Q3 Global SMID-Cap Outlook

Global equities should remain supported by a resilient AI data-centre investment cycle and improving conditions in India, although oil, inflation and bond yields remain risks.

• The earnings outlook remains strong because AI data-centre capital expenditure is still intact, while seasonality is expected to improve over the coming weeks.
• The Taiwan visit confirmed strong momentum in AI data-centre capital expenditure, but the team has begun taking profits in the theme because of valuations.
• The India visit strengthened the team's conviction: bank credit growth reached 19% year on year, the Foreign Currency Non-Resident (Bank) scheme was closed early after strong demand, and liquidity is abundant.
• Indian domestic conditions are improving, with property sales recovering, four-wheeler auto sales up 22% year to date year on year, and signs of renewed private-sector capital expenditure, particularly in power.
• The government remains focused on manufacturing, exports and greater domestic content, while the team added to India through Lemon Tree Hotels and increased exposure to defence, wealth management and healthy living through Hanwha Aero, Pinnacle, Fineco Bank and Vita Coco.

Takeaway: The team remains broadly positive on global equities and has increased its Indian exposure, but investors should balance the opportunity in AI and India against higher oil prices, inflation, bond yields and stretched valuations in parts of the AI theme.