NEWS
9 Dec 2025 - News and Views: The impact of a steeper yield curve on global listed infrastructure
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News and Views: The impact of a steeper yield curve on global listed infrastructure 4D Infrastructure December 2025 15-minute read Utilities and infrastructure valuations, typically sensitive to long-term yields, have been challenged by an exceptional rise in US bond yields despite significant Fed rate cuts, prompting an examination of the drivers, sustainability, and implications of this move for global listed infrastructure sectors. Utilities and infrastructure companies own very long dated assets characterised by high up front capital costs and returns often correlated to economic parameters. As such their valuations can be sensitive to changes in long term bond yields, some sectors more than others. The sharp inflation spike of 2021-22 led the US Fed to raise rates at a record pace, from 0.25% to 5.5% over 18 months, representing a headwind for certain segments of the infrastructure universe, particularly US utilities (no explicit inflation or interest rate pass through). Positively, this Fed action reigned in inflation and market expectations turned to Fed cuts. The subsequent easing cycle, commencing in September 2024, was expected to be a tailwind for infrastructure and in particular for utilities that have strong fundamental linkages to interest rates. While Fed interest rate cuts of at least 25bps generally coincide with a decline in long term bond yields this easing cycle has proved to be an anomaly: the Fed has cut by a cumulative 150bps and US ten-year yields have risen by ~50bps. In this News & Views we investigate what has driven this increase, if it can be sustained and the outlook from here. Finally, we then assess the impact this has on global listed infrastructure (GLI) valuations and how 4D manages these risks and opportunities. Bond yields - short & long term, components & moves after Fed cutsShort term yields are mainly driven by central bank policy rates and near-term inflation and growth expectations. By contrast, long term yields reflect expected future short-term rates as well as longer-run views on inflation, growth and a 'term premium' for compensating investors for the risk of holding longer dated bonds. Specifically, recent studies on the parameters affecting bond yields across maturities point to two key components:
As an infrastructure investor, the level and direction of long term yields are more important to us than short term moves as they have the largest impact on valuations, portfolio construction and risk management. As mentioned above, the inflation spike from very loose COVID monetary and fiscal policies led to a very steep Fed rate hiking cycle in 2022. The subsequent fall in inflation from above 9% to towards the Fed's 3% target led to the shifting of market expectations to an easing cycle.
According to central bank research, since the 1960s Fed cuts of at least 25bps are followed by an average decline in long term bond yields of 10-16bps over the following calendar month, before stabilising at the lower level.2 This can be seen in the lower blue and red lines in Chart 2 below.
The market movements since the Fed started cutting in September 2024 have been very different to the historical price action seen above. As can be seen in Chart 3, as at November 2025 the Fed has cut 150bps while 10 year yields have increased 42bps. This move is rare - with this level of increase in the upper 10% of historical observations in the chart above, where the dark purple shaded area is the 25%-75% range of observations in the distribution.
In order to investigate the reasons for the long bond yield increase, we can split up the components of the yield into its expectations component and term premium (explained above). We can see that over this recent period, the expectations component was largely stable (the light blue in Chart 4).
Furthermore, as can be seen in Chart 5, inflation expectations have stayed broadly stable too, indicated by the US breakeven below in blue.
