One Knightsbridge Capital Monday Espresso Podcast

Monday Espresso Podcast - 13th July 2026

[00:00:00] Andrew Shaw: Good morning. Today is Monday, the 13th of July. My name is Andrew Shaw, Senior Investment Analyst here at Marlborough. And joining me today is special guest, James Athey, Fixed Income fund manager. Good morning, James.

[00:00:12] James Athey: Hello, Andrew. Good to be here. Good to be back.

[00:00:15] Andrew Shaw: Great to have you with us, James. I've got a few questions this week.

[00:00:18] Andrew Shaw: We're covering the situation in Iran, new Prime Minister winging his way into number 10 and a record breaking chip listing out of South Korea.

[00:00:26] Andrew Shaw: Markets last week, it was another week of West versus East, though this time with a bit of a twist. The US ground higher with the S&P 500, up around half a percent, and the NASDAQ doing slightly better than that.

[00:00:38] Andrew Shaw: The Dow Jones lagged. It was actually down 1% last week. And the UK gave back some of its recent strength. FTSE 100 was off, around 1.5%, held back by a sharp fall in AstraZeneca after a failed drug trial.

[00:00:51] Andrew Shaw: The real action though was in Korea. The KOSPI, which has been the best performing market in the world this year, up around 75% had a whip so a weak, it fell over 5% on Wednesday, dropping briefly into a bear market before bouncing back towards the end of the week.

[00:01:07] Andrew Shaw: So, James, what's going on in the world of fixed income?

[00:01:10] James Athey: So unfortunately the main news item last week in terms of fixed income was the return of the US Iran war. Just when we thought that at least the most acute phase of that very public disagreement was passed, the very fragile ceasefire has collapsed, quite rapidly. Some fairly aggressive words from President Trump hitting the headlines, really giving investors significant concern that that situation which had prevailed from March onwards may be returning.

[00:01:48] James Athey: And of course, that raises the potential of higher oil prices and higher inflation. And as we know, inflation is not what bond investors want to see. So we saw a spike in the oil price. We've seen a spike in yields pretty much everywhere, just reflecting the fact that central banks are once again going to have to potentially make decisions about hiking rates to deal with a resumption of inflation pressures from the oil market, and a continuation of inflation pressures coming from the demand for the goods going into the AI and data centre build out.

[00:02:23] James Athey: A bit closer to home, so that was definitely a global theme that was affecting everybody closer to home. And you mentioned it in your intro. Politics is a assuredly front of mind in the UK, as it seems unfortunately to have been pretty persistently over the last few years.

[00:02:40] James Athey: Andy Burnham, who's only recently crowned as a Member of Parliament, having won a by-election, has achieved a significant number of votes from the parliamentary Labour Party.

[00:02:49] James Athey: The vast majority of their MPs voted in favour of appointing him as leader of the party and thus subsequently Prime Minister. So it looks all nailed on now that the next Prime Minister will be Andy Burnham, and that means that gilt investors are continuing to try and glean from his public pronouncements. What his policy stance is going to look like, particularly with respect to fiscal policy.

[00:03:13] James Athey: The big announcement that we're all awaiting for really is his choice of chancellor, as that is likely to be seen as indicative of which direction he's taking the country, more tax, more spend, or something a bit more conservative with respect to fiscal policy.

[00:03:29] Andrew Shaw: That's a fabulous breakdown. Thank you very much for that, James.

[00:03:32] Andrew Shaw: I mean, you are a fixed income guy, but, what's going on in equity markets at this point?

[00:03:37] James Athey: It's difficult to avoid the topic. It tends to be that the main driver in both directions each and every day, and that, of course, is AI. The news this last week significantly actually, has been Meta, for those of you who aren't familiar with the name of that company, it's the company that owns Facebook.

[00:03:56] James Athey: And what Mark Zuckerberg, who's the Chief Executive announced this last week, was essentially they've bought so much data centre capacity that he now feels he's got too much for Facebook's needs and so he's looking at Facebook actually renting out that additional capacity going forward.

[00:04:15] James Athey: Now, this can be taken a number of different ways. One interpretation is that this might indicate that demand for AI for data centres is starting to peak. Or indeed it could simply be a representation of his belief that there's such a shortage of, particularly the chips, the semiconductors that go into these data centres.

[00:04:37] James Athey: That demand will continue as far as the eye can see, and it will be a very lucrative trade for him to begin renting those out. So two competing interpretations. It's definitely been good for the meta share price, that's up significantly in the aftermath of that announcement. What that means for wider stock markets and for the semiconductor stocks remains an open question.

[00:04:59] James Athey: But as you mentioned, there's been significant volatility in those names again over the last week.

[00:05:04] Andrew Shaw: Thank you very much for that, James. The AI trade is still dominating narratives. Can you talk about Korea and the listing of, SK Hynix?

[00:05:14] James Athey: So, SK Hynix for those that don't know, is another of these major global manufacturers of semiconductors, and they particularly have a strong industry position in what's called high bandwidth memory and that's increasingly being one of the key components of the data centre build out.

[00:05:31] James Athey: So, along with companies like Micron and Samsung, which has also Korean, the demand for their products has gone through the roof, the price they're able to charge for those products, for those chips has gone through the roof.

[00:05:42] James Athey: Their profit margins are huge. They're making massive, massive amounts of profit in the near term and expected to continue doing so over the next year or so. And that's led to some stratospheric stock performance. You're talking about, stocks rising by hundreds, if not thousands of percent going back over the last 12 or 18 months.

[00:06:01] James Athey: So what SK Hynix has done is they've issued what's called an American Depository Receipt, and that is simply a way of trading a stock on a different stock market without listing on that market. So to a significant degree, it's a piece of paper which represents a partial ownership of that company.

[00:06:20] James Athey: Lots of these are issued around the world. That's pretty standard behaviour. And so SK Hynix is seeing this as a way of raising additional capital to continue investing in their own productive capabilities. So that happened on Friday. It looks from early indications like it was very well supported, very well subscribed.

[00:06:41] James Athey: So a good cash raise for SK Hynix and a way of them tapping into investors outside of Korea and in the US.

[00:06:52] Andrew Shaw: Fabulous. Thank you very much for that explanation James. Looking forward this week, have we got any data points?

[00:06:59] James Athey: Yeah, not a lot, but we get inflation from both the US and the Eurozone.

[00:07:04] James Athey: So we see CPI numbers in the US will be particularly relevant of course for bond
investors because again, we continue to toss around the idea of the Fed potentially hiking rates, potentially not.

[00:07:15] James Athey: All made more difficult because we have a new Fed chair in Kevin Warsh and he is seeking to do things a bit differently and that is certainly disrupting I think the investor thought patterns that have existed in previous years.

[00:07:30] James Athey: But of course inflation is what they target, the Federal Reserve and many other central banks. So it will be a key input into their decisions ahead and they have a meeting later in July. If we see a big jump in inflation, the market will suspect that rate hikes are coming.

[00:07:45] James Athey: As I say, we also see inflation in Europe probably a little bit less sensitive at the moment because the ECB has already hiked rates once since the Iran war broke out, but certainly they're the big two data points.

[00:07:58] James Athey: I think beyond that, the narrative is going to continue to be dominated by investors trying to work out exactly who the AI winners and losers are and as they rotate from sector to sector, it's just creating volatility, a go-go in single name stocks and at the index level.

[00:08:15] James Athey: So I expect that to continue.

[00:08:16] Andrew Shaw: Really valuable perspective. Thank you very much for joining me this week James.

[00:08:21] Andrew Shaw: To all our listeners, please reach out if you've got any questions and wishing you all a wonderful week ahead.