Macro

• We rank more than 350 Global equity funds using our proprietary Quality framework to identify the highest-quality portfolios, which we classify as Quality Leaders.
• Quality investing is driven more by stock selection than large country or sector bets, with broad ownership of Microsoft, Alphabet, TSMC and NVIDIA across Quality Leader portfolios.
• Quality comes at a price. Despite owning many of the world’s strongest businesses, Quality Leaders have been the weakest-performing group over the past five years.

• The Hong Kong market continues to show gains on the back of a strong July.  The standout sectors this month include materials and healthcare.
• Since the bottom of its bear market, Hong Kong has continued to outperform most Asian markets, even though its valuation remains well below that of others in the region.
• Sichuan Kelun-Biotech Biopharmaceutical (6990 HK) was rated a BUY by several analysts, including UBS and JPM, after 1H26 earnings announcement, benefiting from its partnership with Merck & Co (MRK US).

• Chinese monthly data for July were released earlier in the week, retail sales, industrial production, fixed asset investment and property investment numbers were all pretty soft. The retail sales number was running at 0.2% YoY, industrial production was at 4.5% while sitting around 5% to 5.5% for most of the year previously and fixed asset investment continued to contract.
• Japan released its GDP numbers for the second quarter which came in at 1.1%, half analysts’ expectations which were for an annualized increase of 2%. The story gets worse because if we dive into investment, which is the focus of our attention when it comes to the GDP numbers, gross fixed capital formation was down 1.2% year on year.
• I announced my retirement as Chief Economist at Aletheia Capital in a WeeBits note this week. The jacket will be hung up at the end of September. I would do some Substack work for anyone who might be interested in hearing about Asia in the future.

• Crude oil futures edged higher on Friday after a run of steady gains cemented a second weekly rise, as the tense standoff between the US and Iran showed no signs of easing.
• Oct26 ICE  Brent futures were 0.25% higher at $94.01/b (2023 BST), while Oct26 NYMEX WTI was at $86.80/b , essentially flat with Thursday’s settle, though both benchmarks had traded higher earlier in the day.
• US Treasury Secretary Scott Bessent told CNBC on Thursday that Washington will impose the “toughest sanctions in history” to “collapse” the Iranian government, calling on other nations, including China, to join the effort.

• Government bond yields in the US, Japan and UK have been rising due to inflation and fiscal policy conduct concerns. Japan’s problems are compounded by slow normalisation of monetary policy.
• The US Treasury’s recent foreign exchange intervention masks their concerns about rising long-term government bond yields, fearing Japan will have to liquidate their US bond holdings to support the yen.
• Treasury Secretary Bessent offered Japan access to US dollars via the Fed’s FIMA Repo Facility, a decision that has governance consequences and raised concerns about fiscal encroachment on Fed policy.

• Analysis: For Chinese EVs in Europe, Success Hinges on Holding Their Value Chinese automakers are storming Europe with relentless momentum.
• In 2025, exports of China-made battery and plug-in hybrid electric models to the EU surged, approaching 1 million vehicles, according to industry data.
• In Depth: How China’s Automakers Aim to Keep Up Momentum in Europe When XPeng Inc.

Highlights

• Indonesia May rubber exports hit a recent low of over 99,400 tons

• May returns at over US$206 million, supported by higher prices

• Area under rubber cultivation declines by about 17% in five years until 2026

• The market is moving into its seasonal demand recovery with supply still constrained, leaving South Korea, India and other alternative suppliers to cover more of the shortfall just as maintenance could reduce their ability to do so.

• The summer slowdown is giving way to a seasonal demand recovery just as spare supply remains thin, making every major export source more important.

• Supply is being redistributed rather than restored. South Korea, India and China have increased their importance as Middle East and other Asian flows weaken, but the shift leaves the market more exposed to disruption at any one of those suppliers.

• Traders are hunting hard for short opportunities in commodities right now.
• With the momentum carrying so many markets, that’s a thankless job: selling into a live trend costs you nerves and usually money.
• The grain market, though, could soon offer a cleaner setup – reason enough to take a dedicated look here.

• In the first quarter of 2026, Canada’s economy grew by 1.93% (QoQ).
• This growth was primarily driven by increases in both real private and government final consumption expenditures, which rose by 1.53% and 3.03% (QoQ), respectively.
• However, net exports negatively impacted GDP, contributing -0.64%. Additionally, real gross fixed capital formation slowed, increasing by 1.56%, down from 3.33% in the fourth quarter of 2025.

