Peter Muldowney, premier vice-président et chef, Stratégie institutionnelle et multiactifs, s’entretient avec Plans & Trusts sur le rôle de l’intelligence émotionnelle (IE) dans le façonnement de la culture des conseils d’administration et améliorer la performance.
Veuillez noter que cet article est écrit en anglais.
Cycle analysis suggests economic and market weakness in 2026-27. A recent monetary slowdown is consistent with this perspective but needs to extend to confirm a negative scenario.
Global (i.e. G7 plus E7) six-month real narrow money momentum moved sideways in August, following a March-July fall. The previous low in real money momentum in October 2024 was reflected in a low in global manufacturing PMI new orders in May. Accordingly, the monetary slowdown since March could be mirrored by a peak and reversal in PMI new orders from around October – see chart 1.
Chart 1
The fall in real money momentum has been modest but an expected economic slowdown could become more serious than others in recent years, for two reasons. First, the stockbuilding and housing cycles have entered time windows to begin downswings. Secondly, labour markets are showing signs of weakness for the first time since the pandemic recession, raising the risk of self-reinforcing negative dynamics.
The working assumption here has been that the stockbuilding cycle will reach another low in Q1 2027, implying a four-year current cycle versus a 3.5-year historical average. Recent G7 national accounts stockbuilding data as well as an indicator based on business surveys are consistent with the cycle being at or near a peak – chart 2.
Chart 2
The housing cycle bottomed in 2009 and has ranged between 15 and 25 years historically, averaging 18 years. The pandemic-related money growth surge of 2020-21 appears to have resulted in the current cycle peaking early, in 2022. G7 housing starts or permits have been range-bound since early 2023 but rising unemployment could be the trigger for a break lower. China has been leading in the current cycle and starts are still falling – chart 3.
Chart 3
The suggestion that unemployment is on a rising trend is supported by consumer surveys, with a composite G7 indicator of negativity recently reaching a four-year high – chart 4.
Chart 4
Monetary policy easing, if sufficiently dramatic, could short-circuit negative cyclical dynamics. A dramatic move could occur conventionally if additional evidence of labour market weakness is accompanied by a downside inflation surprise, or unconventionally if the Trump administration succeeds in gaining control of the Fed. A large cut in US rates would magnify US dollar weakness, forcing other central banks to follow.
Inflation prospects are judged here to be favourable, at least through early 2027. G7 annual broad money growth remains subdued (4.3% in August versus a 2015-19 average of 4.5%), while stockbuilding cycle downswings are usually associated with weakness in commodity prices – chart 5.
Chart 5
Near-term US inflation numbers, however, will continue to reflect tariff effects. Elsewhere, central bankers focused on fighting the last war may be slow to respond to favourable surprises. As an example of hawkish bias, the ECB has gone on hold despite forecasting below-target inflation.
The alternative route to a large near-term fall in rates – a take-over of the Fed by the executive branch – still seems far-fetched, with the administration lacking scope to push through personnel changes on the necessary scale.
Among major economies, six-month real narrow money momentum is weakest in Japan and the UK, suggesting over-restrictive monetary policies and downside economic risk. Momentum is similar in the US and Eurozone but the US has slipped to a 17-month low, while a Eurozone recovery has stalled since Q1 – chart 6.
Chart 6
The Eurozone story seems to be that higher bond yields triggered by fiscal loosening along with a stronger euro have offset ECB easing. Optimists argue that German fiscal stimulus is only now arriving but the impact could be balanced by an early stockbuilding downswing – the stockbuilding share of GDP rose by 0.7 pp in the year to Q2 and is above its long-run average.
The recent decline in global six-month real narrow money momentum has been driven by the G7 component. Chinese momentum fell back in April-May but has recovered since, giving a modestly favourable signal for economic prospects.
The assumption of a Q1 2027 trough implies that the current stockbuilding cycle has entered its final 18 months. The 18-month windows before previous lows were usually negative for risk assets and marked by credit events or “crises” – chart 7. The possibility of simultaneous housing cycle weakness, as well outsized gains in the upswing phase of the current cycle, suggests greater-than-normal downside.
Chart 7
These 18-month windows were usually associated with cyclical equity market sectors underperforming defensives, following outperformance during the upswing (unusually strong in the current cycle). Stylewise, there was a weak tendency for quality to outperform, while momentum lagged its upswing gains significantly. The recent drawdown in relative performance of the MSCI EAFE Quality index versus MSCI EAFE was exceeded in magnitude and duration only in the early 1980s – chart 8.
