Capex War
Chart of the Week:
BOJ to Sell ¥37tn ETF Holdings; Current Pace Would Take 100+ Years to Exit
After its Sept 19 meeting, the BOJ said it will sell ¥37tn ETF holdings (book value), with planned sales of ¥330bn annually (book value) or ¥620bn (market value). The move marks another step away from ultra-loose policy, signaling confidence in the economy.
Market Recap 1:
Powell Flags Rich Valuations, U.S. Small Caps Lead Pullback as Rate-Cut Bets Fade
Fed Chair Powell highlighted elevated equity valuations, weighing on sentiment. With 2Q GDP growth revised up to 3.8% YoY, stronger momentum curbed rate-cut expectations, prompting profit-taking in earlier rate-cut-driven rallies. U.S. small caps, more rate-sensitive, saw steeper declines.
Market Recap 2:
Bond Rally Reverses on Profit-Taking; Gold Consolidates at Highs
Fed officials delivered diverging views: new Governor Miran saw policy as overly tight and backed steep cuts; St. Louis Fed’s Musalem said stance is near neutral; Atlanta’s Bostic opposed an October cut given inflation remains above target; Cleveland’s Hammack warned easing too much could risk overheating.
What’s Trending:
UK-U.S. Pact Deepens Nuclear Cooperation; Sector Overbought Near Term, Long-Term Positive
On Sept 18, Trump and Sunak signed the “Tech Prosperity Agreement” covering AI, commercial nuclear power, and quantum computing. In nuclear, the deal includes joint R&D, shared licensing pathways, and a target to end reliance on Russian nuclear fuel by end-2028.
In Focus 1:
AI Giants’ Heavy Capex Fuels High Expectations
Since OpenAI unveiled ChatGPT in late 2022, U.S. tech majors have poured massive capital into AI. Meta, Google, Amazon, and Microsoft together account for about half of total market capex. Their strong share performance and aggressive spending have sparked debate over a potential tech “bubble.”
In Focus 2:
Asia Tech May Offer More Effective Diversification in AI Allocation
Over the past year, the four U.S. tech giants posted average earnings growth of 34%, outpacing the Nasdaq 100 and S&P 500. While valuations are high, growth justifies the multiples. In contrast, the Nasdaq 100 and S&P 500 trade at lower valuations but with weaker earnings growth, making them less attractive.