• The U.S. is now promising to place a “heavy boot” on Iran of additional economic sanctions, telling countries who trade with Iran “you are either with us or against us.”          
• While traders and funds may bid the market up further in response, our belief is that unless Iran responds militarily, the upside to crude oil prices may be limited.   
• In this regard, we will retain our long-standing $75.00-$88.00 per barrel trading range for the prompt NYMEX crude oil contract until proven wrong.         

• A review of recent events/data impacting our investment themes and outlook
• What recent intervention in the US government bond market means for our themes
• While a short-term bounce is likely, the USD’s bear market has resumed

• With market themes also on holiday recently, the USD debasement trade returned, fed by crumbs of poor policy that we doubt carry enough energy to let the theme run far.
• Flash PMIs were broadly solid, especially in the US. UK unemployment data were imputed flat while inflation’s rise was confirmed, including in the EA’s final print.
• Next week has more energy news in Ofgem’s price cap announcement. EA lending, ECB meeting accounts, and annual benchmark revisions for US payrolls are dull highlights.

• Singapore’s export-oriented sectors have extended the economy’s outperformance on aggregate, with a positive output gap for the third consecutive year. 
• However, the concentration of growth in a few electronics-linked sectors masks weakness elsewhere in the economy. Indeed; this concentration has widened since 2025. 
• Alternative measures of momentum for the domestic economy, such as the domestic-sector output gap and implied velocity of money, suggest weaker momentum than the headline

• Cautious Bullish on the KC HRW over CBOT SRW class spread (KE-ZW). Neutral on flat wheat price.

• Treefera captures the winter-wheat crop at the first mile, at plot level.

• That resolution exposes the defining feature of the 2026 season: the shortfall sits overwhelmingly in hard red winter, while soft red winter and the white classes hold near trend.

• Bullish crop, cautiously bearish price — the damaging heat missed the eastern belt, where most of the crop is grown

• Following the August WASDE release on 12 August, December corn futures rallied about 3%, from a pre-release level of 469.25 cents to 483.25 cents at the close on 14 August, as USDA’s lower yield estimate came in below market expectations.

• Over the past month, headlines have pointed to a poor corn crop, driven by heat and drought across the belt.

• These 30 sector ETFs in Korea were down on average 6.8% in the past one week, significantly underperforming KOSPI which was down 0.9% in the same period.
• Among the 30 sector ETFs below, only two ETFs outperformed KOSPI including TIGER Cosmetics (up 2.7%) and TIGER Semiconductor Top10 (up 0.6%). 
• Overall implied market depth continued to be very poor in Korea in the past week (90% of the sector ETFs underperforming KOSPI, 27 out of 30).

• U.S. distillate stocks are 12.7% below their five-year average, compared with a 5.3% shortfall for gasoline, highlighting just how much tighter the diesel market is.
• Record export flows, jet-fuel competition for distillate barrels, and Russian sanctions have pushed the ULSD-WTI crack spread past its 2022 peak to unprecedented levels.
• Gasoline’s deficit fades as driving season ends and demand structurally declines; diesel’s refining-capacity constraint persists through winter heating season and beyond.

• China & HK positioning is turning. Relative positioning is strengthening, flows have turned positive and more managers are moving overweight.
• Buying is highly selective. Managers are rotating towards AI infrastructure, semiconductor equipment and advanced technology, while reducing exposure to recent consumer and platform winners.
• The EM Big 4 has been reshaped. China now carries similar weight to Taiwan and South Korea, but offers a far more diversified range of underlying exposures.

• I believe the mandatory tender offer for all remaining shares is likely to be passed into law sometime in 2H 2026/1H 2027.
• If this is finally made into law, it will have a positive impact on the entire Korean stock market (reduced corporate governance concerns related to M&A tender offers).
• Democratic Party lawmaker Park Hong-bae has proposed a Capital Markets Act amendment requiring a mandatory tender offer for all remaining shares.

• An amendment to Capital Markets Act (mergers in Korea to be completed on fair valuation basis rather than average market prices) was passed at the National Assembly’s plenary session. 
• It is likely that this amendment will be made into law by the end of this year. 
• This is clearly a step in the right direction and takes Korea another step closer to reducing corporate governance problems that have persistently impacted lower relative valuations versus global peers. 

• Iron ore has been relatively steady in the last three years after a highly volatile seven years before that.  Market forces currently pushing IODEX in different directions.
• Major drivers include declining profitability in the Chinese Steel Sector, and the global oil price situation, mainly driven by geopolitical risks and war.
• We discuss a DEC26 options strategy aimed at monetizing iron ore volatility in the current range.

• June rubber production surged 36% month-on-month to 38,500 tonnes.
• Natural rubber exports jumped 32.29% month-on-month in June.
• Tire exports rose 44.22% YoY to over US$630 million during Jan-April 2026.

