Macro

• A review of recent events/data impacting our investment themes and outlook
• Government bond markets continue to exert pressure on other assets
• The Japanese Yen has likely confirmed a trend change – expect more volatility

• Sunken Iranian tankers in the Strait of Hormuz and Houthi control of Bab-el-Mandeb are compounding the energy supply shock, squeezing prices to highs as hopes hit lows.
• Activity is still remarkably resilient, so the trade-off screams hawkish, causing the ECB to hike and probably go again in December. The BoE seemingly prays for a warm winter.
• Another 6-3 BoE vote to hold is likely, but with two more members open to a November hike. The BOJ is set to hike, and the Fed likely will too.

• We aggregate the published asset-allocation views of more than 50 asset managers across 70+ assets, highlighting where buy-side consensus is building or breaking down.
• Risk appetite: Four of five RoRo indicators rose, taking the aggregate to the third-highest level in Tracker history, while equity sentiment hit a record +81% net bullish.
• Still not all-in: EM equities, Tech and EM FX are very popular, but safe-haven positioning is less extreme; the Swiss franc is the least popular asset at -46% net bearish.

• It was with a large pang of sadness this week that we saw the news of the passing of Tung Chee-hua, the first chief executive of Hong Kong post 1997. We were sad not because he was a particularly good leader and that everything in Hong Kong was rosy under his administration, but because he was a perfectly good man with the territory’s best interests at heart. 
• On the other hand, the current US Treasury Secretary, Scott Bessent simply leaves the impression of being arrogant and egotistical. He challenges the markets to take him on as regards what he’s going to do with the bond market and more so with the yen. He says “Don’t mess with my Yen agenda”, but seems to forget he is US Treasury Secretary, not the Finance Minister of Japan (or a hedge fund manager).
• We published a Peregrinations report earlier this week, called Japan: Through AI Glasses. It forms part of the argument behind our long yen call, which at the moment is working because markets are frightened of Bessent and intervention. But it won’t work long term unless the yield differential closes. In our view, the way that it will close is through an accelerated hiking pace by the BoJ, not the way that most analysts expected.

• In Depth: AI Distillation in China Leaves U.S. Tech Giants at Odds

• The U.S. government has leveled sweeping new accusations against China’s leading AI developers, claiming that they are conducting systematic extraction of proprietary functionalities and capabilities of American-developed models through industrial-scale knowledge distillation campaigns.

• China’s Online Lenders See Profits Plunge as New Rules Bite

• Recent spike in oil prices and US yields is not deterring foreigners from buying Asian equities. After buying US$4.8bn of Asian Equities in August, FIIs have bought US$1.8bn in September.
• In August FIIs bought Taiwan (US$11bn) and India (US$3.1bn) and sold Korea (-US$8.5bn). In September they have bought Taiwan (US$2bn) and Korea (US$1bn) and have sold India (-US$1.25bn).
• We believe foreign buying shall bounce back in tech-heavy Korea and Taiwan. FIIs would likely buy India too, but in smaller measure than North Asia. We are cautious about ASEAN.

• The ECB’s unsurprising unanimous 25bp rate hike was dubbed a no-brainer by President Lagarde amid upside news on both activity and pipeline inflation pressures.
• Staff forecasts settle above target through the medium term, with upside risks and news since the forecast’s cut-off, signalling a strong case for another hike in December.
• Stale neutral rate estimates aren’t restraining the ECB like they are at the BoE, so its three hikes can achieve the target while the BoE’s one perpetuates its policy failure.

• CTAs are positioned in Asia uptrends, but the stocks that support it are losing momentum.
• We uncovered stocks that sit outside the CTA trade that may be less vulnerable to outflows.
• Tech uptrends remain intact, just lower their weight and make room for less volatile trends in financials.

• In Depth: AI Anxiety in China Fuels a Gold Rush in Job Training Inside a cramped classroom in an office tower, more than 40 young people sat glued to a projector screen.
• For nearly the entire session, the instructor cycled through dry summaries of AI history that anyone could easily find with a quick online search.
• But nobody left.

