00:00Let's go deeper on the AI narrative and how it's impacting markets. Rohit Gagh is head of EM Asia strategy at Citi Research. Rohit, good to have you with us. We've heard about how Samsung got a lift from the AI play. And when you take a look at EMs as well, they've been lifted by AI and tech. How much momentum is there?
00:19At this point of time, we continue to be quite bullish in general, sort of the core AI beneficiary countries, for instance, Korea and Taiwan. In fact, more recently, we've gone overweight both Korean equities as well as Taiwanese equities and underweight Chinese equities pure as a relative value trade. It's not necessarily that we are sort of bearish on Chinese equities. We're still bullish on Chinese equities. It's just that when you compare the relativeness, we actually think that Korean and Taiwan equities have a lot more room to sort of outperform.
00:46So I think we still we believe that there's still momentum. But some say there's so much potential for Chinese AI plays. I mean, valuations are not looking too expensive and they have a long way to go.
00:57Yeah, no, I mean, that's that's that's why I say that it's purely on a relative basis where we actually think that there's probably more room for Korean and Taiwanese equities to actually perform.
01:05But yes, in general, we think that all the countries that are benefiting out of this AI team, you know, Korea, Taiwan, China, Singapore, Malaysia, they're all the, you know, depending on, you know, which is the core, which is the periphery.
01:18But all of these group countries, we think, will be benefiting in terms of equity.
01:22We continue to talk about CapEx, ROI. And of course, that bubble in AI potentially bursting.
01:30If that were to happen in the U.S., those in Asia will get hit as well.
01:35Yes. No, that's it. That's definitely a big risk right now.
01:38That has been a risk for the last one month. In fact, you know, there continues to be quite a bit of debate.
01:43That's one of the biggest questions that we actually get from investors.
01:46But so far, when we actually look at at least, you know, the pipeline of export orders, even some of the commentary that actually is coming on policy makers, for instance, more recently, even Governor Rhee of Korea actually mentioned that, you know, even if there were to be a bit of stumbling block in AI, but just the export orders or the order book until Q3 actually looks quite solid.
02:07So it's not just a valuation story. It's also a fundamentals story. Is that correct?
02:11So all the lines, all the stars are aligned.
02:14Definitely, especially in the memory sector, when we actually look at the supply demand dynamics, you know, look at the DRAM prices that actually reflects that how much, you know, the demand is actually outweighing the supply at this point of time.
02:24We actually think, yes, definitely. There's a bit of a more fundamentals push that's actually helping Korean and Taiwan.
02:29What is the biggest risk?
02:31I think the biggest risk has to be that, you know, that for some reason that we are not just able to monetize this AI story, that that has to be the biggest risk.
02:41The other risk is that, again, you know, if if the demand continues to be quite solid and that continues to lift up prices, then that is the other end of the risk that, you know, that at some point of time, things actually become just too expensive.
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