• On August 19th, Secretary Bessent implemented the most significant intervention in the US long-end bond market in decades by doubling off-schedule buybacks in 10-to-30-year sector to at least $4 billion.
• This approach compresses long-end yields by reducing duration supply rather than relying on outright Federal Reserve purchases. However, as Japan’s experience shows, it also entails significant long-term consequences.
• The United States faces a trilemma: it cannot simultaneously suppress long-end yields, maintain dollar credibility, and control inflation.  The current administration is prioritizing yield management over the other objectives.

• This edition centers on two shocks arriving in the same week: USDA’s 12 August WASDE delivered a bigger-than-expected corn yield cut alongside a wheat trim, compounding a Black Sea supply disruption, while a faltering Indian monsoon and Vietnamese dry spells point to a separate El Nino pattern building into the fourth quarter across sugar and coffee.
• Novorossiysk’s two disabled terminals remove roughly 15.6 million tons of annual Russian wheat export capacity, arriving as Treefera’s US winter wheat model had already tracked harvested area down to 9.81 million hectares for the season just completed.
• Treefera’s US Corn model reads 12 August yield at 185.9 bushels per acre, 5.2 bu/ac above USDA’s post-WASDE figure, a gap that has narrowed toward Treefera’s estimate in each of the last six seasons.

• In Depth: Game Studios Have Bought Into AI, but Players Still Aren’t Sold In early August, sweltering heat in Shanghai did little to keep visitors away from ChinaJoy, China’s largest gaming expo.
• Crowds packed the halls, queuing for demos, collecting merchandise and posing with cosplayers.
• Most were in their 20s.

• Crude oil futures were higher for a fifth session on Thursday as benchmarks cemented solid monthly gains amid growing concerns of a renewed supply crunch.
• Oct26 ICE  Brent futures were 2.2% higher at $93.59/b (2040 BST), while Sep26 NYMEX  WTI was at $86.66/b , up 2.7% versus Wednesday’s settle.
• The Strait of Hormuz remains the driving factor for oil and while the US claims that the narrow waterway is open, Iran continues to throttle tanker shipments with the threat of attacks.

• Saudi’s industrial production rises in June. SAMA’s half-year data showing deposit growth outpacing credit’s.
• Fitch affirms Kuwait’s sovereign credit rating.
• Trump threatens again Oman. And..Bahrain’s 5-year yield above Egypt.

• Inflation began to ascend to its twin peak in July, despite failing to attain the target in between. Energy utility prices belatedly increased, but only add ~8bps to the y-o-y.
• The gas futures curve is back around its peak. Premature hope for the supply shock’s end helps contain October’s rise, postponing the peak pressure to January.
• Delayed pass-through of energy costs, food prices, and airfares should drive this peak much higher than most economists assume, pushing the BoE to hike once begrudgingly.

• EA inflation bounced back from the brief relief in June as energy price pressures intensified again through July, but it wasn’t quite enough to round up from 2.94%.
• Food prices remain incredibly benign, and underlying inflation measures are contained, despite a bounce back from levels that had been too low in May and June.
• A further rise is likely in August, and the ECB isn’t taking any chances. It seems set to hike again in September, reinforcing the target, unlike its dovish peers.

• Crude futures opened the week firmer as the standoff between the US and Iran continued without resolution, leaving just a handful of tankers passing through the critical chokepoint.
• Oct26 ICE  Brent futures were 2.4% higher at $90.66/b (2030 BST), while Sep26 NYMEX  WTI was at $84.40/b , also up 2.4% versus Friday’s settle.
• Tensions continued to simmer after the US threatened Iran with an “indefinite” blockade and further financial sanctions , a move which potentially extends the conflict and adds to supply worries.

• Bank Indonesia holds its policy rate at 5.75%, in line with consensus, prioritising Rupiah stability and a high real rate over near-term easing.
• Expanded FX hedging incentives and macroprudential liquidity tools aim to absorb shocks before rate moves, signalling a preference to hold rates at a high level.
• Future rate shifts hinge on Fed tightening, Rupiah resilience and inflation staying near the centre of the target despite global commodity and FX risks.

• Chinese steel mill margins are deteriorating, raising the risk of August maintenance, lower hot-metal output and weaker iron ore demand.
• CMRG is tightening control over China’s iron ore procurement, with restrictions hitting Australian miners and contributing to weaker shipments.
• Across SLX’s top 10 holdings, 7/10 beat EPS estimates, while 8/10 carry positive average analyst price target upside.

