In today’s briefing:
- HONG KONG ALPHA PORTFOLIO (February 2025)
- Bessent Gets His Wish, But Not In A Good Way
- What Should You Buy As the Magnificent Seven Falters?
- Copper Tracker 3rd March 2025: China TSF And PMI Rebound A Major Boost, All Eyes On the NPC
- Glacial Bank of Japan Policy Normalisation Intact, but Wage Inflation and Geopolitics Pose Risks
- Iron Ore Tracker (04-Mar-2025): PMI Rebound And China TSF Looking Good, All Eyes On NPC
HONG KONG ALPHA PORTFOLIO (February 2025)
- HK Alpha Portfolio returned 13.58% in February and outperformed the benchmark by 7.68%. The portfolio has outperformed Hong Kong indexes by 5.16% to 11.48% since its inception on 10/01/24.
- About 50% of the portfolio’s excess returns have been from alpha generation. The portfolio had no exposure to Real Estate, Energy, or Utilities.
- At month-end we sold AAC Technologies Holdings (2018 HK) , Trip.com Group (9961 HK) , MINISO Group Holding (9896 HK) , and trimmed Xiaomi Corp (1810 HK) .
Bessent Gets His Wish, But Not In A Good Way
- Treasury Secretary Scott Bessent recently declared that the Trump Administration was mainly focused on lower the 10-year Treasury yield. He seems to be accomplishing his goals, but at a price.
- The U.S. economy is increasingly dependent on the high-end consumer, whose wealth is reliant on continuing increases in stock and property prices. But cracks are appearing in both markets.
- We expect a reset in growth expectations will lead to a short and sharp correction, but no prolonged recession-induced bear market.
What Should You Buy As the Magnificent Seven Falters?
- A global rotation analysis reveals a rotation away from U.S. equities. Europe is poised to sustain leadership, and our favourite sector is European financials.
- China has shown signs of relative strength, but doesn’t appear to be sustainable.
- The most vulnerable countries appear to be the resource exporters such as Australia, Canada, Brazil, Indonesia and South Africa.
Copper Tracker 3rd March 2025: China TSF And PMI Rebound A Major Boost, All Eyes On the NPC
- Copper prices remained tepid last week, owing to a weak global market sentiment with Trump’s tariffs. Funds cut their bullish Comex positions as premiums crashed by 40% from the peak.
- China’s Manufacturing PMI rose to 50.2 in February, surpassing the expected 49.9, while the record Total Social Financing in January also contributed significantly to this positive outlook.
- The NPC 2025, taking place on March 5, will be closely watched for China’s fiscal policy roadmap, which is expected to influence commodity consumption.
Glacial Bank of Japan Policy Normalisation Intact, but Wage Inflation and Geopolitics Pose Risks
- The Bank of Japan (BoJ) has embraced the Fed’s practice of gradualism in normalising policy settings. Private securities holdings make it difficult for the BoJ’s balance sheet to fall rapidly.
- The BoJ’s inflation gauge has been rising again since July 2024, suggesting gradually tighter policy will not reintroduce deflation. Rising wages are the inflation game changer after years of stagnation.
- Monetary policy settings in Japan will remain accommodative in 2025, albeit less so. The attraction of the yen carry trade could fall, but the demand for dollars will remain elevated.
Iron Ore Tracker (04-Mar-2025): PMI Rebound And China TSF Looking Good, All Eyes On NPC
- The Trump administration’s announcement of a 60% tariff on Chinese steel imports affected the market sentiment, leading to a 3% decline in iron ore prices last week.
- China’s Manufacturing PMI rose to 50.2 in February, surpassing the expected 49.9, while the record Total Social Financing in January also contributed significantly to this positive outlook.
- Iron ore prices can remain rangebound (95-110 USD/ton), with the positive demand-side catalysts from China outweighing the long-term supply fears from Rio’s Simandou project.
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