Taiwan supply chain benefits from AI demand spillover
UBS said Taiwan, leveraging its semiconductor and AI hardware supply chain advantages, is seeing demand extend from advanced chips to more supply chain segments, with corporate earnings expected to grow 42% this year and 37% next year, reflecting AI data center and hardware demand remaining the key growth driver. 胡俊禮, Head of Asian Asset Allocation, Chief Investment Office, UBS Global Wealth Management, noted that market uncertainty has risen recently, with bond yields and oil prices moving higher and AI investment returns also in focus. With US midterm elections approaching, political headlines could amplify short-term volatility, but fundamentals such as corporate earnings, interest rates and energy prices matter more for medium- to long-term markets.
S&P 500 third-quarter earnings seen up 28%
On corporate earnings, 胡俊禮 said that supported by AI demand, an improving industrial cycle and resilient high-income consumers, S&P 500 third-quarter EPS is expected to rise 28% year on year. AI remains a key growth engine, but market focus is shifting from the scale of AI investment to commercialization results, with greater attention on whether companies can translate spending into revenue and returns. Earnings growth in Asia ex-Japan this year has clearly outpaced share price performance, with corporate earnings growth of 20% expected next year, of which Taiwan, benefiting from AI growth, stands out. For long-term investors, maintaining a balanced allocation amid still-elevated market uncertainty helps balance growth, income and risk management.
US Treasury yields hit highest since 2002
On bonds, 胡俊禮 explained that bond markets have recently repriced significantly, with the US 10-year Treasury yield once rising to 5.36%, a new high since 2002. Inflation, monetary policy, fiscal concerns and AI-related financing demand have all added upward pressure on yields. However, higher yields now provide a larger buffer: at current levels, US 2-year, 5-year and 10-year yields would need to rise by about 254, 113 and 65 basis points respectively before capital losses over the next year would offset carry. In other words, the recent repricing has improved the risk-reward for high-quality bonds, so in the base case yields are still expected to ease modestly over the next 12 months.
Oil price impact limited, diversified allocation maintained
On geopolitics and energy prices, 胡俊禮 said energy risks warrant attention but are not yet enough to change the overall market direction. The recent oil price gains are estimated to reduce global GDP growth by about 0.3 to 0.5 percentage points, but AI investment, resilient household balance sheets, and improved adaptability across economies since the 2022 energy shock should help cushion the impact. Overall, the view on equities remains positive, with diversified core holdings as the foundation, and investors may moderately reduce excessive single-stock concentration on market strength; in fixed income, selected intermediate- to longer-dated high-quality bonds are favored, while remaining cautious on the longest maturities; in commodities, energy supply risks highlight the diversification value of broad commodity exposure.