00:00Kerry, what stood out to us was the decline that we saw in a market, South Korea, that had been
00:07leading the pack higher for much of this year.
00:10I mean, how are you viewing the ructions we're seeing in South Korea at the moment?
00:16Good morning. Well, I think what we're seeing across the Asian Morning Open here is obviously a continuation of a
00:22bit of the sell-off we saw yesterday.
00:23In the U.S., there's still the concerns around the escalation of the conflict in the Middle East and how
00:29long it could last,
00:30and then the knock-on effects from the potential closure of that Strait of Hormuz for a longer period of
00:35time,
00:35which would flow through to restrict any energy that was available to markets like Korea and Japan, who are big
00:40energy importers.
00:42So I think that's probably on the macro front.
00:44And then on the market front, obviously markets there have done very well.
00:47So you're probably seeing continued repositioning by investors, taking a little bit of what's done very well in their portfolios,
00:53looking to rotate that into more defensive positioning as they sort of weigh what the scenarios that may play out
00:59in the Middle East
01:00and the duration of which is the big question at the moment.
01:04So I think it's probably a little bit more of the rotation within portfolios that's driving this
01:09rather than thinking about a big flight away from risk assets at the moment,
01:14given the questions we still have around the severity and duration of what the conflict in the Middle East may
01:19look like.
01:21Do you think then there is more selling to go when it comes to Korean assets?
01:28I think the market there has done very well.
01:30It's been underpinned by a very strong secular theme around both the AI stocks,
01:35as well as thinking about some of the defensive positioning that comes through in terms of the build out in
01:39Europe,
01:40given their focus on wanting to increase some of their defensive capabilities after the Ukrainian-Russia conflict.
01:45So there's big structural supports there for the market.
01:48Obviously, valuations had moved up a long way, and I think we look at the North Asian markets,
01:53whether it's Taiwan or Japan or Korea, they're going to be going back to thinking about their role in that
01:59AI supply chain
02:00and how that really hasn't changed, given what we've seen in the last couple of days.
02:04And so that can provide a little bit of a cushion.
02:06Or should the outlook start to improve, you may see investors that want to move back into those markets
02:11at slightly better valuations.
02:13That's still a bit early on that question, but I think that there's a longer-term case for these markets,
02:18given their key role in that AI secular theme.
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