• India’s economic outlook remains positive, with real GDP growth projected at 6.48% in 2026 and 6.53% in 2027.
• Over the medium term, growth is expected to stabilize at around 6.50% by 2028, with a broadly similar trajectory anticipated for GDP per capita.
• Investment and gross national savings are also expected to remain relatively stable, at approximately 34% and 32% of GDP, respectively.

• In the market battle between geopolitical risk and fundamentals, thus far geopolitical risk is obviously winning, with the prompt NYMEX crude oil contract trading well above $100 per barrel.                
• However, given the latest weekly EIA data, we must now monitor underlying fundamentals more closely than ever for signs that fundamentals may begin to overtake supply risk.                                  
• At the same time, we keep a close eye on the Houthi-Saudi conflict, since any major strike on Saudi energy assets will elicit a response from Pakistan and Turkey.        

• Gas inventories are accumulating too slowly, so storage levels are at their lowest for the time of year and leaving little buffer against historically experienced drawdowns.
• The location of storage matters to energy security, and yet the UK has the lowest level and fullness of storage in Europe, despite its relative vulnerability to being cut off.
• A cold winter would squeeze prices much higher to destroy less sensitive demand, but that would be unusual for an El Niño year, trimming the probability of this painful risk.

• Analysis: Stricter Rules, State Capital Are Rewiring China’s Venture Ecosystem
• In June 2026, not a single private equity (PE) or venture capital (VC) fund manager successfully registered with the Asset Management Association of China (AMAC) — the first month with no approvals since the registration system launched 12 years ago.
• China’s August Exports Jump 25% on AI Price Surge

• GDP rose by 5.1 % in FY 25/26, better than IMF’s forecasts.                                     
• Net international reserves and NFA higher.
• Non-oil PMI rose close to 50. Stalemate in the Gulf not helping Egypt.

Highlights

• June rubber exports surge 54.1% month-on-month to 114,010 tonnes

• China shipments fall 21.5% in H1, while Indonesia jumps 143.7%

• Rubber-product exports rise 13.4% in H1 to US$802.5 million

• Indonesia emerged as the second-largest destination by volume in the first half, with shipments jumping 143.7% to 47,782 tonnes.

• Demand across the Americas rose 4%, as a rebound in US consumption offset a 7% drop in Latin America.
• Europe’s lubricants demand fell 4% in June, a second straight monthly decline, after rising for three straight months to April.
• Asia’s lubricants demand outside China fell 2% in June, a second straight monthly decline.

• With the “naval war” now in full swing, the prompt NYMEX crude oil contract managed to settle yesterday at the highest level since May.                  
• In tandem with the naval war, we now have intensified military activity between Yemen-based Houthis and Saudi Arabia, compounding oil price strength and risk.                                   
• We have been premature in suggesting that crude oil prices may be peaking, but we would not chase the market since we believe ultra-high ULSD will take its economic toll.           

• Record US copper imports point to aggressive stockpiling, while Congo’s rising cathode shipments signal growing competition for physical demand outside COMEX channels.
• Copper options retain a clear bullish tilt, with OI PCR at 0.55 and volume PCR at 0.30 signaling strong upside demand, while the easing CVOL points to lower volatility expectations.
• Political pushback puts VBM’s IPO on hold, while Vale plans to double its copper business, keeping its growth strategy firmly focused on expanding production.

• Persistent rainfall across Thailand and reported raw material shortages in Vietnam continue to disrupt tapping and constrain availability, while El Niño raises the risk of further production losses during the critical October–November period.

• Physical fundamentals are firm, but speculative activity is amplifying the rally.

• Buyers are becoming increasingly cautious as they are hesitant to chase the rapid rally widening bid-offer gaps and reducing liquidity despite firm producer expectations.

