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Wednesday, Jul 09, 2025
Outside the box.
Asian AI Boom: Goldman Sachs Repositions Asian Equity Strategy Amid AI Growth
The investment bank shifts focus to South Korean and Taiwanese tech stocks as Thai brokerage warns of local economic challenges.
Global investment firm Goldman Sachs is adjusting its strategy for Asian equities, advising investors to increase their holdings in technology shares from South Korea and Taiwan, in anticipation of growth in the artificial intelligence (AI) sector.
This shift is juxtaposed with a cautionary outlook from Thai brokerage Kiatnakin Phatra Securities (KKP), which is advising a focus on diversifying investments internationally, citing headwinds in the domestic market.
At the 'FUTURE OF ASIA' seminar in May, Timothy Moe, Goldman Sachs' Chief Asia Pacific Regional Equity Strategist, discussed the current state of the global economy, which is growing but facing a slowdown.
He identified persistent risks, including fiscal uncertainties and geopolitical tensions, and encouraged investors to seek out 'idiosyncratic opportunities' that are less dependent on overall macroeconomic trends.
Moe indicated the potential for a 10% rise in oil prices—possibly driven by conflicts in the Middle East—to decrease global GDP by 0.1% and increase inflation by 0.2%.
In light of these conditions, he suggested that ASEAN-4 markets, commodity stocks, and defensive equities might perform better than the broader Asian market.
On the U.S. front, Goldman Sachs has made slight upward adjustments to its GDP forecasts and reduced the probability of a recession, attributing this positive outlook to easing tax burdens.
Furthermore, concerns about fiscal discipline remain, which could impact the dollar and bond markets.
The bank anticipates that the S&P 500 will yield approximately 4-5% over the next 12 months if a recession is avoided, setting a target of 6,500 points.
In commodity markets, gold has been recommended due to significant uncertainty, ongoing concerns regarding U.S. institutional stability, and robust buying from central banks around the world.
Within the Asian equity landscape, Goldman Sachs is prioritizing increased exposure to South Korea, Taiwan, and hardware technology sectors while advising a reduction in weightings in Singapore and Indonesia.
China and Japan continue to be favored as overweight positions.
In terms of strategic focus for the latter half of the year, Goldman Sachs emphasizes stocks that are likely to benefit from a weaker dollar, those offering high shareholder returns, firms with robust earnings quality, and those expected to see upward revisions in earnings estimates, alongside sectors such as aerospace and defense, as well as companies benefiting from supportive Chinese government policies.
Conversely, KKP Securities presents a subdued outlook for the Thai economy.
Chief Economist Dr. Pipat Luengnaruemitchai noted 'headwinds from all sides', attributing a significant slowdown in the vital tourism sector to a marked decline in Chinese visitors.
He highlighted ongoing uncertainties arising from reciprocal trade negotiations and financial deleveraging that are impacting domestic demand.
Dr. Pipat acknowledged the necessity for economic stimulus but pointed out the limitations of fiscal policy, given Thailand's high public debt levels.
Any further stimulus could require adjustments to the debt ceiling and should ideally focus on long-term infrastructure projects.
Concerning monetary policy, Dr. Pipat remarked that the low interest rates currently in place might limit the central bank's options, potentially leading to 'unconventional policies' to manage the ultra-low interest rate environment globally.
KKP forecasts Thailand's policy interest rate could decrease to 1.0%.
Ongoing political uncertainty within Thailand continues to undermine investor confidence, and the weakness of the Thai Baht reflects greater economic fragility.
Dr. Pipat emphasized the need for Thailand to expedite structural reforms in labor, education, innovation, regulation, and national competitiveness to enhance long-term growth potential.
Taweesak Paopanlop, Head of Economic and Investment Analysis at KKP Securities, indicated that global stock markets might experience short-term selling pressures due to import tariffs and protectionist policies.
However, he anticipates a strong recovery by 2026, fueled by anticipated stimulus measures in the U.S. and Europe, especially U.S. tax reductions that are projected to elevate 2026 GDP by 0.5% and earnings per share by over 5%.
KKP continues to advocate for full investment across various asset classes, aligned with individual risk appetites.
They regard the S&P 500 at 5,800 points as a compelling entry point for gradual investment, with a mid-2026 target set at 6,500 points.
