Macro

• Australian economy remains sluggish, but some positives include recovery in small caps and resilience of Australian consumers
• Market volatility and narrow leadership driving unhappiness among active investors
• Resilience of Aussie consumer and strong retail results stood out in recent reporting season, with small caps and US housing exposure also notable themes

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• US monetary policy is accommodative and markets are buoyant, especially in commodities
• Investors need to be cautious about being overly bullish in current environment
• Similarities seen with 2006-2007 period, particularly in disruptions in copper supply and new technologies in metal recovery; investors should be wary of hype and potential risks involved

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• A surprise rise in EA unemployment reflects rounding rather than alarming weakness, with labour supply and demand still surging. Finland’s woes are more idiosyncratic.
• Supply has trended much faster post-pandemic, sustaining demand at its old trend without extreme capacity constraints. Migration has more than accounted for the rise.
• Ukrainians are dominating the flow and complicating the read through to disinflationary spare capacity. Wage growth is an even more critical signal when supply is uncertain.

• The US shutdown remains political theatre, with no real progress on deficit reduction or fiscal reform.

• Thailand’s baht is Asia’s strongest currency, but structural issues and weak growth outlook persist despite strong external balances.

• Regional PMIs show a mixed picture, with Thailand surprisingly strong, Taiwan weak, and India continuing to lead.

• Crude oil futures were sliding lower Thursday as benchmarks racked up a fourth consecutive retreat of the week, coming amid expectations of a further OPEC+ hike offsetting heightened geopolitical tensions.
• Front-month Dec25 ICE Brent futures were trading at $64.16/b (2035 BST) versus Wednesday’s settle of $65.35/b, while Nov25 NYMEX WTI was at $60.57/b against a previous close of $61.78/b.
• Briefings from OPEC+ delegates over the last few days have wiped out the previous week’s healthy gains, with the group now expected to bring back a second tranche of voluntary cuts at a quicker-than-expected pace.

• Inflation’s break above target to 2.23%, within 1bp of our forecast, came as past energy price falls dropped out to reveal the more resilient underlying pressures.
• Small upside surprises in large countries, like Germany and Italy, were balanced in number and contribution by larger surprises in small ones, like Greece and Estonia.
• We expect less negative payback in October and January, preventing our profile from languishing below the target through 2026, like the consensus view does.

• Hong Kong Alpha portfolio gained 8.45% in September and 60.89% and 62.80% YTD and since launch one year ago.  The portfolio has outperformed Hong Kong indexes by more than 40%.
• The portfolio has a Sharpe ratio of 3.23 YTD and has generated more than 40% of its returns from stock-picking (alpha).  Its beta is low at only 1.17.
• At the end of September, we increased exposure to AI and robotics and sold positions in the consumer and finance sectors.

• The central bank held rates at 9.25% in a 4-3 split vote, matching consensus expectations but extending the pause cycle to four months amid 5.1% inflation.
• Slower inflation convergence toward 3% target drives caution as service prices remain sticky and analyst expectations rise to 5% for 2025.
• Fiscal deficit widening to 7.1% of GDP and rule suspension through 2027 limits monetary policy flexibility and prolongs the restrictive stance.

• Bankers Optimistic on Loan Demand and Terms: RBI Lending Survey
• Capacity utilisation declines to 74.1% in Q1FY26: RBI OBICUS survey
• New project announcements fall to Rs.5.2 trillion in September 2025 quarter

• Quantum Commodity Intelligence – Crude oil futures were drifting lower Wednesday, extending the heavy losses in the early part of the week amid growing concerns that markets could face a significant supply glut in Q4.
• Front-month Dec25 ICE Brent  futures were trading at  $65.54/b (2000 BST) versus Tuesday’s settle of $66.03/b, while Nov25 NYMEX WTI  was at  $61.97/b against a previous close of $62.37/b.
• Benchmarks came under pressure after Bloomberg reported on Tuesday that OPEC+ is considering an accelerated schedule on unwinding a second tranche of production cuts, which could fast-track the return of around 1.5 million bpd in just three months.