Chart 8
Six-month growth rates of global real narrow money and industrial output have been tracking closely with a small monetary excess on the latest readings – chart 9. The strength of markets appears to reflect a rise in the financial velocity of money more than ample liquidity, suggesting reversibility in the event of a cyclical deterioration in sentiment.
Chart 9
The two monetary conditions historically favouring EM equities – E7 real money growth above the G7 level and global real money growth above industrial output expansion – are currently in place, suggesting EM outperformance in the event of a near-term further rise in markets.
During a research trip to São Paulo this summer, our team met with the management teams of some of our holdings, with prospective investments and with local investors. We observed that consumer demand in Brazil is stronger than expected, particularly in higher-end categories. Companies we like such as Vivara Participações S.A. (VIVA3 SA) and Track & Field Co S.A. (TFCO4 SA) benefit from this consumer strength and offer a compelling risk reward given where these stocks traded during beginning of the year.
Local market behaviour remains distinctly short term, with high turnover and a focus on the next-quarter results. This is largely driven by the elevated Selic policy rate, currently at 15%, which leads investors to assess opportunities on an absolute-return basis rather than seeking alpha. With inflation near 5%, real yields approach 10%, creating a persuasive risk-free alternative that diverts capital from equities. In turn, local equity managers are adjusting their styles to retain AUM.
Banco Central do Brasil Target for Federal Funds rate (Selic)
Source: Banco central do Brasil
These dynamics reinforce our long-term approach: concentrating on high-quality businesses with durable earnings power and consistent EPS expansion. Looking ahead, with elections approaching and potential rate cuts on the horizon, we expect a reallocation of flows from fixed income back into equities, benefiting companies with strong fundamentals and clear earnings visibility.
Brazil’s political landscape is already taking shape as the country heads toward the 2026 elections. One of the most significant developments is the exclusion of Jair Bolsonaro from contention. His ineligibility through 2030, reinforced by a conviction earlier this month, effectively removes the most polarizing figure on the right. In his absence, the centre-right governor of São Paulo, Tarcísio de Freitas, is emerging as the most likely challenger to President Luiz Inácio Lula da Silva (also known as “Lula”) in a potential second-round runoff. This dynamic sets up a more conventional contest between a centre-left incumbent and a pragmatic, reform-minded conservative.
For Lula, the current year has been a test of political resilience. His approval ratings hit a low point of around 24% in February 2025, but have since rebounded modestly, reaching roughly 33% by September according to Datafolha surveys. The recovery suggests some stability, though his support remains fragile, reflecting persistent dissatisfaction with the pace of economic recovery and concerns about fiscal policy. Nevertheless, the directional improvement offers the president some breathing room as he navigates the second half of his term.
From the perspective of markets, the electoral outlook carries important implications. A Lula re-election would imply continuity in the Workers’ Party approach: a more active state role in economic management, coupled with efforts to demonstrate adherence to Brazil’s new fiscal framework. Investor reaction would likely hinge on whether the government can maintain a credible path to primary balance and on its stance toward state-controlled enterprises such as Petrobras, where governance remains a focal concern. By contrast, a victory for a centre-right figure like Freitas would be interpreted as a more reformist and privatization-friendly outcome. Such a scenario could lower perceived political risk, reduce risk premia and prove supportive for equities and local rates markets.
Headline inflation in Mexico remained relatively stable, with the Consumer Price Index (CPI) registering a 3.57% year-over-year increase in August. Preliminary mid-September data suggests a slight acceleration to approximately 3.7%. Inflation expectations continue to trend downward. The Bank of Mexico’s (Banxico) August private-sector survey shows a further decline in median inflation forecasts for both 2025 and 2026, signaling growing confidence in price stability.
On September 25, Banxico lowered its policy rate to 7.50%, executing a 25 basis point cut. The decision was not unanimous, reflecting differing views within the board. Forward guidance remains cautious, as core inflation is decelerating only gradually. Reuters notes that while the easing cycle supports domestic demand and longer-term fixed income instruments, external factors – particularly the pace of US Federal Reserve rate cuts or potential tariff shocks – will ultimately drive risk premiums in Mexican assets.
In 2026, the United States–Mexico–Canada Agreement (USMCA) is scheduled for its first mandatory joint review. At that point, the three countries must decide whether to extend the agreement for another 16 years, renegotiate its terms or allow it to transition into annual reviews. The outcome will directly affect trade certainty and tariff exposure in North America. Currently, approximately half of Mexico’s exports to the United States do not qualify under USMCA’s origin requirements and are therefore vulnerable to a 25% US tariff. Goods meeting the agreement’s rules of origin continue to benefit from duty-free treatment, but non-compliant products face higher costs and stricter enforcement.