• Near-term outlook remains bullish but vulnerable to correction

• WTI gained 9.7% last week as Hormuz tensions drove a sharp geopolitical risk premium, while speculative positioning turned more bullish through fresh long additions and short covering.
• Options markets moved from panic to acceptance, with IV and skew dropping as WTI held above USD 90, though put demand remained elevated for downside protection.
• Cheniere’s contracted model continues to deliver strong growth, but the 2027 to 2028 LNG supply wave could pressure the uncontracted margins behind recent earnings beats.

• Europe’s supply held relatively steady at more than 370,000 tonnes, close to where it has stood for most of the past six months.
• Americas supply dipped as plant maintenance in Brazil combined with US output falling to a 14-month low.
• Middle East supply fell to its lowest level in more than seven years, with a slump in Group III shipments outweighing a rise in flows from Saudi Arabia.

• A quiet week ahead overall, though for UK investors there’s a key number to watch at the end of the week: UK GDP data.
• The consensus estimates for UK monthly GDP (July) is for flat growth (0.0% month-on-month), following June’s surprise 0.3% jump (which had itself beaten the 0% consensus, helped by World Cup-related spending and a summer heatwave, effects economists expect to fade quickly).
• On a year-on-year basis, the consensus is around +1.0%, easing slightly from June’s 1.1% YoY pace.

• Cover Story: The School at the Edge of China’s Education Dream
• For Feng Hongxia, the journey to secure an elite education for her son was arduous.
• From her home in northern China’s Inner Mongolia region, she traveled more than 10 hours to the tropical southern province of Yunnan, then boarded a train to the border town of Mohan.

• Global air freight rates edged up again last week according to the latest data from TAC Index, the leading price reporting agency on air freight markets and calculating agent for the Baltic Air Freight indices.
• The global Baltic Air Freight Index (BAI00) gained +0.6% over the seven days to September 7 as the normally quiet late summer period continued
• With rates little changed over the last four weeks but still at elevated levels of +19.0% year-on-year following this year’s disruption through the Middle East and repeated surges in jet fuel prices. 

• The premium that bond investors are willing to pay for US Treasury securities has fallen since the end of the COVID-19 pandemic due to concerns about monetary and fiscal policy.
• Quantitative easing (QE) by the Fed and below-target inflation persuaded US politicians not to end profligate fiscal policy conduct. QE has sobering legacy issues involving rising inflation and government debt.
• Bond investors and US policymakers disagree about the pricing of Treasury securities as bad fiscal policy conduct is being increasingly factored into valuations as investors seek appropriate price discovery.

• Middle East disruption is drawing more Asian base oils toward the Americas, reducing the surplus normally available in Asia just as seasonal demand starts to recover

• Middle East disruption is leaving the US short of the Group III volumes it normally receives, tightening its balance at a time when summer surplus would otherwise move to export markets.

• Wide US arbitrage is drawing more Asian base oils toward the Americas, adding to established Group III flows.

• Upwardly revised headline EA GDP in Q2 didn’t stop it from underperforming peers in H1, including in the labour market, but global activity has been remarkably resilient.
• There is broad balance in countries reporting higher unemployment rates as lower, which suggests slack and monetary conditions are both broadly neutral now.
• Dovish BoE assumptions leave it accommodating high inflation and credit growth, while the decisive ECB stopped the drift. One BoE hike is not enough, but is all that is likely.

• The US labour day holiday traditionally marks the end of the summer break for markets, especially in the US, which means not only a pick up in liquidity but also something of a shift to a slightly longer term mindset – the summer having been dominated by a lot of short term trading noise, particularly around AI.
• At the macro level, July had been a relatively stable month for equity markets, but beneath the surface there had been an enormous amount of volatility, particularly in tech stocks, much of it associated with the market mechanics of distressed selling from margin calls and forced buying from short covering.
• There was however another important factor (which we discussed here in Were Style Lags part of the July washout?), which was that passive indexation, once again, triggered some powerful rotations within markets.

