SCB CIO believes the Fed will keep interest rates low for a long time due to persistent inflation, highlighting US and South Korean stocks as promising in line with the AI ​​theme.

SCB CIO assesses geopolitical pressures and trade protectionist measures as making it difficult to slow global inflation, resulting in the Fed maintaining high interest rates. They also view AI investment as a key driver of global stock markets and recommend a portfolio focused on US stocks, South Korean stocks, high-quality bonds, REITs, infrastructure, and gold to capitalize on long-term investment opportunities.

30 June 2569 – Mr. Sorachai Sunetta, CFA, Deputy Head of High Net Worth and Affluent Banking, Siam Commercial Bank. SCB CIO revealed that it had exchanged views with BlackRock and assessed that the global economy continues to face pressure from tight supply chains in energy, food, and agricultural products. This is partly due to geopolitical tensions that pose a risk of disruption to key transportation routes, especially in the Strait of Hormuz.

Meanwhile, the United States also plans to implement trade protectionist measures by proposing to raise import tariffs on 60 countries, or 99.4% of imported goods, in retaliation for labor rights violations. This could increase cost pressure on businesses and consumers.

Furthermore, a prolonged and intensifying El Niño phenomenon could impact agricultural production and boost electricity demand. These factors contribute to sluggish inflation, making it more difficult for it to decline. This may necessitate the Federal Reserve (Fed) maintaining high interest rates for an extended period, leading investors to seek higher returns to offset risk in riskier assets.

On the other hand, while investment in artificial intelligence (AI) infrastructure is a key driver of the modern global economy, this growth also comes with a significant demand for resources such as energy, raw materials, labor, and related infrastructure. The increased construction of data centers in many areas could potentially translate into higher costs for goods and services in the economy in the long run.

Major cloud service providers, or hyperscalers, need to raise additional capital through both bond issuance and equity offerings to invest in supporting AI growth amidst high financing costs. It is projected that by 2026, hyperscalers will issue approximately $170 billion in bonds, a rise of about 70% from the previous year, and a value close to the total bond issuance over the past four years.

The fundraising will take place through major capital markets in the US, Europe, and Japan. Furthermore, large IPOs of leading AI companies such as OpenAI and Anthropic, which are expected to raise at least $6 billion combined, may divert some liquidity away from established AI stocks and increase volatility in the AI ​​sector in the short term.

The impact on investment assets will vary depending on the degree of benefit they receive from the AI ​​investment cycle. Groups likely to benefit significantly include US technology stocks and upstream technology companies in Asia, such as semiconductor, memory chip, and hardware manufacturers, which will support the Japanese, Taiwanese, and South Korean stock markets.

While Latin American markets are likely to benefit from high commodity prices, businesses heavily reliant on energy, raw materials, or labor will face pressure from rising operating costs. Overall, SCB CIO views AI as a key driver of global stock markets.

However, investors should not invest in a blanket portfolio of AI stocks, but rather select companies with the potential to support large-scale investments, considering the strength of their balance sheets, cash flow, and ability to maintain profit margins without excessive strain. At the same time, investors should consider diversifying their investments into tangible infrastructure such as data centers, power plants, and electricity grids.

This is a key component for the growth of AI and is further driven by other long-term structural factors such as energy transitions, economic and geopolitical polarization. Such a strategy will help reduce the risk of concentration in a few large technology stocks, which are currently experiencing increasingly stretched valuations.

"The stock market's over-reliance on a few large companies means that market returns are increasingly tied to the specific factors of those companies. Even if the earnings of leading companies remain strong, even a small negative impact from AI factors can create volatility and cause the index to fall more sharply than usual. Therefore, investors should still include AI stocks in their portfolios, but they must manage their investment weight carefully to avoid concentration risk." Mr. Sornchai said.

This SCB CIO advises investors to proactively diversify their portfolios across various asset classes. For long-term investments of one year or more, it is recommended to focus on generating cash flow through high-quality short- to medium-term US bonds and debentures, which have lower interest rate volatility risk than long-term debt instruments. For investors with a moderate to high risk tolerance, it is recommended to allocate a portion of investments to the US stock market, focusing on selecting companies with strong fundamentals, robust profitability, and clear benefits from AI, as well as the South Korean stock market, which has potential support from the upward cycle of the semiconductor sector.

In addition, the portfolio should include high-quality REITs and infrastructure assets to help generate cash flow and enhance portfolio stability, as well as a gold fund to help diversify risk in an environment of high geopolitical uncertainty.

For short-term investments, SCB CIO recommends that investors seek opportunities to enhance returns in themes driven by AI infrastructure and key global mega-forces, such as clean energy funds, smart grid infrastructure, semiconductor stocks, and producers of rare earth minerals and strategic metals. These assets align with the long-term drivers of AI, energy transition, and geopolitical polarization, which are likely to remain key investment themes.

Source: Economics and Portfolio Strategy (EPS) for June 2569, prepared by SCB CIO on June 22, 2569.
Please note that this information is subject to change. Investors should exercise their own judgment when making investment decisions.

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