Tyger Fitzpatrick: Welcome back to another edition of Market Minute. Today I’m joined by Dennis. So. Dennis, thanks for joining us. AI risks as well as inflationary concerns on investors minds at the moment. Kind of interested in what you guys are seeing at the moment. Yeah thanks Tiger.

Dennis Li: So the US release is latest CPI last Friday at 3.4%. It’s meet the expectations. But it’s not very encouraging because the headline inflation numbers took quite high. And then the core inflation is actually slightly above consensus. At the same time the conflict in the Middle East has also intensified last week, which push up the oil price back above $100 per barrel.

So this brings back the concern that the high energy price might be staying for longer. And also, if you look at the other part of the world, some soft commodities, the price has also rebounded in the last couple of months because of changes, weather conditions and also something like consumer electronics. Some of those products are become more expensive because the cost to the memories and components has also increased as well.

So all these factors are actually putting upward pressure on the inflation outlook.

Tyger: So yes, with higher inflation at play, what are the implications you’re seeing sort of around fixed income.

Dennis: So the high inflation and higher interest rate are generally bear phenomenal bonds because inflation is lower. The real purchasing power of the fixed cash flow from a bond. And we saw last week the US has moved up across the calf where the long end of the curve, primarily influenced by the long term economic growth and inflation expectations that has increased. And the shorter end of the curve also move up because the markets start to price in a higher probabilities of rate hikes from central banks.

Tyger: So moving on to AI and tech risk. Now what do you guys seeing in that space.

Dennis: Yeah. So a few AI companies they are expressing concerns that about AI safety. And they want regulations to prevent it from getting out of control. So they all come out and advocating for a slower pace of the AI development. But I think in reality it could be not as easy in practice because it creates something called the prisoner’s dilemma, where all companies might want to have a slower pace for the overall AI industry.

But individually, no one wants to taking a risk to fall behind their competitors. So let’s just bring another layer of complications.

Tyger: I guess. Leading on from that, what are the sort of mark reactions you’ve seen from investors?

Dennis: Yeah, so the technology sector and some Asian markets like Korea and Taiwan with high concentrations have declined last week because the fear of the slower pace of AI developments will lead to a lower AI investments, where their previous valuations are reflecting a rapid deployment of capital into AI, which allowed them to have a strong pricing power. So for investors, I think it’s important that we acknowledge the unknown and to understand that this type of contingent risk and uncertainties will be always associated with AI.

So that’s why we need to consider, consider these factors and this content properly when we’re making investment decisions.

Tyger: I guess my last question for you is how are you guys positioning portfolios now based on all the information you went over?

Dennis: Yeah. In the current environment, our portfolio continue to maintain exposures in healthcare and consumer staples sectors where we think the valuation is good and also provide provide diversification benefits to our portfolios.

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