In today’s briefing:
- UK: Government Leads Imbalances
- Asia Structural Underweight Persists as Americas Stay Overweight, EMEA Recovers
- Global Fund Positioning in Asia
- ASEAN Rotation: Indonesia Weakens, Singapore Gains, Thailand Stabilises
- Americas/EMEA base oils supply outlook: Week of 29 September
- Oil futures: Crude extends losses, focus on OPEC+ unwinding
- MENA: From Structural Underweight to Selective Rebuild
- Global base oils arb outlook: Week of 29 September
- Asia base oils demand outlook: Week of 29 September
- Asia base oils supply outlook: Week of 29 September
UK: Government Leads Imbalances
- 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 Structural Underweight Persists as Americas Stay Overweight, EMEA Recovers
- 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 Fund Positioning in Asia
- 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.
ASEAN Rotation: Indonesia Weakens, Singapore Gains, Thailand Stabilises
- 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.
Americas/EMEA base oils supply outlook: Week of 29 September
- 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.
Oil futures: Crude extends losses, focus on OPEC+ unwinding
- 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: From Structural Underweight to Selective Rebuild
- 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.
Global base oils arb outlook: Week of 29 September
- 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 base oils demand outlook: Week of 29 September
- 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 base oils supply outlook: Week of 29 September
- 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.
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