In today’s briefing:
- The Bullish Elephant in the Room
- Sovereign Debt Management Concerns: US Better Positioned to Pursue Growth
- Iron Ore: Mill Spreads Continue to Improve, Bullish Ore To 110 USD/Ton
- Hong Kong Alpha Portfolio (June 2025)
The Bullish Elephant in the Room
- We have been fairly cautious on equities in the past, but that’s changing. There is a bullish elephant in the room that is becoming evident and can’t be ignored.
- Market psychology had panicked and became overly concerned about left-tail risk. . Better, or less bad, news emerged and price momentum became dominant.
- Our base case scenario calls for the rally to continue into the August–September time frame.
Sovereign Debt Management Concerns: US Better Positioned to Pursue Growth
- The passage of the Big Beautiful Bill in the US has raised concerns about the sustainability of sovereign debt across the world’s major economies. Demand for US Treasuries remains high.
- The seizure of Russia’s foreign exchange reserves raised concerns about the wisdom of holding dollar reserve assets, but there are currently no viable alternatives to US sovereign debt exposure.
- Governments have a range of choices for debt management, ranging from austerity to growth. The US is unlikely to ever embrace austerity and is better positioned to pursue growth strategies.
Iron Ore: Mill Spreads Continue to Improve, Bullish Ore To 110 USD/Ton
- We had called iron ore Iron Ore: Small Bounce From 96 to 100 USD/Ton As China Mill Margins Turn Positive, and we are now at 99 USD/ton.
- We continue to see mill margins benefit and the restock in the chain, including coking coal, which has started to move up, and forecast a gradual uptick to 110 USD/ton.
- We express our bullishness through owning Fenix Resources (FEX AU), a small-cap iron ore miner (read: Fenix Resources (FEX AU): Q3 FY25 Concall Update + CZR News )
Hong Kong Alpha Portfolio (June 2025)
- The Hong Kong Alpha portfolio has significantly outperformed the Hong Kong indexes in June and since inception. Outperformance range is 17% to 23% since inception.
- At the end of June, we sold positions in the tech sector after substantial gains. The portfolio’s exposure to the consumption sector was also trimmed, both discretionary and staples.
- The portfolio added exposure to the metals refining sector and initiated positions in conglomerates Shanghai Industrial Holdings (363 HK) and Citic Ltd (267 HK) .
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