• On my socials the chart claiming El Nino leads world food prices by 12 months is making the rounds again, but the correlation behind it is actually weak (just +0.13, barely significant and explaining under 2% of the variation)
• That doesn’t change our view that we still expect upward pressure on ag commodity prices this cycle, based not on one macro chart but on the mechanism-specific signals we’ve tested individually…
• Cocoa’s ONI momentum signal, Corn Belt heat, the live Texas-Xinjiang cotton stress, and an Indian monsoon tracking the textbook strong-El-Nino pattern.

• In Depth: China’s Transport Price War Shows What Happens When Trains Catch Up to Planes When confronted with the choice of flying or taking the train across China, a growing chorus of travelers is defaulting to a single answer: “whichever is cheaper.”
• This encapsulates a profound shift underway in China’s transportation market.
• Analysis: Why China Is Rewriting Its Stock Market Refinancing Rules

• Given the latest round of “naval warfare” between the U.S. and Iran, we were somewhat surprised that the market response has not yet been more “robust.”                
• With Iran’s apparent willingness to be the aggressor in response to Operation Economic Outcast, however, it is extremely difficult to trust this market.                                 
• Nonetheless, despite our belief that the conflict will continue through year end, at the risk of famous last words, we believe that the upside to oil prices will be limited.         

• Global equities and commodities contributed to gains throughout our portfolio suite, driven by positive selection effects.
• Aggressive strategies continue to outperform their respective benchmarks YTD, especially as tech and crypto stabilize.
• Positioning carries over into September, maintaining an underweight to bonds and overweights to global stocks and commodities.

• A review of recent events/data impacting our investment themes and outlook
• Rate hike expectations yo-yoing as the Fed meeting draws closer, impacting many of our themes
• Long Japanese Yen starts to work. Now follow through is needed

• Boisterous US labour market data move the Fed a step closer to a September hike, with next week’s CPI release now pivotal, while rising EA inflation preserves the ECB’s path.
• The RBNZ hiked and signalled further normalising steps, while central banks in Canada and Malaysia held rates, albeit with the odds of tightening rising in the former.
• Beyond next week’s ECB rate hike and Friday’s US inflation highlight, we await GDP data from the UK and the EA, along with the latter’s final Q2 employment data.

Highlights

• Indian tire exports rise 16% to INR 7,700 crore in April-June 2026.

• European tire exports jump 25% to INR 3,003 crore in Q1

• PCR tire exports increased 21% in value during Q1 FY27

• The export performance comes as manufacturers face a less favourable cost environment. Natural rubber prices have risen sharply in recent weeks, while crude-linked inputs, freight and logistics costs remain elevated amid geopolitical disruptions.

• The SPR sits near its statutory floor with degraded withdrawal capacity, leaving the U.S. far less room to absorb the next major supply shock.
• Record U.S. production hasn’t rebuilt reserves. Gradually rising output and strong export demand mean few barrels are being diverted to SPR storage.
• Trump’s Venezuela deal is unlikely to “top out” the SPR in 2026, as heavy crude quality, damaged infrastructure, and no DOE program stand in the way.

• In Depth: Marriage Fraud Exposes Holes in China’s Reproductive Rules.
• As assisted reproductive technology (ART) rapidly advances, it is increasingly colliding with traditional legal frameworks and societal norms.
• Nowhere is this clash more vividly illustrated than in a recent, high-profile controversy in China involving an “extramarital frozen embryo.

• A large cargo of Group II base oils loaded from Taiwan in late August before heading to South Korea, set to arrive this week.
• Shipments from Taiwan typically move to China, Southeast Asia or India rather than to South Korea.
• Singapore-to-US shipments extended their surge for a second week, even as total Singapore exports declined.

• In this insight, I provide the data analysis regarding the relative performance of my Korea Small Cap Gem series insights (for 27 KOSDAQ listed companies) versus KOSDAQ last two years.
• These 27 companies’ share prices are up on average 3.9%, 11.5%, and 13.8% over one week, one month, and three months, respectively from one day prior to their insight publications.
• I compared these performances versus KOSDAQ which was up on average 0.1%, 1.2%, and 3.4%, respectively from one day prior to these insight publications (same time periods). 