The brokerage particularly favors 'quality stocks' and 'defensive stocks' distinguished by strong fundamentals, low risk, and reliable dividend payouts, to sustain portfolio stability amid market fluctuations.
This shift is juxtaposed with a cautionary outlook from Thai brokerage Kiatnakin Phatra Securities (KKP), which is advising a focus on diversifying investments internationally, citing headwinds in the domestic market.
At the 'FUTURE OF ASIA' seminar in May, Timothy Moe, Goldman Sachs' Chief Asia Pacific Regional Equity Strategist, discussed the current state of the global economy, which is growing but facing a slowdown.
He identified persistent risks, including fiscal uncertainties and geopolitical tensions, and encouraged investors to seek out 'idiosyncratic opportunities' that are less dependent on overall macroeconomic trends.
Moe indicated the potential for a 10% rise in oil prices—possibly driven by conflicts in the Middle East—to decrease global GDP by 0.1% and increase inflation by 0.2%.
In light of these conditions, he suggested that ASEAN-4 markets, commodity stocks, and defensive equities might perform better than the broader Asian market.
On the U.S. front, Goldman Sachs has made slight upward adjustments to its GDP forecasts and reduced the probability of a recession, attributing this positive outlook to easing tax burdens.
Furthermore, concerns about fiscal discipline remain, which could impact the dollar and bond markets.
The bank anticipates that the S&P 500 will yield approximately 4-5% over the next 12 months if a recession is avoided, setting a target of 6,500 points.
In commodity markets, gold has been recommended due to significant uncertainty, ongoing concerns regarding U.S. institutional stability, and robust buying from central banks around the world.
Within the Asian equity landscape, Goldman Sachs is prioritizing increased exposure to South Korea, Taiwan, and hardware technology sectors while advising a reduction in weightings in Singapore and Indonesia.
China and Japan continue to be favored as overweight positions.
In terms of strategic focus for the latter half of the year, Goldman Sachs emphasizes stocks that are likely to benefit from a weaker dollar, those offering high shareholder returns, firms with robust earnings quality, and those expected to see upward revisions in earnings estimates, alongside sectors such as aerospace and defense, as well as companies benefiting from supportive Chinese government policies.
Conversely, KKP Securities presents a subdued outlook for the Thai economy.
Chief Economist Dr. Pipat Luengnaruemitchai noted 'headwinds from all sides', attributing a significant slowdown in the vital tourism sector to a marked decline in Chinese visitors.
He highlighted ongoing uncertainties arising from reciprocal trade negotiations and financial deleveraging that are impacting domestic demand.
Dr. Pipat acknowledged the necessity for economic stimulus but pointed out the limitations of fiscal policy, given Thailand's high public debt levels.
Any further stimulus could require adjustments to the debt ceiling and should ideally focus on long-term infrastructure projects.
Concerning monetary policy, Dr. Pipat remarked that the low interest rates currently in place might limit the central bank's options, potentially leading to 'unconventional policies' to manage the ultra-low interest rate environment globally.
KKP forecasts Thailand's policy interest rate could decrease to 1.0%.
Ongoing political uncertainty within Thailand continues to undermine investor confidence, and the weakness of the Thai Baht reflects greater economic fragility.
Dr. Pipat emphasized the need for Thailand to expedite structural reforms in labor, education, innovation, regulation, and national competitiveness to enhance long-term growth potential.
Taweesak Paopanlop, Head of Economic and Investment Analysis at KKP Securities, indicated that global stock markets might experience short-term selling pressures due to import tariffs and protectionist policies.
However, he anticipates a strong recovery by 2026, fueled by anticipated stimulus measures in the U.S. and Europe, especially U.S. tax reductions that are projected to elevate 2026 GDP by 0.5% and earnings per share by over 5%.
KKP continues to advocate for full investment across various asset classes, aligned with individual risk appetites.
They regard the S&P 500 at 5,800 points as a compelling entry point for gradual investment, with a mid-2026 target set at 6,500 points.
The brokerage particularly favors 'quality stocks' and 'defensive stocks' distinguished by strong fundamentals, low risk, and reliable dividend payouts, to sustain portfolio stability amid market fluctuations.