This implies that an increase in term premium has caused a steepening of the yield curve, despite short rates dropping since September 2024. The term premiumOver 2025 there has been a lot of debate among central bankers, academics and market participants, as to the cause of the increase in term premiums by 50-100bps since the Fed's easing cycle began in 2024. Arguments include:
Other reasons for a steepening in the curve:
US Fed Governor Michelle Bowman summed up another risk of higher yields brought on by higher term premiums in a speech on 26 September 2025: Term premiums...A second challenge for monetary policy would be a significant rise in longer-term interest rates driven by higher term premiums, which could offset a reduction in the expectations component stemming from monetary policy easing. This scenario would weaken the transmission of changes in the policy rate to economic activity, as investment decisions of households and businesses are dependent on longer-term rates, such as mortgage rates and corporate bond yields.5 While the term premium has risen sharply, and many are looking for reasons why, it is worth noting that it remains below levels that persisted prior to the GFC. As JP Morgan note, "while this is a big move, it is not unexpected: term premium has retraced closer to average levels observed in the decade prior to the GFC, and does not seem to be unduly high in our opinion right now. Moreover, the demand for longer duration assets seems to be receding globally now as well". Transmission mechanism to the rest of the worldThe steeper yield curve has not been isolated to the US. As seen below, German, French and UK yields have also been steepening over the last 18 months - evidenced by the spread between the 2 and 10 year yields. Part of this has been the linkages in sovereign debt markets with the US, while other drivers are country specific. These all include common traits of worsening debt metrics and political impasse:
Likewise, JP Morgan analysis estimates the term premium for these economies, despite fiscal idiosyncrasies between them, remain well correlated.
At an absolute level, long bond yields across developed economies remain higher than pre-COVID. In part this is because of higher long run neutral rates (known as r*), due to structurally higher inflation expectations (less global slack), as well as larger government deficits, higher investment needs and more issuance.
By contrast, Brazil has reported the opposite moves in short term cash rates and long term yields. From mid 2024 the central bank aggressively raised the SELIC rate 450bps to 15% to combat rising inflation expectations due to market expectations of lower government fiscal discipline and constraint around annual budget planning. This aggressive hiking cycle, while painful, also aimed to cool strong domestic economic growth. To date this has proved successful, with inflation expectations coming back down towards the target range. Since the start of 2025 cash rates are up 275bps and 10 year yields have actually fallen 120bps. A key reason for this, according to Bloomberg's Brazilian Economist, is the ultra hawkish approach has actually given the central bank a credibility boost, which has reduced the risk perception and lowered inflation expectations. Looking at the 5 year rate, which declined to 13.2% from 15.5% at the start of the year (even as policy rates rose 275bps), Bloomberg states that their "model attributes 150bps of the cumulative 240bp drop to an improvement in risk factors. In our view, this largely reflects reduced concerns over monetary policy making under Gabriel Galipolo, who became central bank governor in January for a 4 year term" 6
Why this matters - the relationship between infrastructure values and yieldsAt 4D, we use long bond yields to discount the cashflows from these long duration assets. Therefore, a steeper curve - as well as a permanently higher curve - has an impact on valuations of infrastructure assets as a simple function of discount rates. It also impacts fundamental cash flow modelling through forecast regulated return profiles, inflation expectations and borrowing costs, as well as the ability to borrow. In very general terms, it has a greater impact on the utility segment relative to other sub-sectors due to its greater correlation to economic indicators like government yields (as a building block of regulated returns) and in some cases inflation. This is where stock and sector selection within the GLI universe becomes crucial, and a truly active approach to investing is highly valuable. Across the global infrastructure universe 4D has the ability to shift between geographies and sectors where there is more or less sensitivity to long bond moves (both steepness and level of change) and look for exposures that can fundamentally capitalise on moves better than others - as well as exposures with greater ability to pass through inflation, serving to mitigate the impact of higher rates alone.
Also, ignoring sentiment and historic correlations, a number of sector dynamics are supporting fundamental growth outside historical long term yield dynamics. This is particularly relevant for the utility sector which is undergoing a seismic shift in investment mandates to support AI and data centre themes (US) and/or network upgrades to support energy transition and replacement spend (Europe). As such, the historic tight correlation of utility share price performance with yields is potentially no longer warranted, as seen in Chart 11 from early 2024.
ConclusionOne must be careful not to naively assume the Fed's easing cycle is a slam dunk for long duration assets such as utilities and infrastructure assets. The long end of the curve drives GLI valuations more than the short end, and since the Fed started cutting rates in 2024 we have witnessed something rare by historical standards - an increase in long term yields. This has been driven by an increase in the term premium, due to increased political and economic uncertainty, worsening debt metrics, long term budget outlooks and supply-demand dynamics. At 4D we monitor these risks and construct and actively manage a portfolio to balance the risks and opportunities across geographies and sectors. Furthermore, with an active approach to portfolio construction, we can target exposures with idiosyncratic drivers of earnings growth to offset these factors, such as those seen in the networks businesses globally.