• The RBI held its repo rate at 5.5%, unanimously keeping a neutral stance as the committee assesses the impact of prior cuts amid an improved inflation outlook.
• Inflation projections were slashed to 2.6% from 3.1%, driven by GST reforms and benign food prices, creating policy space despite growth risks from 50% US tariffs.
• Domestic demand raised the growth forecast to 6.8%, but H2 FY26 faces headwinds from trade tensions. The MPC adopts a wait-and-see approach before its next move.

• It is imperative to closely monitor the China economy in the current environment
• My China Monthly Alternative Growth (CMAG) gauge provides a timely assessment of the aggregate economy
• The CMAG is currently tracking below average in August, all else equal, with early indications of additional sogginess going forward

• Household saving and inflation have eroded their debt burden while corporates remain prudent. A lack of imbalances to correct starves the UK of fuel for a recession fire.
• Persistent fiscal and current account deficits highlight where the UK’s primary risk lies. If the market regime focuses on fiscal issues, the corrective pressures could be fierce.
• We don’t expect that correction to occur, but the Chancellor should tread carefully, while doves need not worry about a recession arising from healthier other UK sectors.

• Asia dominates EM allocations at ~70–75%, though funds remain structurally underweight versus benchmark; Americas overweight has plateaued, and EMEA is recovering from 2022 lows.
• 83.8% of funds overweight Americas, just 17.5% overweight Asia; EMEA shows signs of rotation but still leans underweight overall.
• Sub-Region trends: EM Asia ex-ASEAN underweight deepens, LATAM remains consensus overweight, MENA underweight narrows, while Developed Market exposure fades to record lows.

• Global funds remain structurally underweight Asia, with Japan and China & HK widely held but still below index weight; India stands out as the clearest consensus underweight.
• Taiwan Technology dominates sector positioning as the largest regional overweight, while Australian and Asian Financials are structural underweights; rotation shows China sectors and Japan Financials/Industrials gaining traction.
• Stock leadership is highly concentrated in TSMC, now owned by 61% of funds; second-tier names stagnate while SK Hynix, BYD, and Sea Ltd attract rising investor participation.

• The ASEAN overweight rests on Indonesia and non-benchmark Singapore/Vietnam, offset by Malaysia’s structural underweight. Recent flows show pressure on Indonesia and Malaysia, with Singapore and Thailand benefiting.
• Indonesian Financials dominate ASEAN exposure but are losing momentum; fresh inflows support Singapore Discretionary and Technology, plus Thailand Communication Services and Staples.
• Stock trends highlight fading Indonesian banks, while new highs come from ICTSI, Grab, GoTo, and Singtel, signalling a potential shift in leadership.

• US light-grade base oils domestic prices weaken versus feedstock/competing fuel prices; export price-differentials hold firmer.
• Diverging trends reflect weaker outright prices for domestic supplies and firmer prices for export volumes.
• Premium of Group II domestic light-grade base oils prices over export prices falls in response to narrowest level in more than two months.

• Crude oil futures extended early-week losses Tuesday as concerns over a Q4 supply glut took hold, with sluggish demand growth seen unable to match growing supplies from OPEC+.
• Dec25 ICE Brent  futures were trading at  $66.21/b (2030 BST) versus Monday’s settle of $67.09/b, while Nov25 NYMEX WTI  was at  $62.57/b against a previous close of $63.45/b.
• The latest retreat also came after Bloomberg reported that OPEC+ could unwind an additional 1.5 million bpd over the next three months , with the option said to be under consideration.

• MENA remains a structural underweight, absent in nearly 25% of EM funds, though participation has climbed to a decade high with 75.9% of EM funds now holding positions.
• UAE has overtaken Saudi as the largest allocation, supported by inflows into Real Estate and Financials; Saudi remains underweight, while Qatar and Kuwait attract little investor interest.
• Emaar, Al Rajhi, Aldar, and Saudi National Bank anchor MENA exposure, with second-tier growth from ADCB, Emirates NBD, and UAE Energy sectors.

• Asia’s Group II base oils prices stay unusually firm vs US export prices so far this year.
• Strength of Asia Group II prices curbs arbitrage flows from Asia to Americas so far this year.
• Strength of Asia prices facilitates flows of base oils shipments from US to markets like UAE and India so far this year.

