Asian equity selloff and AI trade outlook (with Abeer Abu Omar)

Asks if the peak of the AI trade has been seen given the sharp selloff in Asian equities.

Abeer Abu Omar

Eugenia Victorino

It's too early to call the peak. The selloff is a healthy correction injecting sanity into the market, as the KOSPI still holds over 60% gains for the quarter. This is a good opportunity to buy on dips, as the outlook remains supportive for North Asian equity markets.

Capital flows are concentrated in North Asian equity markets; other regions like Thailand and Singapore are a side show. It's all about AI.

Asks about market sentiment on AI given Apple's price hikes and OpenAI's IPO delay.

Abeer Abu Omar

Eugenia Victorino

The story in Asia is about providing AI infrastructure, not just OpenAI. Demand for infrastructure is strong regardless of OpenAI's IPO timing. We are at the beginning of a structural uptick in AI usage, so it's premature to call a top.

The drivers are different but connected. The focus is on infrastructure demand.

Asks what catalyst would turn the tide for struggling Asian currencies.

Abeer Abu Omar

Eugenia Victorino

Asian currencies didn't benefit from US-Iran peace prospects because the market recalibrated Fed expectations. An October hike is fully priced in, and historically the Fed doesn't hike just once, so there's room for another hike in 2026, keeping depreciation pressures on Asian currencies.

Only the yuan is holding on to year-to-date gains, but it's starting to show strains.

Asks if the biggest risks for Asian markets are external (Fed, oil) or domestic.

Abeer Abu Omar

Eugenia Victorino

Some currencies are exacerbated by domestic issues, like the Philippines' balance of payments and shaky foreign sentiment on Indonesian assets. The more resilient sentiment is on the Chinese yuan and, to some degree, the Indian rupee, but it's early to say they are on a path to appreciation.

Even if the market fades Fed hike expectations, domestic issues in the Philippines and Indonesia would still weigh on their currencies.

SignalTube