TISCO Signals Portfolio Shift From Tech to Energy Stocks
TISCO warns that tech and AI stocks face increasing fragility from excessive leverage, signaling investors should shift capital toward energy and materials sectors as markets transition from speculation-driven gains to fundamentals-focused
TISCO ESU cautioned on July 30 that global stock markets are entering a turning point in the second half of 2024. Technology and AI stocks have tightened as investors increasingly use leveraged positions, raising concerns that market fragility could worsen if the Federal Reserve raises interest rates, hiking financing costs. The firm expects investment capital to gradually shift toward fundamental, robust equities, spotlighting energy and materials sectors.
Senior strategist Thanathat Srisawat of TISCO Economic and Strategy Center revealed that TISCO ESU will emphasize diversifying investments away from crowded trades, particularly the semiconductor industry, which has surged dramatically with elevated valuations and volatility. The firm sees energy and materials as attractive sectors, bolstered by a recovering commodity cycle reflected in significant upward revisions to 2024 earnings-per-share estimates. If sector rotation occurs—drawing capital away from concentrated technology and AI holdings—both energy and materials could benefit substantially.
"Global markets faced volatility in the first half from geopolitical tensions in the Middle East, energy price swings, and major central banks' dramatic policy tightening," Thanathat said. "While markets recovered multiple times, gains concentrated in technology and semiconductors, clearly reflecting rising speculative behavior." TISCO ESU believes markets are shifting from speculation-driven rallies to periods when investors prioritize earnings quality and fundamentals, making this a critical moment for investors to review asset allocation and prepare for new investment flows.
Research assistant Thanachote Phutthanakij of TISCO ESU noted that a key market signal is not merely rising share prices but surging leverage use—margin lending climbing to record or near-record highs in Taiwan, South Korea, Japan, and the U.S., all crucial to global semiconductors. Taiwan's margin loans have already exceeded dot-com bubble levels from 2000, signaling intense speculation, while South Korea's borrowing for investment has jumped over 141% since early 2024, reflecting aggressive retail leverage tactics.
