AI-driven trading crowds creating years of market volatility ahead, says Nomura chief

Market volatility will persist for years as structural shifts driven by artificial intelligence and geopolitical tensions reshape trading patterns, according to a senior wealth manager at one of Japan's largest financial institutions.

Julia Wang, North Asia chief investment officer at Nomura International Wealth Management, told the South China Morning Post that only a global recession could alter the current trajectory of heightened market swings. She advises clients with at least US$20 million in potential investable surplus on their offshore investments.

Decades-long structural change

The volatility reflects structural changes to markets "over the decades" rather than temporary disruption, Wang said. Recent turbulence includes last year's US Liberation Day and sell-offs in semiconductor shares and US Treasury bonds in recent months.

Wang joined Nomura's international wealth management arm in November last year.

AI creates crowded trades

Despite maintaining a positive outlook on artificial intelligence and the global economy, Wang identified AI as a key driver of market instability. Expectations of outperforming gains from the technology as a future productivity driver have led to crowded trading and excessive leverage, typically followed by sharp sell-offs.

The semiconductor sector illustrates this pattern. After the memory chip-heavy Korea Composite Stock Price Index reached a record high in late June, it plunged 22 per cent in the following month. A Hong Kong-listed exchange-traded fund with leverage to SK Hynix dropped 71 per cent over the same period.

Wang's assessment puts wealthy investors on notice that market instability will remain a defining feature of the investment landscape for years ahead.

Source: South China Morning Post