• Crude futures extended the firm start to the week on Tuesday as fading prospects for peace talks kept markets on edge after Monday’s expiry of the US-Iran MoU.
• Oct26 ICE Brent futures were 0.1% higher at $90.95/b (2030 BST), while Sep26 NYMEX  WTI was at $84.06/b , up 0.4% versus Monday’s settle, though both benchmarks had traded higher earlier in the day.
• On Monday, an unnamed senior Iranian official told Reuters that Tehran will shift to a “fully offensive” military position after stalled efforts to negotiate a permanent end to the war, with Washington ruling out extending a temporary ceasefire agreement.

• Capesize futures gained 87% in H1 2026, with June’s 35% reversal erased as Middle East tensions eased, before prices recovered in July.
• Chinese commodity demand remains a key support: YTD iron ore imports rose 6.4%, aluminium ores 18%, while longer Guinea- and Brazil-origin voyages tighten effective Capesize supply.
• Options positioning remains more bullish for Capesize: H1 put/call ratio was 0.38 versus 0.47 for Panamax, with August Capesize calls nearly three times puts and 40k a key upside strike

• In Depth: China’s AI Component Powerhouse Faces Geopolitical Reckoning 
• In Depth: Millions Tied Up as Hong Kong IPO Fund Network Runs Into Trouble
• Head of Zheshang Bank’s Lucrative Bills Business Taken Away by Authorities 

• Oil prices increased further yesterday, with the prompt NYMEX crude oil contract having closed in on our trading range peak of roughly $88.00 per barrel.          
• At this juncture we see no reason to amend the upper end of our long-standing trading range where we would recommend selling small volumes of NYMEX crude with tight stops.                       
• However, with September going off the board today and October NYMEX crude oil trading at a roughly $4.00 per barrel discount to our peak, we will remain patient.              

• Q2’s flat end for the labour market might be exaggerated by imputation after the ONS forgot to appoint anyone to pick up the phone for the labour force survey.
• Underemployment’s decline corroborates the labour market’s trend of tightening so far in 2026, despite low vacancies, as both supply and demand are structurally struggling.
• Divergent pay growth measures have slowed by about 0.5pp on the year but remain excessive, near 4%. We still expect the BoE to hike once, failing to break the problem.

• President Trump is pressuring nations to sign a Loyalty Pledge to the US for their AI future.  The pledge aims to counter the rapid growth of open-weight Chinese AI models.
• Nations that agree to the AI Pledge risk compromising their digital sovereignty.  This concern was underscored recently when the United States restricted foreign nationals’ access to Anthropic’s latest AI models.
• If the US can convince countries to join its US-controlled AI ecosystem, it would pose a powerful mechanism to co-opt them into future conflicts driven by US geopolitical interests.

• Oil prices gained yesterday in response to President Trump’s threat to bomb Oman, an ally of the United States, if they try to “control” the Strait of Hormuz with Iran.          
• At the risk of famous last words, this will never happen, but if we are wrong, President Trump, with respect, will have opened a floodgate difficult to close.                         
• In any event, as before, we would be sellers of the prompt NYMEX crude oil contract if it reaches our trading range peak of roughly $88.00 per barrel.               

• The strategy seeks to invest in global companies with sustainable competitive advantages.
• By adopting a portfolio of stocks instead of individual stocks, the strategy is diversified across countries and industries; and optimised with respect to their expected risks and returns.
• Previous portfolio returned 7.1% vs. MSCI World (4.2%) – outperformed the benchmark by 2.9%.

• Dividend is a key component of overall returns.
• The strategy seeks to invest in high dividend stocks globally.
• By adopting a portfolio of stocks instead of individual stocks, the strategy is diversified across countries and industries; and optimised with respect to their expected risks and returns.

• WTI swung daily as shifting U.S.-Iran signals repeatedly changed the risk premium, while a record inventory build briefly pressured prices before renewed sanctions fears.
• WTI options volatility fell while managed money added longs and cut shorts, pointing to improving bullish conviction despite continued demand for downside protection.
• Energy ETFs attracted broad inflows, while VLO offered the cleanest exposure to a distillate-led refining rally despite a sharp valuation re-rating.

• Risk appetite: Sentiment is close to its most bullish level in five years, a modest headwind but not yet a strong standalone sell signal.
• India added: A new Indian equities Heatmap expands coverage into another large, liquid market with strong futures accessibility and useful positioning data.
• Brazil cools: Sentiment has fallen sharply from late-July extremes, but only back to neutral rather than the bearish levels seen before June’s rally.