• Asia’s base oils demand could turn more cautious amid improving availability of supply.
• Rising supply gives buyers more flexibility to procure smaller volumes more frequently.
• Rising supply raises concern about exposure to price-volatility, adding to attraction of managing stocks carefully.

• Asia’s base oils prices slip versus gasoil prices amid recent rise in crude oil prices.
• Heavy-grade base oils margins stay relatively firm even with recent downward pressure.
• Recent squeeze on margins could prompt refiners to resist price-adjustments to reflect any change in supply-demand fundamentals.

• Lending activity is sustaining beyond the levels prevailing before the stamp duty tax hike distortion. Only housing transaction volumes are down, but by less than before.
• New loan rates have fallen by 23bp since then, for a 110bp cumulative fall. New rates are close to the outstanding stock. Many borrowers are refinancing for similar deals.
• Past tightening has broadly passed through, but the strength in broad money growth signals that monetary conditions are settling at a slightly stimulative setting.

• The Riksbank will keep policy rates unchanged at 1.75%, with no further cuts expected and a small probability of a hike in 4Q26.
• The Swedish budget announcement of unfunded reforms totaling 120 billion in additional easing caused Swedish rates to rise and yield curves to adjust.
• The Norges Bank surprised by cutting rates despite strong economic data, with markets pricing in further easing despite the bank’s revised higher rate forecast.

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• Market sentiment is data dependent, particularly on US economic data, which has been surprising to the upside
• Despite some uncertainty surrounding Fed independence, the overall macro backdrop is conducive for dollar weakness
• FX models are showing lack of conviction in the current environment, with carry trades in FX, including EM currencies, being a popular choice for market participants

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• Copper prices surged from around $10,000 to $10,350 per metric ton due to a longer and more severe outage than expected at the Grasberg mine.
• The disruption in production is expected to result in a 200,000 metric ton shortfall in the fourth quarter of 2025 and a further 270,000 metric ton loss in 2026.
• The impact of the supply shortage has flipped the refined copper market from a surplus to a significant deficit, leading to a bullish outlook and a projected price increase to $11,250 per metric ton in the first quarter of 2026.

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• India’s markets continue to underperform Asia since our insight last November recommending investors to “Fade the Market”.
• Foreign investors continue to exit the market this year with the largest net outflow since COVID.
• The Trump administration is pressuring India in trade negotiations with reciprocal tariffs (25%), additional tariffs for importing Russian oil (25%), pharma tariffs (100%), and new restrictions on H-1B visas.

• US government shutdown likely, with significant impact on data releases
• US payrolls report delayed by potential government shutdown, expected to show improvement in September
• Nomura’s chief economist for developed markets discusses potential outcome of government shutdown and expectations for US payrolls data

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• US tariff-related uncertainty about future global corporate capital allocation remains elevated, particularly for those entities contemplating the relocation of production sites.  Significant costs and investments are associated with production relocation.
• Companies with a relatively high labour input in the production of low value-added products should find it easier to shift production to lower-cost jurisdictions to mitigate the impact of tariffs.
• China’s pending five-year plan will seek to continue expansion into high value-added segments within the manufacturing sector via elevated research and development spending to reduce reliance on foreign technology.

• We remain intermediate-term bullish on stocks, but the market is at risk of a correction.
• If last week’s weakness is the start of a pullback, short-term trading indicators point to further downside potential.
• Investors should be prepared to buy the dip, but not yet.

• “We’re going to take some of that tariff money and give it to our farmers,” Trump said at the White House.
• Agriculture Secretary Brooke Rollins has said the administration is weighing an aid program, opens new tab modeled after the approach taken by the previous Trump administration, when farmers were given billions to offset losses from a trade war with China.
• Farmers are “for a little while going to be hurt, until it kicks in, the tariffs kick in to their benefit,” Trump said. “Ultimately, the farmers are going to be making a fortune,” he added.

• Crude oil futures opened the week sharply lower as oversupply concerns came back into focus, although a tense geopolitical situation continued to lend some support.
• Front-month Nov25 ICE Brent futures were trading at $67.72/b (2010 BST) versus Friday’s settle of $70.13/b, while Nov25 NYMEX WTI was at $63.22/b against a previous close of $65.72/b.
• Prices eased back from the recent multi-week highs following reports that OPEC+ would continue its unwinding program for at least another month.

