Last week was marked by a questionable rally on hopes that peace was just around the corner, but weekend news dampened that optimism, and the week opens on a mixed note with many unanswered questions. The Strait of Hormuz is reportedly closed again, Iran is not happy with the US blockade and even less with a ship being seized a few hours ago, and is no longer willing to attend the upcoming negotiations until the blockade is lifted. Donald Trump continues to threaten to destroy the country’s power plants and bridges.
As a result, US crude jumped at the open but has since given back part of its earlier gains. It is about 5% higher at the time of writing, while Brent crude is up by around 3.4%.
US and European equity futures are down, but Asian indices are up. Tech-heavy indices, in particular, are doing just fine this morning—despite the jump in energy prices—as news on the AI front has been very encouraging. As long as oil prices remain below the $100pb level, investors seem willing to maintain—and even increase—exposure to technology names.
Korean Kospi index, which was one of the most heavily hit Asian indices on the war news, is back near the peak levels seen before the conflict started. Investors have returned to the memory chip shortage theme, keeping demand for Korean champions Samsung Electronics and SK Hynix strong. Both are flirting with new all-time highs, thanks to robust and resilient AI demand.
Earnings last week added to that optimism, as TSMC, which builds chips for tech giants like Nvidia and Apple, reported a 58% surge in profit in the three months to March and said it expects revenue to grow more than 30% this year—above its previous guidance. Meanwhile, ASML, which sells machines to chipmakers, raised its full-year sales forecast on AI demand, signaling that the war in Iran has not depressed AI investment and is unlikely to derail the AI rally. The Japanese Nikkei 225 pared early losses after hitting an all-time high last Friday, while the Hang Seng Index is up around 0.83%.
If I could say one thing about my travels across Asia over the past weeks, I would say that I have been impressed—and left speechless—by the few days I spent in China. The technology, the EVs, the robots—it felt like landing on a different planet, in a different era. Since then, I haven’t stopped reading EV news, and I can tell you: Chinese EVs are something else from a technology, design and cost perspective. The technology gap is now such that import tariffs on Chinese EVs in Western economies may delay their arrival, but are unlikely to protect traditional brands. Many are already striking deals with Chinese producers to stay afloat.
That said, Chinese EV makers are not necessarily cheap. BYD is trading at a P/E ratio of around 27 and has been under pressure due to an aggressive price war in the EV space. Still, it is hard not to see a bright future for these companies after experiencing the products firsthand.
Anyway, that was a brief personal note.
