The Shanghai Co-operation Organisation summit

Hi Simon,

A huge and interesting event which even Dan Andrews got a guernsey to! We could write a large missive on the topic especially as we believe the meeting was an illustration of how the US is slowly losing its position as the leader of the financial world, although we stress the journey could take decades. Hence, we’ve picked out two salient points which we believe will have a significant influence across financial markets:

$US Dollar: SCO leaders discussed reducing reliance on the Greenback in trade and finance, they want members to settle more trade in their own currencies (not just the dollar or euro). Leaders proposed joint financial tools like a regional development bank and cross-border payment systems to support this shift. Over time, this could weaken the dollar’s dominance in global trade, especially in Asia.

• The $US has already fallen almost 14% from its 2025 high.
• At MM we are bearish the $US medium/long term which will impact ASX stocks with large $US revenue.
• Gold which has already soared on central bank buying should benefit from a weak Dollar.

AI: In January Chinas’ DeepSeek unveiled DeepSeek‑R1, a low-cost AI language model claiming performance comparable to major Western models, but at a fraction of the cost. This announcement triggered a sudden sell-off in global tech stocks, notably hitting Nvidia, whose shares plunged ~18%, wiping nearly US $600 billion off its market value in a single day, the largest one-day loss in Wall Street history. The total market impact extended to about US $1 trillion loss across AI and computer hardware sectors.

Chinese children are learning AI as part of a national curriculum kick starting as early as age 6, posing the obvious question of who will be sitting on top of the AI Everest in 10-20 years’ time.

• We see further AI disruption out of China/Asia in this rapidly evolving space, with Alibaba (BABA US) well positioned in this space, a theme we wrote about on Wednesday.