CTBC Bank Optimistic About AI Growth Momentum, Warns of 2 Risks in Second Half

(CNA, Taipei, June 30) CTBC Bank stated today that in the second half of this year, two key variables requiring attention are geopolitical risks and concerns over debt sustainability. Corporate profit momentum will continue to be supported by artificial intelligence investment and manufacturing. The bank recommends adopting a strategy of "AI growth as the main theme, with diversified allocation" to focus on AI-driven technology stocks while managing risks and maintaining stable asset growth through diversified allocation and dynamic adjustments.

CTBC Bank issued a press release today stating that in the first half of this year, global financial markets were significantly influenced by geopolitical conflicts and the expansion of AI capital expenditure. Among these, sectors with policy support and AI industry performance shone the brightest, with Taiwan, South Korea, and Japan's stock markets showing significant returns, leading major markets.

CTBC Bank forecasts that the projected deficit in the crude oil market supply and demand will continue until the end of 2026. Oil prices and inflationary pressures will constrain monetary policy, delaying the US Federal Reserve's interest rate cuts and resulting in moderate expansion of end-user demand.

Structurally, the trend of divergence in the global economy and markets is widening. AI and technology investments are driving the growth of high value-added industries, with related exporting countries performing relatively well. On the consumer side, a K-shaped divergence is evident, with strong momentum among high-income groups and rising pressure on low-income groups. In capital markets, funds remain concentrated in large-cap technology stocks. However, as the economic expansion and corporate profits gradually spread, funds are expected to shift towards undervalued and cyclical-sensitive sectors, leading to broader market participation.

CTBC Bank reminds investors that in the second half of the year, both stocks and bonds will require attention to two major key variables. The first is a potential escalation of geopolitical risks, particularly if energy supplies in the Middle East or shipping routes are disrupted, which could drive up oil prices and trigger secondary inflation, forcing the Federal Reserve to pivot back to tightening and further suppress the valuation of risk assets.

The second is the continued rise in global fiscal expansion and debt levels. High interest rates are increasing interest burdens, and debt risk has become a significant concern in financial markets. Simultaneously, the US faces debt ceiling pressure in the first quarter of next year, while Japan may experience a bond market sell-off due to a surge in its new fiscal budget, amplifying global capital volatility through the reversal of yen carry trades. This will further impact stock markets and cross-asset prices, and increase pressure on the banking and credit markets.

CTBC Bank stated that overall, amidst policy uncertainties, corporate profit momentum will continue to be supported by AI investment and manufacturing expansion, which will help maintain positive market development. For the second half of the year, the recommended investment strategy is "AI growth as the main theme, with diversified allocation." In terms of asset allocation, the core will be AI-driven technology stocks, focusing on semiconductors, cloud infrastructure, and related application services. Additionally, cyclical industries that benefit from the spillover effects of AI capital expenditure, such as industrials and utilities, will be included to reduce the volatility risk from single-industry concentration. (Editor: Yang Lan-hsuan) 1150630

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