Transcript:

Hi, I’m Bianca Rose, a Senior Portfolio Manager with Morningstar Investment Management.

Welcome to this week’s Market Minute where we look to discuss key events that have happened in markets this week.

After AI optimism has lifted all things AI this year, and in particular the major Asian semiconductor companies, we saw a pull-back in tech names within the region this week on concerns that valuations may have gotten ahead of fundamentals. In a rare and surprising move, on Tuesday, the Korea exchange issued an “investment caution” warning over the strong share price surge seen for SK Hynix, a Korea memory semiconductor known for its high bandwidth memory chips used by NVIDIA.

By contrast the Australian equity market have seen much less volatile market action this week, although is still modestly down so far this week. On Tuesday, the RBA kept the cash rate steady at 3.6 per cent, as they continue to watch inflation figures which have crept past the top end of the central bank’s target threshold.

In the US, on the economic and government policy front, we saw the US government shutdown enter its 36th day of shutdown, making it the longest period of time the American government has been closed. It is the longest period, but not the first time this has happened. The last time this occurred was back in 2018/2019, 2013, 1995 and eight shutdowns occurred during the 1980s. The difference is that these periods were briefer periods. Thousands of federal workers have already missed pay cheques, and there are growing fears of increased impacts to air travel across the US as air traffic controllers and airport staff work without pay.

The US market has largely continued to sail through this shutdown, with the market more focused on AI developments. On the AI front, we saw OpenAI and Amazon agree to a $US38 multi-year deal, which gives the ChatGPT maker access to Amazon’s data centres. Alphabet also announced that it is looking to raise around USD22 billion in debt as it continues to invest significantly in AI.

We continue to remain focused on undercovering attractively priced opportunities. Today we see these opportunities within the healthcare, consumer defensives and cyclicals segments.