Markets Climb Despite Inflation and Geopolitical Risks

Despite rising inflation and escalating geopolitical tensions—including a flare-up in the Straits of Hormuz and ongoing U.S.-Iran hostilities—Asian and global markets continued to climb, driven by strong AI infrastructure demand and resilient corporate earnings. The episode unpacks why investors are increasingly favoring Asian hardware suppliers over pure-play tech giants like Meta and Microsoft, whose massive AI spending guidance led to short-term market punishment. Lai Yu Roy, Head of Investments at East Springs Alwara, argues that companies building AI infrastructure—such as high-bandwidth memory providers, power management chip makers, and cooling systems—are now safer bets due to their direct exposure to sustained capital expenditure. As the high-stakes Trump-Xi summit approaches, Roy identifies three key indicators to watch: progress on trade truces, the fate of critical minerals and tech export negotiations, and any shift in U.S. language on Taiwan. On fixed income, he cautions against broad rotation from equities, noting that rising yields and inflation are not uniformly triggering a flight to bonds—especially in ASEAN markets where central banks may hike rates to defend currencies. Instead, he recommends strategic diversification, including gold, which remains a long-term hedge against dollar dominance despite recent price pullbacks.