• The BNM held its OPR at 2.75%, in line with expectations, while signalling a prolonged pause unless inflation drifts above its projected bands.
• Robust growth near 5% and moderate core inflation leave little case for cuts, but nor is there much desire to lean into the commodity‑driven price shock unless it’s sustained.
• Future rate moves hinge on energy pass‑through, wage dynamics and global tech and financial cycles, broadly keeping the policy bias balanced overall.

• The introduction of the “forced labour” tariffs increased headline rates for some economies, but the list of exemptions has expanded as Washington seeks to mitigate domestic impact. 
• The exemptions imply that effective tariff rates facing Asian exporters are broadly stable from the Section 122 regime, and most economies will pay only modest additional tariffs.  
• While the direct trade impact is manageable for now, the indirect impact of trade policy volatility on the US fiscal position, monetary policy, and investor sentiment may be material

• August Asian PMIs were published earlier this week, most Asian countries were above the 50 boom-bust line with Singapore leading the way at 59. There were only two countries reading below 50, one was Indonesia and the other one was Hong Kong, the readings were 49.8 and 49.5 respectively. It appeared that everyone had a good summer.
• Japanese industrial production was up 4.1% YoY, which was not a bad headline number and compares well with a lot of countries in the region and Europe. However, in absolute terms it took Japan industrial production back to 2023 levels. In other words, Japan is bumping along the bottom of where it’s been in the last three years in terms of overall industrial production activity.
• Philippines exports in July were up 10.8% YoY but imports went up 19.8% YoY at the same time. The worrying part is the trade deficit is now at $6 billion a month and international reserves are sitting at about $81 billion only. The numbers do not imply a crisis point at the moment, but the country surely is vulnerable.

• It may be our imagination, but we believe we are coming close to the peak in oil price, at least for the near term.              
• Even if we are correct in this regard, there are a number of factors that support our long-standing belief that the U.S.-Iran conflict will continue through year end.                              
• Our thoughts derive in part from the political reality of the U.S. mid-term elections.       

• EPU can work as a contrarian indicator: periods of very high policy uncertainty have historically been followed by strong equity returns.
• Broad news-based EPU measures have produced the strongest backtest results, while non-news components and specialised categories have generally been less reliable.
• Trade Policy Uncertainty is becoming more promising in both monthly and daily data, although the history of genuinely extreme readings remains limited.

• Treefera’s first-mile view of the US hard red winter wheat belt reads 925.5 million bushels, 6.5% below USDA’s August estimate of 989.9 million, adding a domestic supply story to the Black Sea-driven rally.
• Treefera’s drought-stress tracking shows Cote d’Ivoire’s cocoa crop 78% less stressed than a year ago, running counter to headlines framing El Nino as a fresh threat to the 2026/27 harvest.
• Treefera detects Indian cane area down just 1.22% across Uttar Pradesh, Maharashtra and Karnataka, concentrated entirely in Maharashtra, a gap too small on its own to explain sugar’s climb to a 14-month high.

• In Depth: China’s Autonomous Driving Race Shifts From Hype to High Stakes For years, China’s hyper-competitive smart electric vehicle (EV) market ran on a heady cocktail of AI breakthroughs and marketing bravado.
• To match the hype Tesla Inc. created with its end-to-end automated driving system, Chinese automakers coined jargon of their own, such as “Level 2++” and “Navigate on Autopilot,” promising technology that could guide vehicles through chaotic city streets with the skills of a seasoned chauffeur.
• (London) — The U.K.’s financial regulator has fined and banned former executives of Dolfin Financial (UK) Ltd. for orchestrating a “visa loan” scheme that helped nearly 100 Chinese nationals — including a fugitive billionaire — fraudulently obtain U.K. residency.