Interview, Earnings Call
Can the Asia Equity Rally Continue?
- Token usage in the agentic AI economy is expected to increase 24-fold between the current date and 2030.
- The semiconductor memory super cycle is projected to persist for three to five years, surpassing current market pricing assumptions.
- Semiconductor supply is anticipated to remain unable to match the step-function demand growth shifting from an inference to an agentic AI economy, creating supply shortages.
- High pricing power from these supply constraints is predicted to drive bottom-line profits for memory stocks and supply chain participants over the next three to five years via high operating leverage.
- A semiconductor stock correction is expected due to overbought conditions, specifically with the Relative Strength Index recently reaching 85.
- Stock prices are not expected to sustain a straight-line annualized rise of approximately 60 percent without a pullback.
- The U.S. re-industrialization theme, leveraging Korea and Japan as upstream partners, is viewed as a relevant investment driver for five to ten years.
- Japan's interest rate normalization is expected to benefit banks by steepening the yield curve and raising absolute rate levels, though a potential risk exists if normalization occurs too quickly.
- Domestic Japanese investors holding significant bank cash are predicted to continue deploying capital into equities via tax-advantaged NISA funds.
- Corporate governance improvements and the "value-up" program in Japan are expected to drive further market upside.
- Global investor skepticism regarding the duration of the semiconductor memory cycle remains a prevalent view, consistent with discussions on companies like Micron.
- The market "halo trade" favoring heavy assets with low obsolescence is expected to persist as an investment vector in Japan.
- Forward-looking markets have largely priced in the current energy supply shock, assuming the conflict will resolve soon.
- If the state of war persists for six weeks or longer, markets could face convex negative impacts on energy availability, pricing, and downstream supply chains.
- A potential market correction is possible during summer months if the energy supply shock is not resolved as quickly as current investor assumptions predict.
- Markets are considered overstretched and vulnerable to a pullback due to the rapid pace of news flow in the technology sector.
- Geopolitical tensions and the Middle East war are identified as critical variables determining the sustainability of North Asia's outperformance.