AI and geopolitics take centre stage as volatility continues to buoy markets: FOW Asia 2026

Speaking at the FOW Asia 2026 conference in Hong Kong on Thursday, panellists examined how geopolitics and artificial intelligence (AI) are influencing market volatility and risk.

Stuart Knowling, managing director (Hong Kong) at DRW, highlighted the risk around the dependency on the AI roadmap to drive valuations in the US.

“Stocks leveraged to the AI theme such as Nvidia and Anthropic as well as TSMC are having downstream effects,” said Knowling. “These stocks are backed by profits right now but if these profits don’t continue, the trades will unwind.”

Marcus Bischoff, executive director at UBS, believes that the AI headlines that haven’t occurred yet is the impact of agentic AI on markets.

He observed that there’s been relative market stability despite extreme regional volatility due to buffers in energy and effective risk management on the part of market participants.

From a monetary policy perspective, he commended the credibility and central bank independence of the Federal Reserve under Warsh.

In terms of the Bank of Japan, Bischoff said that investors are considering different scenarios as the interest rate differential closes.

One bet is where institutions are exiting the Japanese government bond market as yields continue to rise and because of the increased risk, it will have a negative effect on currency.

Another bet is that as yields rise and Japanese investors reconsider asset allocation and repatriate, this would in turn push up the value of the yen.

He highlighted the overriding concern in the developed market around sovereign debt, highlighting French and US sovereign yields.

“Some markets are behaving like emerging market debt and there’s been sufficient liquidity for price discovery to be relatively smooth,” he said. “This has been accepted by the market and there haven’t been blowups but it’s going to be a challenge in the next few years.”

Looking specifically at India, Nitin Shahi, executive director at Findoc, highlighted that it’s not only price volatility that needs to be watched, but also liquidity volatility. At the same time, policy volatility is coming from tariffs and sanctions.

“From crude to forex to equity, markets have become much more volatile,” said Shahi. “However, it’s dangerous when there is volatility without liquidity.”

He emphasised the importance of getting resilience around market scenarios rather than forecasting, particularly making use of AI for simulations.

Rohit Kumar, head of institutional business at Bombay Stock Exchange (BSE), shared that the Indian regulator has aimed to shield investors from the external volatile environment by further enhancing resilience.

With the Indian derivatives market seeing 50% of volumes from brokers, 40% from retail and 10% from institutions, and nine out of 10 retail investors losing money in derivatives, the regulator has highlighted that retail shouldn’t be trapped in the derivatives market.

“The overall direction for the Indian regulators is that they’re keen to increase cash market volumes and promote longer dated derivatives,” he said. “Most volumes are concentrated on weekly options so the regulators want to expand the base for more institutional investors to take positions.”

Vivek Sharma, head of international business, asset services and private wealth at Nuvama, said that despite the challenges of an economy that is heavily reliant on oil imports and a currency under pressure, India offers an interesting opportunity driven by its microstructure.

“Volumes on derivatives remain robust and there’s a good mix of institutional, prop traders and retail investors,” he said. “Volumes remain high on index options and single stock options. What the regulators are grappling with is providing structure to the economy yet keeping interest of traders also at bay by having regulations that support both segments with different points of view in the near term.”

From Nuvama’s point of view, he said that risk management remains a key focus, particularly with technology-led investing.

“As trading becomes more tech led and firms are getting access to more clients, managing the liquidity of those flows is crucial,” he said.

He highlighted a further concern that large volumes are driving derivatives while the cash market is still at an infancy stage.

“If you peel back the onion, liquidity is still concentrated in the top 200 names,” he said. “Despite having 60% of the world’s index options volume, India has a shallow cash market.”

With the surge in derivatives, managing inflows will be key, particularly as markets continue to be buoyed by regulatory changes and unstable geopolitical dynamics.

Shipowners and refiners discussed the realities they are facing as geopolitical uncertainty continues to loom and price assessments change rapidly.

Singapore Exchange aims to capture investor interest in rates derivatives and gold amid persistent volatility.