In parallel, Mexico has recently imposed tariffs of between 10–50% on a wide range of imports from China, including auto parts, textiles, steel and consumer goods. This move underscores Mexico’s effort to shield domestic industries from low-cost Chinese competition, but also adds a layer of complexity to supply-chain strategies for companies operating across the region.
The 2026 review will thus be a critical inflection point: it could either reaffirm the stability of North American trade or introduce uncertainty through renegotiation and tariff escalation.
Toronto (Ontario), le 29 septembre 2025 – Connor, Clark & Lunn Infrastructure (CC&L Infrastructure) est heureuse d’annoncer l’acquisition d’une participation de 49 % dans un portefeuille de trois projets éoliens en exploitation en Ontario, totalisant environ 235 mégawatts (MW) de la capacité brute de NextEra Energy Resources, LLC (Energy Resources). Grâce à cet investissement, le portefeuille d’énergie renouvelable de CC&L Infrastructure représente maintenant près de 2,4 gigawatts (GW) de capacité brute, y compris plus de 1,2 GW de capacité éolienne sur 10 actifs distincts diversifiés selon le marché, la contrepartie, la juridiction et le régime éolien.
Adelaide Wind, Bornish Wind et Goshen Wind (les projets) sont situés dans le sud de l’Ontario et ont une capacité brute d’environ 60 MW, 73 MW et 102 MW respectivement, produisant ensemble une énergie équivalente à la consommation annuelle de plus de 200 000 ménages ontariens. Toute l’énergie générée par les projets est vendue en vertu de conventions d’achat d’électricité (CAE) d’une durée de 20 ans à la Société indépendante d’exploitation du réseau d’électricité (SIERE) (cotée Aa3 par Moody’s). Energy Resources conservera une participation de 51 % dans les projets et continuera de gérer et d’exploiter les actifs à l’avenir.
« Cette acquisition fait progresser notre stratégie visant à bâtir un portefeuille d’actifs d’infrastructure résilient et à long terme, soutenu par des contreparties solides et des flux de trésorerie stables », a déclaré Matt O’Brien, président de CC&L Infrastructure. Ces projets renforcent notre présence sur le marché des énergies renouvelables de l’Ontario et démontrent notre engagement à investir de façon responsable dans des projets qui offrent des rendements ajustés au risque attrayants. »
Les projets apportent des contributions économiques importantes à long terme aux collectivités dans lesquelles ils sont menés grâce aux impôts fonciers et au financement direct. Les projets sont également à la base d’ententes sur les retombées locales avec plusieurs groupes autochtones locaux.
« Cette transaction reflète à la fois les solides données fondamentales que nous continuons de voir sur le marché canadien des énergies renouvelables et la capacité de notre équipe à réaliser des acquisitions complexes avec des partenaires de premier plan de l’industrie », a déclaré Eric Reidel, directeur général de CC&L Infrastructure. Nous sommes heureux d’avoir travaillé en collaboration avec Energy Resources pour conclure cette transaction, qui met en évidence notre approche axée sur les relations pour trouver des occasions qui ajoutent de la valeur à long terme à notre portefeuille. »
Marchés des capitaux CIBC a agi à titre de conseiller financier de CC&L Infrastructure pour la transaction et Torys LLP a agi à titre de conseiller juridique.
À propos de Connor, Clark & Lunn Infrastructure
CC&L Infrastructure investit dans des actifs d’infrastructure du marché intermédiaire présentant des caractéristiques de risque et de rendement attrayantes, une longue durée de vie et la possibilité de générer des flux de trésorerie stables. À ce jour, CC&L Infrastructure a accumulé environ 7 milliards de dollars d’actifs sous gestion diversifiés dans une variété de régions géographiques, de secteurs et de types d’actifs, avec plus de 100 installations sous-jacentes dans plus de 35 placements individuels. CC&L Infrastructure fait partie de Connor, Clark & Lunn Financial Group Ltd., une société de gestion d’actifs multiboutique dont les sociétés affiliées gèrent collectivement des actifs d’une valeur approximative de 154 milliards de dollars.