The content contained in this article represents the opinions of the authors. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the authors to express their personal views on investing and for the entertainment of the reader. |
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Funds operated by this manager: 4D Global Infrastructure Fund (Unhedged) , 4D Global Infrastructure Fund (AUD Hedged) |
Source: 4D, Bloomberg as at 20/11/25M
Source: Bank of Greece, Federal Reserve Bank of Saint Louis and LSEG
Source: 4D, Bloomberg as at 20/11/25
Source: Bank of Greece, Federal Reserve Bank of Saint Louis and LSEG
Source: NAB, Bloomberg, Fed Reserve Bank of New York, Macrobond
Source: 4D, Bloomberg
Source: JP Morgan
Source: 4D, Bloomberg
Source: 4D, Bloomberg
Source: 4D, Bloomberg
8 Dec 2025 - New Funds on Fundmonitors.com
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New Funds on FundMonitors.com |
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Below are some of the funds we've recently added to our database. Follow the links to view each fund's profile, where you'll have access to their offer documents, monthly reports, historical returns, performance analytics, rankings, research, platform availability, and news & insights. |
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| Paradice Australian Mid Cap Fund - Active ETF | ||||||||||||||||||||||
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Paradice Australian Equities Fund |
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ELMRI ANZ Conviction Fund |
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5 Dec 2025 - Laffont's Take on the AI Bubble
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Laffont's Take on the AI Bubble Marcus Today November 2025 5-minute read With Warren Buffett stepping down from public life at 95, younger investors are looking for a new sage to follow. God knows the legendary Buffett gave us enough wise words on life and markets over the years. I'm not sure he can help us today anyway. Buffett's no expert on artificial intelligence, at least as far as I know. He doesn't even have a computer in his office or a smartphone. AI is the new guy's problem. Hunting for a New Buffett in the AI EraWhom to select as a Buffett replacement as the next global sage? Some would suggest Phillipe Laffont might do the trick. He runs a firm called Coatue Management. It now has (approx.) $70bn under management. Laffont's calls on the US tech boom have been prescient for a long time. Last month, Coatue Management released his latest thinking publicly and he addressed the big question of our times: Is AI a bubble, after all? Well, it could be. You can make an argument for the case, and he at least addresses it. Yes, capital expenditure is big. Adoption may not happen on a sufficient scale. The circularity of deals is something to watch for. But Laffont was, and remains, an AI bull. Why the AI Bulls Still Have a CasePerhaps the most compelling point for the bull case, at least for me, is that AI adoption is massive, and yet still so early. There's a long runway here. A further point is that, while the US market is richly valued, it's not crazy, and certainly not like the dot-com boom. You can see how he presents this point below:
Source: Coatue Management We can extrapolate this point further. Much of AI spending is from existing cash flow, at least for now. There isn't the same financial fragility as historic bubbles usually show. Laffont adds that the Big Tech firms may even have lots more cash to splash. That's if a core promise of AI comes to fruition: less labour costs. The numbers around this are quite something. Coatue say that the top 50 tech companies in the US could save $75bn in labour costs annually if AI can reduce headcount by 6%. Imagine what it could do with a higher percentage. All those figures around "headcounts" are to do with human beings, and their livelihoods. There's a big discussion for society to have on this point. But as far as the stock market goes, it leads, all else being equal, to higher profits. Good for share prices. It may not be wise to go against this for too long. Amazon (NASDAQ: AMZN) is already shedding thousands of people. It's usually an early mover on all the big trends. There are no certainties in the markets, or life for that matter. I'm sure Buffett would agree on this point. Bubble Risk vs Opportunity in the Next AI WaveCoatue sees the most likely outcome as AI increasing productivity and GDP. That keeps inflation contained, and, left unsaid, the big US debt problem for another time. Coatue are not blind to the risks. They see a 1/3 chance that the AI bubble bursts and takes the market down with it. But their conclusion seems to be that there's too much potential in the next wave of adoption, such as enterprise AI apps and how AI companies like OpenAI monetise their user base. Don't forget that even a titan like Google (NASDAQ: GOOG) is now under threat here. That should be enough for a lot of companies to shake in their boots... and us watching for the next behemoth to emerge. No moat, a feature so beloved by Buffett, looks safe from the AI encroachment. I can't tell you today what the next wave of AI winners will be. But we won't find them if we don't even look. Rather than fret about whether AI is a "bubble", I'm sure we'll both be better served by looking to see who benefits. That's my takeaway from Laffont's messaging. I'd like to think Buffett might say the same. |
