NewsGlobalDBS Bank's Taimur Baig Discusses AI Valuations, Fed Policy and India's Geopolitical ChallengesDBS Bank's Taimur Baig Discusses AI Valuations, Fed Policy and India's Geopolitical Challenges
DBS Bank's Taimur Baig discussed key global market themes with ET Now, noting AI market frothiness while defending major tech company valuations based on strong revenue growth. He expects Federal Reserve policy to face continued political pressure for aggressive cuts despite elevated inflation, predicting financial repression scenarios. Baig maintains a bearish US dollar outlook and identifies geopolitical relationship management with the US, China, and Russia as India's primary challenge, while highlighting precious metals demand driven by geopolitical uncertainty.
*this image is generated using AI for illustrative purposes only.
DBS Bank's Taimur Baig has provided insights on several key themes shaping global markets, addressing artificial intelligence valuations, Federal Reserve policy expectations, and India's strategic challenges in a recent interview with ET Now.
AI Market Assessment: Frothy but Not Bubblicious
Baig acknowledged significant frothiness in various areas of the AI market while stopping short of declaring an outright bubble, particularly regarding major technology companies. He highlighted the strong fundamental performance supporting current valuations.
| Company Characteristics | Market Position |
|---|---|
| Valuation Multiples | High 20s to low 30s range |
| Revenue Growth | Strong performance across major tech firms |
| Key Players | Apple, Alphabet, Nvidia |
| Fundamental Justification | Revenue growth supports high multiples |
"It is frothy in many areas, but the really big companies are not that extraordinary highly valued. That is the amazing part that they can justify a high 20s or even low 30s multiple because their revenue growth has been so strong," Baig explained.
He identified potential disruption risks from rapid technological advances outside the US, particularly from China, which could produce comparable technologies at significantly lower costs. However, Baig expressed confidence that even an AI-driven market correction would not create massive systemic global risks, unlike the leveraged structures preceding the 2007-08 financial crisis.
Federal Reserve Policy Outlook
Baig adopted a cautious stance on US monetary policy, noting that while markets currently price in just one rate cut, the discussion remains clouded by political factors and data quality concerns. He believes the Fed is already approaching appropriate policy levels.
| Inflation Factors | Current Status |
|---|---|
| Underlying Momentum | High 2% to low 3% range |
| Labour Market | Tight conditions |
| AI Impact | Increased electricity demand |
| Fiscal Policy | Substantial stimulus measures |
Baig expects continued political pressure for aggressive rate cuts, predicting a scenario he terms "financial repression" for 2025. This environment would involve quantitative easing, operation twist policies, and measures designed to suppress both short-term and long-term interest rates.
US Dollar Weakness Expected
The analyst maintains a "fairly bearish" outlook on the US dollar, citing the combination of expected rate cuts, financial repression policies, and increasing politicisation of Federal Reserve decisions as key factors driving potential weakness.
India's Geopolitical Balancing Act
Baig identified geopolitical management as India's primary risk, emphasising the complexity of maintaining relationships with multiple global powers including the US, China, and Russia.
Strategic Relationships
He noted a strategic thaw between India and China over the past 18 months, characterised by economic pragmatism despite ongoing geopolitical tensions:
- China seeks access to Indian markets
- India requires Chinese technology
- Economic symbiosis despite political tensions
- Potential US concerns over India-China cooperation
Sector-Specific Challenges
Certain Indian sectors continue experiencing pressure from geopolitical tensions:
- Gems and jewellery exporters in Gujarat face ongoing tariff pressures
- India's apparel sector ambitions as China alternative undermined by current trade narrative
- Energy purchase scrutiny regarding Russia relations
"So, to manage Donald Trump, to manage Vladimir Putin, that sort of stuff and how that impacts investor sentiment I think is the biggest challenge and biggest risk for 2025," Baig stated.
Precious Metals Outlook
Baig highlighted two primary forces driving recent precious metals gains: the continued weaponisation of the US dollar and heightened geopolitical uncertainty. He emphasised that investor demand stems from seeking tangible stores of value rather than inflation concerns or dollar scarcity fears.
"It is the uncertainty that makes one to hold on to something a little more tangible and bitcoin is not the answer, that is where we see precious metals come out," he explained.
While acknowledging India's reasonable navigation of geopolitical pressures thus far, Baig cautioned against complacency and stressed the importance of concrete trade deals and greater acceptance of multi-alignment strategies in the current global environment.
16