• The key question for investors is the likely trajectory of U.S. total factor productivity in the next decade.
• Our review shows that while AI adoption and deployment is a tailwind, stagnant population growth and the effects of climate change are headwinds.
• We conclude that, at best, factor productivity will be no better than trend. At worst, it will flatten and show little or no growth.

• A review of recent events/data impacting our investment themes and outlook
• More government  deals in the critical minerals sector support our outlook
• Grasberg mine accident and closure highlights tightness in the copper market

• Bullish GDP revisions and jobless claims provided further reminders that the economy is much more resilient than market pricing has dovishly assumed, causing a hawkish shift.
• Nonetheless, the Riksbank surprised with a 25bp rate cut, but projected that as the terminal rate before hikes start reversing the stimulative setting in 2026.
• Next week’s US payrolls data dominates the calendar, given the potential to break market conviction in an October Fed cut. EA inflation should rise back above the target.

• Domestic consumption is boosted by a continued expansion of the middle class, a process set to accelerate from wage-uplifting policies. A boom in inbound tourism is a further boon.  
• Capital formation, long considered a relative weak spot, will also benefit from a strong pipeline of committed investments. Progress in policy catalysts may provide more upsides. 
• The country’s politics has gotten a bad reputation after previous episodes of scandal and instability, but the institutional guardrails proved effective in limiting outbreaks of unrest.

• Crude futures steadied Friday as oil headed for the strongest weekly gains since June, coming amid disruptions to Russian fuel supplies and heightened tensions between Moscow and NATO.
• Front-month Nov25 ICE Brent futures were trading at $69.53/b (0925 BST) versus Thursday’s settle of $69.42/b, while Nov25 NYMEX WTI was at $65.17/b against a previous close of $64.98/b.
• Fuel shortages in Russia have forced Moscow to extend the ban on gasoline exports and restrict overseas diesel sales.

• Between January and August of this year, the trade balance recorded a deficit of USD 528 million.
• Manufacturing exports maintained their resilience, growing 6.5% y/y over the same period, which has supported the dynamics of economic activity so far this year.
• In August, the trade deficit amounted to USD 1,944 million, compared to our estimated deficit of USD 962 million and the consensus deficit of USD 2,600 million. 

• Restaurants /In Depth: Starbucks, Burger King Overhaul China Strategies
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• Grasberg shock: Force majeure after mudflow cuts ~3% global supply; 50–60kt/month at risk; copper jumped to $10,300/t, near 2024 highs.
• Asian impact: Indonesia’s downstream push stalls; Chinese smelters squeezed by collapsing TCs; Japanese/Korean smelters face higher costs; miners and traders gain leverage.
• Winners: +$1,000/t adds ~6–8% EBITDA for Zijin, ~5–7% for Jiangxi; Japanese majors 15–45% exposed; Mitsui/Marubeni gain 0.5–2% via mine stakes/trading.

• Falling US jobless claims and bullish GDP revisions are reinstating evidence of ongoing resilience. Underlying GDP only slowed by about 0.1pp in H1, or 15% of 2024’s average.
• Risk management rate cuts to balance the higher costs of being wrong on the downside raise the probability that easing proves premature and swiftly ends.
• The ECB already sees the transmission of its past cuts trending loan growth higher. It may reach pressures consistent with hikes next year, and it already clashes with easing.

• Crude oil futures were challenging monthly highs Wednesday, extending the previous session’s gains as investors eyed threats to oil supplies, including Russian diesel, after the latest spate of refinery attacks.
• Front-month Nov25 ICE Brent futures were trading at $69.13/b (2010 BST) versus Tuesday’s settle of $67.63/b, while Nov25 NYMEX WTI was at $64.86/b against a previous close of $63.41/b.
• Benchmarks have largely been rangebound in September with markets torn between supply disruptions and concerns over a Q4 supply glut as OPEC+ continues its unwinding program.

• Citi warns iron ore’s rally is overstretched, with policy support and supply disruptions priced in, leaving limited upside ahead.
• Managed Money participants are ramping up net long exposure, underscoring renewed bullish sentiment and rising confidence in stronger demand and price gains.
• Iron ore’s momentum is fading as Bollinger Bands and MACD flash bearish signals, with sellers gaining control and downside risks rising.

