SINGAPORE: Temasek International’s investment chief has highlighted the potential for the artificial intelligence (AI) trade to reverse and inflation pushing up bond rates to a point that may end the run-up for equities as top risks facing global markets heading into next year.
“The unwinding of the AI trade is the biggest risk,” said Temasek International chief investment officer Rohit Sipahimalani.
“We don’t see that as imminent.
“But, will you have bumps in 2027, possibly yes.”
Speaking at the “Milken Asia Summit 2026” in Singapore yesterday, Sipahimalani said the other main issue is “concerns around inflation”.
“Inflation is a risk, together with what is happening in the rates environment, that means there probably is a risk of some breaking point in the equity market at some point,” he said.
Together with AI, these are “two key risks I would see for 2027”.
Debate is raging ahead of the upcoming US earnings season that will mark a key test of whether hundreds of billions of dollars of AI-related spending by tech giants is following through to stronger profits.
Global bonds have slumped as higher energy prices and fiscal borrowing needs push bets on more central bank rate hikes to rein in inflation.
State-owned Temasek, which had S$518bil (US$405bil) as of March 31, this year pledged to more than double its allocation to AI-related investments from 6% to up to 15% by 2031.
AI has already been a major driver of the firm’s returns – it owns stakes in some of the sector’s biggest names including OpenAI, Anthropic and Nvidia Corp.
Sipahimalani said he wants to move more of that AI exposure away from private holdings into publicly-traded assets.
This will help Temasek remain nimble to respond timely if needed, he said.
“AI is such a fast changing environment, things could change quite easily and you have to be able to pivot,” he said.
The firm has half its AI exposure in public markets, and “we want to increase that number ideally to 70% to 75% so it gives us more flexibility to pivot with changes in the environment, as against being stuck with a private asset which there’s little you can do when things are changing”.
Temasek’s investments in the Americas have surged in recent years, thanks in large part to AI investments, and made up 26% of its portfolio as of March 31.
Speaking on the same panel, Mubadala Chief Financial Officer Carlos Obeid said the Middle Eastern fund has been trying over the last few years to increase its Asia exposure.
“A few years ago, the share of the portfolio that was allocated or invested in Asia was about 10%, it has increased now to 13% and we want to do more.
“We’re present in China, South Korea, Japan and India.
“And we want to grow those exposures.”
Granite Asia Capital senior managing partner Jenny Lee highlighted how the narrative has changed for allocators’ investing in China.
“I think China has gone from ‘China is not investable’ to ‘Is China investable’ with a question mark to now the most common question I get - ‘are we missing out?,” she said. — Bloomberg