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Funds operated by this manager: |
4 Dec 2025 - US Private Credit Signals Superior Value Down Under
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Phil Strano: Is now the sweet spot for active bond management? Yarra Capital Management July 2025 The volatility currently seen in bond markets is being fuelled by a combination of macroeconomic forces. In the U.S., ballooning fiscal deficits and a new $3.8 trillion tax bill are putting upward pressure on long-term interest rates. At the same time, foreign demand for U.S. Treasuries appears to be weakening. Central banks are reducing interest rates, yet are constrained in their influence over longer-dated bonds. Meanwhile, Australia faces a decade of projected deficits of its own, and our yield curve continues to respond more to global forces than domestic settings. These pressures are driving significant steepening in the yield curve - the difference between short- and long-dated bond yields. Steepening curves allow skilled credit managers to adjust risk exposure and capitalize on price differences. In this environment, extending the maturity of our bond holdings has become more appealing, particularly given longer-term bonds can offer stronger price gains as they approach maturity - a dynamic we term "rolldown." At the same time, we're also seeing anomalies in credit spreads, where less sophisticated investors are prioritising yield over relative value, creating pockets of possible mispricing. This is where active management proves its worth. Passive bond funds are bound by index rules. They cannot reposition for anticipated curve moves, nor can they selectively add risk when prices dislocate. Given the Bloomberg FRN Index is more highly rated (average AA- compared to BBB) with shorter spread duration (~two years compared to ~three), the Yarra Higher Income Fund (HIF) is well placed to outperform during risk-on periods (refer Chart 1). However, HIF's outperformance during certain risk-off periods demonstrates the potential benefits of active management. HIF outperformed the index through 2022 in an environment of both higher bond yields and credit spreads and more recently in April 2025. Outperformance in April provides a recent example of how nimble decision-making up and down the curve may contribute to risk adjusted returns. While the FRN Index posted a negative excess return of 11bps compared to the RBA Cash Rate, HIF posted a positive 32 bps excess return despite credit spreads widening by 20-30bps over the month. In April, we started the month expecting volatility around geopolitical events, which prompted us to lift cash levels and position our portfolios with higher overall interest rate duration. Crucially, we also implemented this with a steepening bias or, in other words, a view that long-term interest rates would rise faster than short-term rates. By focusing our exposure on the front of the curve, or short-term bonds, and being underweight long-term bonds at the back end, we were well-positioned when the long end sold off sharply while the short end remained stable. Chart 1 - Cumulative Return - Yarra Higher Income Fund v. Bloomberg FRN Index
Source: YCM/BBG, June 2025.In terms of stock selection, April also presented some fantastic buying opportunities for us to take advantage of spread widening and add high-quality credit exposures at discounted levels. One such name was the USD-denominated Perenti 2029 bonds, an issuer we had previously sold at tight spreads of BBSW+180bps and were able to buy back ~200bps wider (BBSW+380bps). Credit spreads have since contracted ~100bps from these wides, providing a tidy return on investment. While our portfolio positioning has not changed markedly from 12 months ago, these two recent examples show how we're actively managing nimble, benchmark-unaware portfolios that are more 'all-weather' credit in nature. Our April performance, in which both Yarra's Enhanced Income Fund (EIF) and Higher Income Fund (HIF) posted positive absolute returns, underscores the value of our approach. Our strategy came together as a result of preparation, speed, and conviction, none of which are available to passive strategies. Looking beyond the tactical wins, and the case for active credit is supported by the broader