• Crude oil futures eased back from multi-week highs Thursday amid profit taking but remained at the top end of the summer trading range.
• Front-month Nov25 ICE Brent futures were trading at $68.80/b (0945 BST) versus Wednesday’s settle of $69.31/b, while Nov25 NYMEX WTI was at   $64.45/b against a previous close of $64.99/b.
• Prices slipped after hitting the highest levels since July on what was put down to profit-taking, but concerns over Russian supplies continued to underpin the relatively elevated levels.

• Over 2024 and 2025, Asia-ex-Japan equities are up c30%. During this period, the 12-month forward EPS has expanded only 5.6%. Forward EPS recovery is essential to take the market higher.
• Over the medium to long term, share prices track earnings, as we notice in our long-term analysis of forward EPS trajectory and market movement. Disjoint movements usually mean revert quickly.
• Forward EPS could move up further in China, Korea, Taiwan and Thailand. Hong Kong has overshot its forward EPS trajectory. Philippines has massively undershot. Other markets appear broadly in line.

• China is building a whole new operating system for its economy, just as Apple built iOS.

• We need to judge China accordingly, as Steve Job’s Apple, not Jack Welch’s GE

• A multi-polar world is now one of two operating systems. We need to make sure our investments can run on both.

• Asian exports remained resilient, led by Thailand, Hong Kong, and Taiwan, though Japan showed clear trade weakness.

• The US economy continues expanding but faces risks from an inverted yield curve, dollar weakness, and Trump tariffs.

• Massive technology investment raises growth hopes, but skilled labor shortages and heavy import reliance limit sustainable impact.

• Rubber exports rebound in July, lifting Cambodia’s monthly earnings  
• Domestic consumption surges 76%, reshaping supply-demand dynamics  
• Smallholder reforms push sector toward increased efficiency

• Policy /In Depth: Beijing Bets on New Policy Tool to Bolster Emerging Sector Investment
• WTO /: China to Give Up Special Treatment in Future WTO Talks, Premier Says
• Beverages /: Beverage Giant Wahaha to Abandon Eponymous Brand Name

• The U.S. continues to play “Whack-A-Mole” using tariffs to threaten and/or negotiate on many economic and geopolitical issues.
• The Trump tariff policy, which may be declared illegal by the Supreme Court next month, has caused manufacturers to hold off on hiring and expansion plans.
• Although tariff revenue for the U.S. government is at an all-time high, the U.S. will still record its highest trade deficit in history this year.

• Most large Asian markets’ forward PE multiples are significantly higher than their long-term averages. But their valuations relative to Asia-ex-Japan are mostly at the averages, only Korea’s is significantly lower.
• HK/China’s relative PE is slightly lower than average, Taiwan’s is slightly higher. ASEAN markets’ relative PE are sharply lower than their averages, but we think most lack rerating catalysts.
• We think Korea and Philippines deserve to get rerated. India’s relative PE, though at its long-term average, could decline slightly further, to reach its recent bottoms.

• European policymakers and investors see Donald Trump’s economic policies harming Republican prospects in the 2026 midterms and the 2028 general election.
• The Trump Administration is placing a good deal of faith in AI as a panacea. But the US may not have the skilled labour or the power-generating capacity to fuel an AI boom.
• Nor is it clear whether the current Administration is preparing for the related socio-economic disruption from which the MAGA faithful would be far from immune.

• Crude oil futures steadied Wednesday, consolidating the previous session’s gains as investors eyed threats to oil supplies, including Russian diesel after the last spate of refinery attacks.
• Front-month Nov25 ICE Brent futures were trading at $67.90/b (1030 BST) versus Tuesday’s settle of $67.63/b, while Nov25 NYMEX WTI was at  $63.55/b against a previous close of $63.41/b.
• Benchmarks have largely been rangebound in September with markets torn between supply disruptions and concerns over a Q4 supply glut as OPEC+ continues its unwinding program.

