ROI-US blue wave reshapes Asia's winners and losers: Manishi Raychaudhuri

A resounding Democratic takeover of Capitol Hill did more than rattle Asian chipmakers. It set off a macro realignment of foreign policy, energy, and trade that could create new winners ​and losers across Asian markets.

The "blue wave" in the US midterm elections on November 3 triggered an anti-AI market shock, sending the tech-heavy ​Nasdaq to its steepest fall in 19 months. Investors feared that incoming Democratic leaders would subject AI ‌companies ​to stricter scrutiny, including over data centre construction and tax breaks. Asian equities — home to some of the world's biggest chipmakers — led the regional retreat in the week of the vote. South Korea's KOSPI and Taiwan's TAIEX each tumbled 12%, dragging the broader MSCI Asia ex Japan index down 5%.

While Asian markets have recovered some ground, investors remain on edge after an October tech selloff driven by valuation concerns and doubts about the payoff from AI investment, fears since ‌amplified by turmoil at Nvidia, a key engine of the AI boom. The risk from the AI blowback is clearly concentrated in North Asia. The CSOP-Solactive AI exchange-traded fund, the region's leading AI-focused fund, allocates 37% to Taiwan and South Korea and 26% to Japan. KraneShares' more geographically diversified AI ETF allocates 12% to China, highlighting Asia's wide exposure to the sector.

Less tech-dependent neighbours are feeling less heat from the AI jitters. India's benchmark BSE Sensex rose 7% in the election week, while Singapore's Straits Times Index fell only 3%; both have since advanced further. If the tech rout deepens, these markets appear better placed than the regional bourses that ‌led gains in the first half of 2026. COMPETING FORCES

The ramifications of the US elections for Asia extend well beyond data centres. First, there is US policy in the Middle East. Democratic congressional control could pressure the White House to de-escalate the US-Iran war. Indeed, President Donald Trump said that ‌the US was unlikely to strike Iran while negotiations continued, a far cry from the more hawkish rhetoric before the elections.

Markets appear to be pricing in this policy shift. Since the midterms, benchmark Brent crude oil has fallen for a second straight week, dropping nearly 19% to below $96 a barrel. Cheaper energy could offer relief across Asia. Historically, around 80% of oil and 90% of gas transiting the Strait of Hormuz chokepoint was destined for Asian markets, meaning this year’s Middle East conflict, which effectively closed the narrow waterway for months, has hit the region particularly hard.

The countries that stand to benefit the most from falling fuel prices include Japan, South Korea and India. In addition to weighing on inflation and helping boost growth, declining oil prices should ⁠also be positive for ​Asian energy importers' trade balances, which, all else being equal, could help boost their ⁠currencies.

But this is where countries may see greater divergence. North Asian economies have seen their trade surpluses balloon over the past year on the back of massive AI exports. So, if oil prices and AI demand decline together, the latter could offset the former, leaving large tech exporters as net losers. That shouldn't be the case for their less tech-exposed neighbours.

Currency markets illustrate ⁠the divide. Since November 3, South Korea's won and the Taiwan dollar have underperformed their major Asian peers, whereas the Indian rupee , heavily exposed to oil prices but not to tech hardware exports, has appreciated sharply. AFFORDABILITY PUSH

A widely held view in the US, echoed by leaders on both sides of the aisle, is that elevated prices were ​a major factor behind the Democratic landslide. Policy focused on improving affordability could therefore become more prominent in both parties' agendas. Tariffs played a role in cost-of-living concerns, so the election results may reduce the likelihood that Trump ratchets up his aggressive trade policy, even if he could ⁠persist via executive authority.

Given bipartisan concerns about China, trade pressure on Beijing may not ease. But this could benefit other Asian countries that supply consumer goods, such as Vietnam, Bangladesh, Thailand, Indonesia and India. Another key affordability issue was healthcare. Efforts by Democrats to lower healthcare costs could accelerate demand for generic drugs and outsourced manufacturing.

India could be well positioned here. The country’s generic manufacturers, including Sun Pharmaceutical ⁠Industries, produce ​roughly 20% of the world's generic medicines and already supply about 40% of US demand for generics. Another winner could be contract development and manufacturing organisations (CDMOs) such as South Korea's Samsung Biologics, which provide outsourced manufacturing services to major US drugmakers.

WHEN TAILWINDS CONVERGE India appears to be the Asian market that most clearly ticks all of the above boxes.

As a net energy importer with minimal exposure to tech cycles, it could directly capture the upside of lower commodity prices, reduced trade pressure and pharmaceutical tailwinds. It was therefore no surprise that Indian stocks outperformed after the vote. Foreign flows have also skyrocketed in recent days, ⁠underscoring investors’ renewed confidence in a market often touted as an “anti-AI” play.

However, nothing is certain. Should Trump leverage his executive powers to escalate Middle East conflicts, any projected relief from inflation or high energy costs would immediately vanish. He could also shrug off voter concerns and continue to pursue his ⁠aggressive tariff agenda.

Furthermore, if strategic competition with China pushes Washington to loosen domestic constraints on ⁠AI development, capital could pivot rapidly back to North Asian hardware exporters, relegating markets like India to the sidelines. For now, navigating Asia requires recognizing that Washington's policy shifts reach far beyond the AI supply chain.

(The views expressed here are those of Manishi Raychaudhuri, the founder and CEO of Emmer Capital Partners Ltd and the former head of Asia-Pacific Equity Research at BNP Paribas Securities.) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source ‌for global financial commentary. Follow ROI on LinkedIn, and ‌X.

And listen to the Morning Bid daily podcast on Apple, Spotify, or the Reuters app. Subscribe to hear Reuters journalists discuss the biggest news in markets ​and finance seven days a week. (Writing by Manishi Raychaudhuri; Editing by Marguerita Choy)