UBS's MacLeod On Transformation & Impact of GenAI

So I was there where you are yesterday. I was having a look at the sort of the agenda and we're two days in. You're the curator. So we'll, we'll, we'll make you stick your neck out here. What was the stand out so far based on all the conversations and panels that you guys have had there? Well, David, good question. I think I'll upset a lot of people if I pick one session because we've had so much fantastic content. The Thai Prime Minister is speaking at the moment and the room is packed as you would expect. It's it's very rare to have a sitting leader speaking at an investment conference. So we've been very honoured to have him here today and he's been giving us an extremely bullish outlook on the Thai economy, tourism coming back, FDI really booming, digital wallet coming later on the year. So that that's been a big stand out today. Yesterday, inevitably, one of the big debates is around monetary policy with Doctor Rajan and Olivier Blanchard. And clearly investors are still grappling with this, this issue where interest rates go. So that that was also something that's very, very popular. And John Kerry joining us, climate inevitably one of the biggest issues for us all. So there's been a lot of really interesting content, right, Neil? I'll try and speak up because I know it's loud just behind you right there. And you know, you mentioned inflation remains a key worry for global investors in terms of asset allocation and one thing or one, well, well, one development, it's actually trumped inflation as far as a key driver of returns has been AI. And I know you guys have been very deliberate in making sure that AI is part of the conversations there at UBS. Is that something that your clients asked you to do? Look, it it over the last year, it's been the number one issue for everybody. It's, it's, I wouldn't say it's come out of nowhere, but when ChatGPT came along about 18 months ago, the interest levels have really exploded. And, and even though we know so much more about it in terms of the impact on companies today, I think the macroeconomic impact is still something that people are grappling with. Olivier Blanchard was talking about this yesterday. Paul Romer, who I'll be sitting down with just after this, is also grappling with this subject. And you've got these very incredible minds, Nobel laureates, trying to figure out what does it mean? There's still enormous uncertainty about the productivity impact, but we also have a series of other panels looking at issues like security. I mean, a really critical issue for us when we think about what AI can do. So we have to think about four or five different panels around AI, the impact on the economy, the impact on companies, the impact on the markets. And of course, more importantly now also we have to think about the impact on security. So a lot, a lot that that clients are interested from this theme. Neil, what's been the tone of the conversations around China in particular? Because we've seen that stock rally from February sort of stalling of sorts. Is there a sense that that investors are seeing this as an opportunity to buy or is this just about reassessing and really thinking perhaps there hasn't been enough fundamental changes coming through yet? Well and well, it's a great question. The the mood music coming out of a lot of the corporate meetings is quite positive. I wouldn't say people are pounding the table with unguarded optimism, but corporates are actually quite confident on the consumer side. We've had a lot of them talking about businesses being on plan, if not a little bit ahead of plan. The Internet companies have been talking a pretty good story. So yes, the rally has been very, very strong and perhaps it's taking a breather. But the the meetings have been full. Clients are really trying to assess if there are fresh data points that can keep this going. And I would say that the, the mood music has been quite positive in China. I'm not a surprise given what the market's done perhaps. But sometimes at these conferences, the corporates are a little bit more cautious than what the market's already been doing. But I'd say the, the general tone has been somewhat positive. People are not getting carried away. I would say the corporates aren't getting carried away. Investors are not getting carried away. But there's a, there's definitely green shoots appearing on the consumer side, some of the industrial companies talking about orders picking back up, as I mentioned, the Internet companies, capital return, rising margins, cost being controlled, higher returns and capital. I mean, these are the sorts of things that bull markets are built on. It's not just GDP growth. You want to see those higher returns. And there's a, there's a lot of stories that would support that coming out of this conference. Neil, I think I, I hear your former hat talking, there's an equity strategist. So let me let me push you a little bit more on that. And certainly in the conversation around exposure to China is I guess to your point, not so much unbridled optimism, certainly optimism is warranted, but you know, still caution Ditto. Is there a sense though from those meetings that we're ready to talk about China's beyond a tactical equity play at this point in time or do or is that does that seem for the, you know, a few months down the road still? Well, David, I mean, being somewhat cynical as a former strategist, bull markets start reluctantly and then they tend to carry on as the data gets better, the news gets better. We've had that first leg up and our own UVS strategist moved overweight on China a couple of months ago and that's been great so far. But I think to keep this going, you need to see more evidence of the economy getting a little bit better and that that's certainly consistent with what we've heard. You need to to have more confidence that the risks are coming down, which on the property side, my colleague John Lamb's been writing a lot about this and highlighting some of the policy measures from the government that are very supportive. Again, tick on that front, the corporates getting a little bit more optimistic. As I said, we've had some positive data points from from one-on-one meetings as well. But there is as you as you described it, David, there's always a little bit of reluctance to get carried away, particularly after two tough years for the market. But I would say that the fresh news coming out of this conference wouldn't disappoint somebody that was wanting to be more optimistic. Maybe, maybe that in itself is me being guarded about what we've seen. But I I certainly think the data points have been encouraging that this Chinese move or the China market move can continue somewhat further.

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