Investment market volatility is ‘here to stay’ unless global recession strikes: analyst

Nomura International Wealth Management's North Asia chief investment officer Julia Wang said investment market volatility is 'here to stay' for years unless a global recession occurs, citing structural market changes driven by artificial intelligence development and geopolitical risks. Wang noted that AI expectations have led to crowded trading and leverage, exemplified by the 22% plunge in South Korea's KOSPI index last month and a 71% drop in a Hong Kong-listed SK Hynix leveraged ETF.

Advertisement Investment market volatility is ‘here to stay’ unless global recession strikes: analyst Rich investors put on notice as AI advancement and geopolitical risks continue to change market structure, causing instability, says Nomura 2-MIN READ2-MIN Listen Wealthy investors https://www.scmp.com/topics/wealth-management?module=inline&pgtype=article should be ready for higher volatility “for years” as uncertainties around artificial intelligence https://www.scmp.com/topics/artificial-intelligence?module=inline&pgtype=article AI development and geopolitical risks are set to persist, according to a major private bank. In the past few years, asset prices underwent several roller coaster rides, from US Liberation Day last year to the sell-off of semiconductor shares https://www.scmp.com/business/markets/article/3364550/china-fund-managers-stick-ai-chips-august-despite-july-sell-survey-finds?module=inline&pgtype=article and US Treasury in recent months.But volatility came after changes to the market’s structure “over the decades” and was expected to be “here to stay”, said Julia Wang, North Asia chief investment officer of Nomura International Wealth Management, in an interview with the South China Morning Post. “ Periodic high volatility is already a result of structure changes to the market https://www.scmp.com/business/china-business/article/3364498/hong-kong-stocks-decline-rising-bond-yields-and-stalemate-iran-war-dent-sentiment?module=inline&pgtype=article , so it’s unlikely to change, unless we have a global recession,” said Wang, who joined the international wealth management arm of Japan’s largest investment banking and brokerage firm in November last year, to advise the offshore investments of clients with at least US$20 million of potential investable surplus.While Wang reaffirmed Nomura’s positive outlook on AI and the global economy, AI was one of the key pushes behind the ups and downs. She explained that expectations for outperforming gains from the future productivity driver resulted in crowded trading and leverage, which usually would be followed by market sell-offs. Semiconductor shares could be a good example. After hitting a record high in late June, the memory chip-heavy Korea Composite Stock Price Index plunged 22 per cent last month, sending a Hong Kong-listed SK Hynix https://www.scmp.com/business/banking-finance/article/3364860/why-hong-kongs-sk-hynix-fund-stayed-full-leverage-amid-market-volatility?module=inline&pgtype=article -leveraged exchange-traded fund to dive 71 per cent over the month.Advertisement Select Voice Select Speed 1.00x