• High miss probability: Suzano has $2.75B SLBs. The 2031 SPT needs 2025 intensity to fall 14% YoY, while the largest one-year reduction since 2019 is ≈2.9%. A miss is likely.
• Catalyst within months: Observation windows end YE 2025 and 2026. Coupons reset from July and September 2026. Vendor updates often lag disclosure, creating a tradable timing gap.
• How to position: Accumulate select SLBs into verification for carry when SPTs miss. Trade equity around KPI disclosures as a read on efficiency and capex cadence.

• Kharif food grain production to surpass government’s target in 2025-26
• Centre readies Rs.1 tln Urban Challenge Fund for city development
• CBIC enforce s retrospective GST amendment from 1 Oct 2025

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• The exit of Indonesia’s veteran Finance Minister, Sri Mulyani Indrawati, marks a turning point in the country’s fiscal regime.
• With her out of the picture, it is only a matter of time before the government revises the 3% deficit ceiling higher to accommodate Prabowo’s large spending plans.
• This is a slippery slope and an indiscriminate push for spending, without concomitant tax reforms, could put debt on an unsustainable path.

• PMIs broadly disappointed and declined relative to August, but absolute levels mostly remain robust or at least expansionary. We are not concerned by these noisy moves.
• Such broad slowing seems shocking relative to the past few months, but it is historically a regular occurrence. Five of the previous twelve were at least as broadly bad.
• The labour market remains tight in the euro area, softened in the UK, and steady in the US. Slower activity does not mean disinflationary slack. We stay relatively hawkish.

• Tire makers see profit pressure despite revenue gains  
• JK Tyre eyes double-digit growth, expands global footprint  
•  CEAT eyes expanding Chennai plant at US$51 million spend  

• Crude oil futures were climbing higher on Tuesday as concerns about oversupply vied with geopolitical uncertainty to set the tone for the early part of the week.
• Front-month Nov25 ICE Brent futures were trading at $67.91/b (2017 BST) versus Monday’s settle of $66.57/b, while Nov25 NYMEX WTI was at  $63.71/b against a previous close of $62.28/b.
• Benchmarks had opened the session lower, but geopolitical tensions continue to keep markets on edge amid ongoing strikes on Russian energy infrastructure, while Russian military activity close to the Polish border has raised wider tensions.

• Crude oil futures were slightly lower on Tuesday as concerns about oversupply vied with geopolitical uncertainty to set the tone for the early week.
• Front-month Nov25 ICE Brent futures were trading at $66.37/b (0850 BST) versus Monday’s settle of $66.57/b, while Nov25 NYMEX WTI was at  $62.10/b against a previous close of $62.28/b.
• Markets have been unable to shake off fears of a looming supply glut, with the International Energy Agency (IEA) setting off alarm bells last month with its forecast of a 2.5 million bpd Q4 surplus rising to over 3 million bpd next year, with OPEC+ seemingly on course to add more 2.5 million bpd by the end of this year.

• Global base oils margins mostly hold at levels that sustain incentive for refiners to maintain high output.
• Incentive for refiners to maintain high output puts pressure on global demand to remain sufficiently firm to absorb steady-to-higher supply.
• Pressure on demand to hold firm coincides with time of year when demand typically starts to ease.

• US base oils demand likely to stay more muted.
• Seasonal slowdown in demand in Q4 2025 incentivizes blenders to cut current stock levels.
• Unexpectedly quiet Atlantic hurricane-season so far this year incentivizes blenders to start working down inventories that were built up to cover against supply-disruptions.

• Surprise rate cut to 1.75% reflects weak growth trumping temporary inflation concerns; policy likely on hold “for some time”.
• Fiscal stimulus of SEK 80bn for 2026 supports the outlook but creates inflation uncertainty via supply-demand imbalance.
• The projected terminal rate is now reached, with the next move potentially a rate hike before the end of 2026.

• US base oils prices hold in narrow range versus feedstock prices.
• Steady Group II margins contrast with sharper fall in margins in H2 Sept 2024.
• Steady Group II margins sustain incentive for refiners to maintain high output levels.

• Asia’s base oils demand could turn more cautious amid signs of healthy availability and unusual change in trade flows.
• Limited build-up of surplus supplies so far in Q3 2025 had eased concern about price-volatility, supporting steadier demand.
• Buyers could instead limit their procurement plans amid unusual surge in Singapore’s base oils exports to southeast Asia in recent weeks.