macro context. While spread volatility continues, outright yields in the front and mid-parts of the curve have held steady. That means the income on offer remains attractive - and investors are simply being rewarded through a different mix of risk premia. The flexibility to shift between spread and rate risk allows us to preserve capital and position for growth, depending on where the market is offering best value. It's a powerful setup. Investment-grade credit today is offering yields that, on a 12-month view, look comparable to long-term equity market returns - but without the same drawdown risk. Across the spectrum, private credit looks less compelling: the illiquidity and default risk required to justify allocations to private credit simply aren't being compensated in this environment. Looking ahead, we see the drivers of this opportunity set - fiscal overreach, inflation variability, and steepening curves - as persistent features of the bond market over the next 6 to 12 months. We believe this is a sweet spot for credit investing. High running yields and steeper curves, allowing active positioning across durations are compelling and signal the era of 'buy everything and wait' in fixed income is over. Today's market rewards clarity of view, agility of execution, and a willingness to lean into volatility when others step back. |
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Funds operated by this manager: Yarra Australian Bond Fund , Yarra Australian Equities Fund , Yarra Emerging Leaders Fund , Yarra Income Plus Fund , Yarra Enhanced Income Fund |
3 Dec 2025 - Is travel becoming the new status symbol for Gen Z?
2 Dec 2025 - 10k Words | November 2025
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10k Words Equitable Investors November 2025 (2-minute read) Apparently, Confucius did not say "One Picture is Worth Ten Thousand Words" after all. It was an advertisement in a 1920s trade journal for the use of images in ads on the sides of streetcars... We check in on the yield curves in the US and Aus, which have levelled-out or fallen of-late, having steepened through much of CY2025. The IMF's take on economic growth is that the US and Australia will both be growing below the overall global rate this year and next. Australia's latest inflation read was cause for pause. US consumer inflation expectations remain firm. There's not much private sector job growth going on in Australia, while in the US announced job cuts have been peaking. Yet analysts' consensus earnings growth expectations remain in double-digit territory in the US. The "Magnificent 7" has continued to satisfy investors even as the average stock battles on. Private clients have record exposure to equities. Digging deeper, Pure Asset Management highlights takeover premiums for ASX industrials; Carta puts some data around "SAFE" round startup valuations; and Bolton Clarke charts the relative under-investment in Australian aged care infrastucture.
US 10 year - two year government bond yield curve
Source: Koyfin Australia 10 year - two year government bond yield curve
Source: Koyfin IMF economic growth projections (October 2025)
Source: IMF Where Australia sits in the IMF economic growth projections (October 2025)
Source: IMF Australian trimmed mean inflation came in at 3.0% in the September quarter
Source: ABS US consumers' inflation expectations
Source: New York Fed Survey of Consumer Expectations Australian private market sector jobs flat while government-linked surge since COVID-19
Source: Ai Group Announced job cuts in the US Source: Challenger, Gray & Christmas, Koyfin Australia MSCI consensus annual earnings growth forecasts (weekly) Source: Yardeni Research US MSCI consensus annual earnings growth forecasts (weekly)
Source: Yardeni Research Bank of America private client equity holdings as % of AUM
Source: Bank of America Extreme divergence between the "Magnificent Seven" and the average S&P 500 component
Source: Koyfin Small cap takeover premiums 2023 - 2025 (ASX industrials)
Source: Pure Asset Management Distribution of "SAFE" round valuation caps in the US
Source: Carta Aged Care v. Health as a proportion of total building work done in Australia
Source: Bolton Clarke, based on ABS data Funds operated by this manager: Equitable Investors Dragonfly Fund Disclaimer Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI. |
1 Dec 2025 - New Funds on Fundmonitors.com
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New Funds on FundMonitors.com |
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Below are some of the funds we've recently added to our database. Follow the links to view each fund's profile, where you'll have access to their offer documents, monthly reports, historical returns, performance analytics, rankings, research, platform availability, and news & insights. |
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SPARX Japan Focus All Cap Australian Feeder Fund - Wholesale Distributing |
