* Foreign investors pull $137 billion from Asian stocks in

H1 2026

* South Korea and Taiwan see heaviest outflows despite rally

* AI chipmaker rally forces investors to sell stock winners

By Gaurav Dogra and Ankur Banerjee

July 1 (Reuters) - Foreign investors sold Asian equities at

the fastest pace in at least 16 years in the first half of 2026,

as a blistering AI-driven rally forced them to trim their

biggest winners in South Korea and Taiwan and hunt for laggards

at a discount.

Overseas investors pulled a net $137.36 billion from shares

across South Korea, Taiwan, India, Indonesia, Thailand, Vietnam

and the Philippines in the first six months of the year, the

fastest six-month outflow in LSEG data going back to 2010.

South Korea and Taiwan bore the brunt, shedding $70.8

billion and $29.6 billion respectively.

The exodus reflects investors grappling with the stunning

rally in South Korean and Taiwanese markets as the KOSPI

nearly doubled in the first half of the year while Taiwan stocks

are up 62%.

But with the rally being driven by three major chipmakers, TSMC

, Samsung and SK Hynix, it has

spurred investors to cut their exposure to these winners amid

their growing influence in indexes and to look for cheaper,

under-the-radar markets in the region.

"Markets in Asia, there's only two markets and one sector

that's outperforming, so at the end of the day, you have to get

your balance right," said Joshua Crabb, head of Asia-Pacific

equities at Robeco.

Analysts said the withdrawals were not a straightforward

risk-off move, rather they pointed to currency hedging and

benchmark rebalancing, where funds sell outperforming stocks to

stave off concentration risks in their portfolios.

In June alone, foreign investors sold $27.08 billion of

regional equities, including $12.63 billion from South Korea, $8

billion from Taiwan and $5.91 billion from India.

Bank of New York Mellon analysis showed mutual funds sold

$7.50 billion of South Korean equities, pension funds sold $4.35

billion, while hedge funds accounted for a further $1.87

billion.

The selling by long-only funds points to rebalancing and

profit-taking, not a broad rejection of South Korea, BNY said.

The shift comes as investors question whether the strongest

phase of the AI-led rally has passed. While demand for AI

infrastructure remains strong, markets have become more cautious

after sharp gains in semiconductor and memory stocks.

The concentration risk is also forcing investors beyond the

obvious AI winners, prompting fund managers to look down the

supply chain and find better value in other parts of the region.

Crabb said Southeast Asia remained "very, very cheap" and

had long-term structural tailwinds, though the near-term case

for a strong overweight was less clear.

Kerry Craig, global market strategist at J.P. Morgan Asset

Management, said investors were reassessing whether they had too

much technology exposure while also looking at themes such as

defence, renewables and broader diversification.

Still, analysts cautioned that record outflows do not mean

foreigners will return to regional laggards as much of the money

may have been hedged, repatriated or redeployed outside Asia,

although a valuation reset could lure them back.