In today’s briefing:
- HONG KONG ALPHA PORTFOLIO (August 2025)
- Fed Policy Operating Framework Revision and Dovish Pivot Overshadowed by Political Battles
- Brent Crude: Flying With Clouds Ahead. Or, When Supply Outruns the Tide
- Could A Bond Market Tantrum Derail Stock Prices?
- Silver in Focus: Global Deficits, Japan’s Reliance, and Dowa’s Hidden Leverage
- Indian Economy – August 18, 2025
- Still on the Road to Financial Repression
- Eurozone Economy – August 06, 2025
HONG KONG ALPHA PORTFOLIO (August 2025)
- Hong Kong Alpha portfolio gained 11.34% in October outperforming its benchmark and HK indexes. The portfolio’s Sharpe ratio increased to 2.91 and the beta and correlation to its benchmark decreased.
- The Hong Kong Alpha portfolio is generating significant alpha (idiosyncratic) returns since launch, with 40% of returns represented by superior stock selection, with the remaining due to sector weighting.
- At the end of August, we bought Luk Fook Holdings Intl (590 HK) for the portfolio as retail demand for gold products in mainland China increases.
Fed Policy Operating Framework Revision and Dovish Pivot Overshadowed by Political Battles
- The timing of Fed Chairman Powell’s apparent dovish pivot at Jackson Hole appears strange due to the large amount of economic data awaiting release before the next policy meeting.
- The Fed has just revised its long-term policy operating framework that is no longer centred around a zero per cent federal funds rate dominating the economic and financial landscape.
- President Trump’s clash with the Fed has taken a fresh twist with his sacking of Governor Cook due to alleged mortgage fraud, who launched a legal challenge against her dismissal.
Brent Crude: Flying With Clouds Ahead. Or, When Supply Outruns the Tide
- Major agencies now align on a possible consensus: the crude market is entering a phase of structural imbalance.
- Inventory builds and shifting producer strategies are setting the stage for a market environment not seen in years.
- Historical parallels suggest that the coming quarters may test price resilience more than recent memory.
Could A Bond Market Tantrum Derail Stock Prices?
- We remain intermediate-term bullish on equities as global trends point to higher prices in the coming months.
- However, the risks of a bond market tantrum are increasing as global rising inflation expectations threaten the bond market.
- It’s unclear how a bond market tantrum might affect equities. Higher nomination growth and inflation should be equity bullish, but the market’s technical internals call for short-term caution.
Silver in Focus: Global Deficits, Japan’s Reliance, and Dowa’s Hidden Leverage
- Silver has rallied nearly 40% over the past year, outpacing other precious metals on the back of record industrial demand and renewed investor flows.
- Persistent structural deficits, led by solar PV and EVs, point to a supportive multi-year backdrop even if investment flows remain volatile.
- For Japan, Dowa Holdings’ 30% stake in Los Gatos offers the only meaningful listed exposure to primary silver mining, with earnings leverage that is underappreciated by the market.
Indian Economy – August 18, 2025
- India’s growth projections are still very high compared to both developed and emerging countries, with expectations of Real GDP growth rates of 6.20%, 6.27% and 6.47% from 2025 to 2027.
- Inflation remains below the 2% target of most economies, with QoQ% CPI standing at -1.83% and 0.33% in the first two quarters of 2025, signaling that the inflationary pressures of 2024 are not a threat anymore.
- The latest data regarding the Labor Market, suggest that the unemployment rate is near the lowest point of the last years, standing at 4.03% in the Q4 2024.
Still on the Road to Financial Repression
- An important and controversial research paper was presented at Jackson Hole, which came to the startling conclusion that “debt could reach 250% of GDP without pushing up interest rates”.
- While there were some holes in its assumptions, the paper offers cover for fiscal authorities to declare that “deficits don’t matter (very much)”.
- The risk is that it provides a license for fiscal authorities to engage in financial repression and force a regime of fiscal dominance, inflation and a falling currency.
Eurozone Economy – August 06, 2025
- The Euro area economy has lost momentum following strong growth at the start of the year 2025, with recent indicators pointing to subdued activity in Q2.
- Survey data suggest that overall business activity weakened compared to the first quarter of the year despite marginal improvements in June.
- Both Germany and France registered volatile industrial production figures partly driven by temporary factors such as frontloaded exports to the US.
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