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28 Nov 2025 - Markets Brace for Patchy US Data and Policy Uncertainty
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Markets Brace for Patchy US Data and Policy Uncertainty JCB Jamieson Coote Bonds November 2025 (3-min read) The latest official U.S. macroeconomic data readings, to be imminently released, are front of mind for central banks and global financial markets. The U.S. federal government shutdown has had the effect of delaying several significant data releases on inflation, labour markets and economic activity. However, with the shutdown ending, many anticipate a flurry of data. Global markets are closely watching the imminent release of delayed official macroeconomic statistics from the Bureau of Economic Analysis, the Bureau of Labor Statistics and other key agencies. That said, the scope of the releases is yet to be determined, and some data may never be released, perhaps due to the lack of staffing to conduct surveys and collect information. In the latest developments, the White House has indicated that the October consumer prices index and employment situation reports (which includes the critical figures on the change in non-farm payroll employment) likely will not be released. This leaves policymakers and markets in a quandary - does the U.S. administration have something to hide, or is it simply not possible or feasible to produce retrospective data during the circumstances of a record government shutdown? There are a range of views on what might transpire in the months ahead. Some surmise that the U.S. economy is poised to pick up, with private sector measures of payroll growth slowing but remaining resilient. On this view, sticky services prices and goods reflation are driving persistent upside risks relative to the U.S. Federal Reserve's inflation target. Asset prices are adding fuel to the engine of growth - exuberant stock market and credit valuations are buoying confidence and driving a continuation of U.S. dynamism and exceptionalism. Others highlight that U.S. economic activity remains remarkably concentrated in capital expenditures relating to the AI sector, without which the U.S. is either staring down a recession or has already entered one. Pervasive and widespread downside risks to the labour market are seen as the justification for further policy easing to support a fragile and fractured heartland, with the American dream only barely alive for many lower and middle-class families facing hardship and an uncertain future. Caught somewhere in the middle between these polarised narratives, markets are nervously awaiting official readings on the underlying pulse of U.S. macroeconomic conditions, and the likely policy responses from the Federal Reserve and U.S. Administration. Sound risk management principles suggest that U.S. fiscal and monetary policymakers are likely to discount individual data points on employment growth and core inflation �' even if they prove benign �' in order to sure up consumer and investor confidence. This is an oft-repeated dynamic at times of heightened uncertainty - policymakers tend to focus on their (admittedly subjective and error-prone) interpretation of the underlying momentum and pulse from the data. Markets don't necessarily fare any better. Pricing often over-reacts on immediate attention-grabbing headlines. The unambiguously strong domestic employment figures for October are another manifestation of this phenomenon, and followed an unquestionably weak print in September. The RBA will undoubtedly be encouraged by the fact that, inflation aside, its near-term forecasts have been progressively realised to date, as markets reprice away from further policy easing. As always, the truth is somewhere in the middle of all of these competing forces, and it pays to take out insurance against tail risks being realised. Following the same principles of risk management and least regret alluded to above, investors searching for stability in these uncertain times may wish to consider defensive allocations as part of their investment strategy, while staying grounded in fundamentals and attentive to policy signals to make informed, confident decisions. Funds operated by this manager: CC Jamieson Coote Bonds Active Bond Fund (Class A) , CC Jamieson Coote Bonds Dynamic Alpha Fund , CC Jamieson Coote Bonds Global Bond Fund (Class A - Hedged) |
27 Nov 2025 - Unlocking Indonesia's growth potential: low leverage, rich in resources, and market inflection
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Unlocking Indonesia's growth potential: low leverage, rich in resources, and market inflection in 2026? Ox Capital November 2025 Indonesia's President Prabowo Subianto has an ambitious target to reach 8% annualised GDP growth by 2029. This would represent a sharp acceleration from an annual growth rate of ~5% for most of the past decade. Chart 1: Indonesia's annualised GDP growth
