month improvement was significant.
• Asia-Pacific ex-Japan corporate earnings expectationsNet 33% expect stronger earningsThis was previously net 45% expecting weaker earnings, showing a sharp reversal in earnings expectations.
• Inflation expectationsNet 81% expect higher inflationInflation pressure remains a macro constraint.
• BoJ rate hike expectations67% believe the next hike is most likely in JuneThis is consistent with the view of the report's economists.
• 12-month expected returnAsia-Pacific ex-Japan 6.0%, Japan 6.9%Expected returns for Japanese equities reached a historical high.
• Semiconductor cycle expectationsNet 71% expect a stronger Korea/Taiwan semiconductor cycleThis was net 14% two months ago, and the current reading is in the 91st historical percentile.
• Japan equity driver38% of investors cite earnings as the main driverEarnings are the most frequently cited key factor for the outlook on Japanese equities.
• Energy security concernsFell from 91% to 52%Concerns about energy security eased significantly from the prior month.

Impact & implications

The report suggests that Asia-Pacific equity positioning is shifting away from broad macro defensiveness toward a more concentrated structural offensive, especially in AI, semiconductors, and North Asia markets. From an asset allocation perspective, the relative attractiveness of Japan, Taiwan, and Korea is rising, while semiconductors and technology hardware remain the most crowded but also the most supported directions. In China, AI/semiconductor and shareholder return themes continue to draw attention, and preference for internet names has improved. The main constraints are elevated inflation expectations, continued downside risk to global growth, and valuation and crowding risk in the AI trade after its strong rebound.

Risks

• A further weakening of global growth could reduce risk appetite for regional equities and trigger de-risking from markets such as India.
• Net 81% of investors expect inflation to rise; if inflation stays elevated, valuations could be pressured and policy rate uncertainty could increase.
• AI and semiconductor trades have already driven strong gains in related markets; if earnings or order delivery fall short of expectations, crowded positions could unwind.
• If the timing or path of BoJ rate hikes surprises to the upside, Japanese equity valuations, the yen, and capital flows could be affected.
• This report is a fund manager survey and strategy analysis, not a single-stock rating that is continuously tracked; investors should combine it with the latest research and their own risk tolerance.

What to watch

• Whether Korea and Taiwan semiconductor export growth can deliver on the survey's net 71% bullish expectation.
• Whether AI capex, compute demand, and semiconductor orders continue to support technology hardware performance in Taiwan, Korea, and Japan.
• Whether Asia-Pacific ex-Japan corporate earnings expectations can translate from net 33% bullish to actual earnings upgrades.
• Whether the BoJ hikes in June and how that affects Japanese equities, banks, and the yen.
• If global growth continues to slow, whether India sees relative outflows or de-risking pressure.
• Whether preferences for AI/semiconductors, buybacks/dividends, and internet names in China continue to improve.