• Global air freight rates edged a little higher again last week according to the latest data from TAC Index, the leading price reporting agency for air freight markets and calculating agent for the Baltic Air Freight indices.
• The global Baltic Air Freight Index (BAI00) gained +0.2% over the seven days to August 17, leaving it higher by +19.2% over 12 months previously – with tensions still simmering in the Persian Gulf and jet fuel price pressures escalating again after an average gain of +8.2% over the week to August 14 leaving jet fuel now at +76.5% year-on-year according to the latest IATA Jet Fuel Monitor figures. 
• Rates on the busiest lanes out of China were up again WoW both to the US and to Europe amid signs that, after an initial sharp drop in volumes last month, the market has now started to adjust to the new flat-rate customs regime into the EU following an end to the old de minimis exemption for smaller parcels on July 1.

Highlights

• 2026 Q2 exports fall 13% QoQ to 422,000 tons, but remained 1% above last year

• China imports dropped 24% QoQ, while Turkey boosted purchases by 29%

• AFR10 rallies on tight supply before macro-driven correction erases gains

• With the 60-day negotiating period now history, as we fully anticipated absolutely nothing has been accomplished between the U.S. and Iran.
• On the contrary, as we also have suggested in previous reports, there is a reasonably high probability that the stalemate could well continue through at least the end of 2026.  
• Despite no indication that traffic through the Strait will pick up significantly, we believe that the prompt NYMEX crude oil contract will remain in a $75.00-$88.00 per barrel trading range.        

• Following the inception of the World Trade Organisation, working capital demands in the G7 fell as production was offshored. Higher investment rates could put upward pressure on G7 bond yields.
• National security concerns are increasingly driving international economic policy. The pivot towards onshoring the production of strategically important industries will drive investment rates higher.
• The large AI investment requirements of the hyperscalers will boost corporate credit demand, potentially putting upward pressure on US Treasury yields and could potential crowd out other corporate borrowers.       

• CPI ticks higher in July! CBE ought to leave rates unchanged next week.                                       
• Most analysts see the Pound ending the year firmer.       
• Summer heatwave hits the markets.

• In Depth: How Gamed AI Answers Can Lead Investors Astray
• When China Central Television used its annual consumer-rights program in March to show how artificial intelligence (AI) could be manipulated to present pure fiction as fact, the state broadcaster showed an industry insider conjuring a product out of thin air.
• Harry Chun Tak Yeh, a veteran cryptocurrency investor and founder of Quantum Fintech Group, died after falling naked from a luxury high-rise apartment in Paraguay’s capital early Aug.7, local media reported.

• US markets gyrated wildly beneath the surface in July and we recently found out a key reason why; a young, inexperienced and wildly over-leveraged trader from the West coast was in the process of being ‘taken out’ by the seasoned hunting dogs of Wall St.

• What we saw as software stocks surged and plunged while hardware stocks followed was the killing process.

• However, we see this as part of a much bigger turf war over who gets to create money. 

• Summer seasonality is providing some relief to the tight base oils market, with slower lubricant demand helping offset the loss of Middle East supply and allowing the market to operate with a thinner surplus

• The underlying supply position remains tight, with Middle East disruptions continuing to remove significant volumes and Group III availability still under the greatest pressure.

• Asia’s June supply fell faster than lubricant demand, cutting the regional surplus sharply and leaving less spare material to absorb stronger requirements later in the year.

• Crude futures initially were mixed but ultimately moved higher in a choppy trading session on Friday as the market priced renewed US threats against Iran and lingering pressure from a large build in US inventories and weaker demand forecasts.
• At 2024 London time, Oct26 ICE Brent was up 1.7%   at $88.55/b , while Sep26 NYMEX WTI was up 1.4% to $82.37/b .
• Brent had fallen to an Asian-session low of $86.20/b before recovering as trading progressed to a high of $88.69/b during the European session.

• Everyone is talking El Nino, but the textbook regional fingerprints in North and South America are nowhere to be found.
• That is not the thesis breaking down – it is the calendar. The Indian monsoon shows why.
• El Nino is everywhere in commodity conversation right now, and our own data points to this cycle running strong. 

• ASEAN has underperformed Asia in 2026, but Singapore (up 24%) and Thailand (up 28%) are stand-out outperformers. Both have benefitted from AI capex, but many other drivers have supported Singapore.
• Both Markets have had significant EPS estimate upgrades driven by tech hardware, industrials and process industries. For Thailand, basic materials and energy have also chipped in significantly.
• Screening stocks on strong growth, reasonable valuations, healthy balance sheets and EPS upgrades over past 6 months, we highlight 5 stocks in Singapore and 6 in Thailand.

• A review of recent events/data impacting our investment themes and outlook
• Rate hike expectations in the United States continue to fall
• July is forgotten as speculation returns in the AI space