Source: Trading Economics. Unlike other economies, however, Indonesia is one of the least leveraged countries in the world. With government debt-to-GDP below 40%, there is ample room to spend to lift economic growth. Chart 2: 2024 government debt-to-GDP for selected countries
Source: Trading Economics. Typical of years following the election of new Indonesian presidents, government spending and economic activity has been weak in 2025. This presents the potential for a rebound in 2026 as newly installed government ministers and SOE leadership teams begin to execute on key programs and strategies. To support this growth agenda, a new growth-focused Minister of Finance, Purbaya Yudi Sadewa, took office in September 2025. We are beginning to see the initial impacts of his changes to monetary and fiscal policy, with money supply growth jumping from mid-single digits in August to nearly 20% YoY in September. This will likely help to kick-start the economy into next year. Chart 3: BI adjusted M0 growth versus M2 versus loans growth (% YoY)
Source: BofA Global Research. In addition to low leverage, Indonesia is rich in natural resources, notably critical minerals such as nickel. In an inflationary world, these resources represent assets to the Indonesian economy which can continue to fetch ever-higher prices, supporting a stronger current account. Chart 4: Indonesia plays a significant role in the global supply of some mineral and agricultural goods Source: International Trade Center, Ministry of Energy and Mineral Resources, USGS, CEIC, Goldman Sachs Global Investment Research. Indonesia's downstream verticalisation strategy to add value to its "rocks in the ground" has dramatically increased the export value of nickel-based products. As it moves up the value chain in different commodities, this can add material upside to the GDP growth outlook. Chart 5: Nickel-related products export value increased ~8-fold since 2013 (left); Indonesia is a major producer of nickel, whose derivatives have high export value multiplier (right) Source: International Trade Center, Haver Analytics, Goldman Sachs Global Investment Research (left); International Trade Center, Ministry of Energy and Mineral Resources, USGS, CEIC, Goldman Sachs Global Investment Research (right). In light of temporary sluggishness in the domestic economy in 2025, we are finding highly attractive opportunities to own leading quality franchises in Indonesia. Some of these companies are generating dividend yields above 10% and delivering ROE approaching 20%, all while trading at discounted valuations. Chart 6: Top yielding large cap APAC banks - FY25E yield (%) Source: BofA Global Research. Indonesia represents an exciting emerging economy, with a huge population of more than 285 million, rich in sought-after resources. This can support strong economic activity and business earnings into the future, particularly in an inflationary world. Trading at depressed levels of <12x forward P/E, nearly 2 standard deviations below the 15-year mean, and with strong dividend yields in leading larger corporates, now is the time for investors to reconsider Indonesia. These kinds of valuations do not come around often! Chart 7: Indonesia MSCI Index forward P/E Source: Citi Research, Bloomberg. Funds operated by this manager: |
26 Nov 2025 - Glenmore Asset Management - Market Commentary
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Market Commentary - October Glenmore Asset Management November 2025 (1 min read) Global equity markets continued their strong run in October. US indices led the charge, buoyed by sustained strength in the 'Magnificent Seven', which saw the NASDAQ and S&P 500 rise +4.7% and 2.3%, respectively. This included Nvidia's market cap surpassing the US$5 trillion valuation. Interestingly, approximately 20% of the S&P 500's YTD increase has been attributable to Nvidia. Outside of the US, the FTSE and Euro Stoxx 50 followed suit, rising +3.9% and 2.4%, respectively. Domestic markets were more muted than their international counterparts, with the ASX All Ordinaries Accumulation index rising +0.5%. During the month, inflation figures for the September 2025 quarter came in at 3.0% (YoY) vs 2.7% as at the end of the June 2025 quarter. These results were at the top-end of the RBA's target band (2-3%) and higher than expectations. As a result, financial markets have further tempered their rate cut expectations and are now factoring in less than 1 additional rate cut over the next 12 months. In bond markets, the US 10-year bond yield declined -7 basis points (bp) to 4.08%, whilst its Australian counterpart was largely unchanged at 4.30%. The Australian dollar declined marginally, closing at US$0.655, implying a decrease of 0.7 cents. Funds operated by this manager: |
