Risk sentiment in markets stabilised overnight, although under the hood there remains concerns around the sustainability of the AI trade, and with that the spillover to FX markets as well. The key in Asia today is Bank Indonesia’s policy decision, where consensus is split on whether BI will deliver a rate hike on the back of the recent MSCI proposal to downgrade Indonesia to standalone status.
In particular, we saw the S&P500 up 0.3% with NASDAQ futures rising 0.7% at the time of our writing. A Wall Street Journal report said Anthropic could spend US$750bn on additional computing power in the coming years, citing a draft prospectus, but with a net loss of US$81bn in the 1st half of 2026. Latest trade data from South Korea released this morning showed that exports remained strong in the 1st 20 days of October, rising 66%yoy on a working-day adjusted basis, which is indicative of the strong momentum still in the AI market.
Nonetheless, it’s important to remind ourselves that markets are always forward looking and what matters is the change at the margin as much as the absolute levels. Over here, you are seeing some signs that segments of the datacenter businesses are starting to see more risk premia priced in, with Elice Inc a South Korean AI computing supplier dropping 32% in its debut in Seoul yesterday. Meanwhile, the likes of Coreweave has seen its shares decline 20% with bond yields also rising sharply on concerns over rising debt loads. From a macro perspective the best lead indicators we track are starting to show signs that Asia’s export growth is rolling off into 2027 but to be clear implied growth rates remain healthy into 2027 just not as high as what we’ve seen. Meanwhile, global economic surprise indicators also show some signs they are starting to move lower although the good news is that inflation surprises remain contained for now.
Our best guess looking ahead is that 2027 could prove somewhat more challenging for risk assets, and in particular because we could also see the Democrats flip both the House and the Senate with the possibility of greater AI regulation and also a more divided and partisan push on fiscal policies.
Meanwhile for Asia our FX relative preference remains for now for outperformance in the Asia Tech FX such as KRW and TWD and also CNY, with underperformance in the likes of INR and IDR due to domestic reasons as well. Nonetheless looking ahead, our conviction levels on this FX dispersion are lower now given what we mentioned above.
Overall, we could perhaps see greater instances of risk-off, with the likes of safe haven currencies such as JPY and CHF outperforming and so overall going long the Dollar, JPY, or CNH against higher beta currencies may make sense moving forward.
The key focus today is on Bank Indonesia, and the policy action here will be crucial in determining whether USD/IDR stabilises.
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