Causeway Capital Management's Head of Quantative Research, Arjun Jayaraman, shares his preferred plays in Asian stock markets, telling CNBC's Squawk Box Asia that he's still bullish on TSMC and South Korean banks continue to trade at very compelling valuations.

Wall Street

Analysts express concerns over India's high market valuations and lower-than-expected earnings growth, making it less attractive for investment compared to other Asian markets. They note that tariff issues are not a primary concern for India, but the current market conditions present significant headwinds.

In contrast, South Korea and Taiwan are viewed more favorably due to their exposure to the artificial intelligence sector and ongoing corporate governance reforms, particularly in Korea. Taiwan's semiconductor industry, especially TSMC, is highlighted for its strong earnings growth, while Korean markets are seen as undervalued with potential for re-rating, especially in the banking sector.

India too pricey, South Korea and Taiwan offer better bets

I think the issue for us with India is the valuation. We're not too concerned about the tariff issues. As we're seeing, there's a lot of ability for India to scale back its purchases of Russian oil. Oil's a highly fungible commodity, and it can agree to buy more oil from the U.S. and other places. So I think that that issue, the tariff issue, at least with regards to India, is not the issue for us. For us, it's more the high valuations coupled with earnings growth that this year is not looking great. It's kind of below expectations. So those are the headwinds for us with respect to India. Okay, so you're underweight India, but you're bullish on two markets. We're talking about Korea and Taiwan. How much of the optimism is based on relief over trade policy, or are you looking at the longer-term story about corporate reform and, of course, the AI boom? Yeah. So all of those things. First off, of course, the AI boom. You can't ignore AI. That's a secular growth driver for the next few years. Taiwan is obviously most exposed to that growth driver, especially Taiwan Semi, the world's preeminent foundry. Over in Korea, you have Samsung and Hynix as well. And then you raise a good point. Other things are, other tailwinds are there, especially for Korea. You think about the corporate governance reform. We're very encouraged by what we're seeing on that front in terms of more minority shareholder-friendly type proposals. And then in the case of Korea, valuations are also still very compelling. If you separate Korea from export-oriented Korea and domestic Korea, domestic Korea has been a long-term underperformer. But if you look at things like Korean banks, for instance, they trade at something like half a book. So very cheap multiples. So you have the valuation tailwind, especially for Korea. You have the AI secular growth story. And then you have some of the corporate governance reforms, especially once again in Korea. When it comes to Taiwan, I mean, TSMC clearly in focus today because of that mind-blowing number. When it comes to earnings, we have the ADRs in the U.S., and of course, what's trading in Taiwan, there's a big gap there. Would you be a buyer of the chip stocks in Taiwan? Yes, certainly. We're overweight. The whole semiconductor supply chain, AI supply chain in Taiwan, most notably, of course, you have Taiwan Semi. But then you have a lot of stocks along the AI supply chain, the server makers, the cooling units, the power companies, the companies that make the printed circuit boards. So yeah, so we like a lot of those companies along the supply chain. Very strong earnings growth. The valuations are not as cheap, admittedly, as they were a couple of years ago. So now it's more of an earnings growth story as opposed to a re-rating story. We would consider Korea to be more the re-rating story, and then Taiwan to be more the earnings growth story.

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