GIC chief highlights liquidity amid growing AI stock concentration

Investors need enough liquidity to respond to market changes when exposure to artificial intelligence-related stocks is difficult to diversify, GIC chief executive Lim Chow Kiat said in Hong Kong on Nov 3. He outlined how Singapore’s sovereign wealth fund assesses risks in increasingly concentrated markets.

Addressing the Global Financial Leaders’ Investment Summit, Lim said investors should examine what companies do and how much their businesses depend on AI. US stocks make up about 70 per cent of the MSCI World Index’s weightings, he noted, but many of those companies earn revenue internationally.

He also favoured assessing individual companies’ quality over making top-down capital allocations. Strong management and competitive advantages can help investments over a longer horizon, he said.

Lim cautioned that fast-moving technological developments could produce structural shifts rather than cyclical changes, leaving greater uncertainty about where valuations might ultimately settle. Investors should receive higher risk premiums for that uncertainty, he said, particularly in credit markets where they may be wary of excessive exposure to a few large issuers.

Despite GIC’s increased size, international reach and specialisation, Lim said its mandate remains to grow Singapore’s reserves and keep funds available for the country when required. He also stressed that long-term investing is not merely a succession of decisions made for the short term.