Personne-ressource
Kaitlin Blainey
Directrice générale
Connor, Clark & Lunn Infrastructure
(416) 216-8047
[email protected]
If you want to go fast, go alone. If you want to go far, go together. – African proverb
At Global Alpha, we truly believe in having strong, connected teams because we’ve seen how it translates into better performance at work. When team members trust each other, we can push boundaries, test new ideas and endure more uncertainty. So, when we’re looking for team-building activities we look for unique activities that feel relevant, challenging and outside of the box.
This year we did a couple of truly extraordinary events that brought our team together in new ways – like a crash course in sailing with future Olympians! – but the real standout was our participation in the Grand défi Pierre Lavoie. It’s an epic annual four-day, 1000 km relay race that unites thousands of cyclists to promote healthy living and fundraise to support research into rare diseases.
No one person completes the défi alone, just as no one person can run a successful investment firm alone. It takes a cohesive group of skilled team members who can trust and count on each other, especially in volatile times – this challenge was not only a test of physical endurance and teamwork, but also a metaphor for the long-haul journeys that define our success as investment professionals.
Picture the starting line of the Grand défi Pierre Lavoie: the sun rising, nerves jangling, teammates poised for the first pedal stroke of a 1,000 km adventure. It’s daunting. The finish feels distant, almost impossible. But there are steady wheels on all members of this team – the kind of company that makes every bitter wind lighter and every small victory sweeter.
When you’re part of a team, you’re working toward achieving a common goal, whether it be crossing a finish line 1,000 km away or producing positive returns at the end of a volatile year. As with any team, there are different strengths to be found in each of its members. For the Grand défi Pierre Lavoie, some riders were fast on the straightaways, some were strong up the hills, some were daring through the turns. In our investment team, there are curious researchers, strong risk managers, detailed analysts and more, each of whose skills differ from the others.
On the race path or in the office, the Global Alpha team leans into the grind together, trading stories, picking each other up, finding the opportunities in setbacks. Making these journeys together, especially when there are struggles, builds grit. Over time, the team learns how to support the other members and how to play to their strengths.
There are challenges – sore legs, broken chains, missed targets, sour news, a string of rough quarters or market turmoil, but because of the trust within the team, these are not seen as failures. Instead, the team regroups. An injection of humour gives that second wind that pulls the team through a headwind; one rider’s encouragement or a colleague’s fresh perspective is the spark that keeps everyone moving forward.
But in both environments, there’s an important lesson to be learned: real breakthroughs come after being stretched to the limit.
During a tough market or a rough patch in life, it can be easy to doubt the journey. During the Grand défi Pierre Lavoie, there are long, quiet stretches where progress feels invisible. Despite pedaling hard, the scenery barely changes. In investing, some days are just as sluggish – despite strong investment principles and proven strategies, the returns can still seem lacklustre.
But these stretched-out moments are where the magic actually happens.
Short-term lulls aren’t proof that nothing’s working – they’re part of playing the long game. It’s easy to chase quick wins or get spooked by setbacks. But by trusting the process, working as a team and continuing to move – one kilometre, one quarter, one decision at a time – perseverance and endurance will deliver quiet rewards and lasting success that go well beyond numbers or market cycles.
Endurance is at the heart of long-term investing because the real rewards come to those who stay disciplined through every market storm and quiet patch. Team endurance wins in investing by combining diverse strengths, steady encouragement and a shared commitment – making it possible to persist, adapt and thrive when others might falter or give up.
Here’s the heart of it: the real win isn’t found at the finish line, but in the journey itself.
It’s not about quick wins or epic heroics. It’s about the discipline to show up, the courage to trust the team and the humility to lean on each other for a reset. After every breakdown – on the bike, on the water, in a tough portfolio review – the team draws closer. What once felt like a failure becomes a shared memory, a lesson, a source of strength.
Global Alpha Capital Management stands out because the same teamwork, grit and appetite for challenge that drive us in events like the Grand défi Pierre Lavoie also fuel our investment success. Our edge lies in superior stock picking, shaped by deep, bottom-up research and a thematic, fundamental approach to finding quality companies with real growth potential.
We’re equally relentless in risk management, applying robust analytical frameworks to ensure every investment is weighed wisely no matter how uncertain the market gets. Just as our team perseveres together through endurance events – adapting, supporting and trusting the collective process – we do the same for our clients, aiming for long-lasting performance in turbulent times.
What’s up next for Global Alpha team members? A 30 km trail run on Mont Tremblant – another chance for us take on an uphill challenge and cross a finish line, together.
The UK primary fiscal balance is in sizeable deficit, while the effective interest rate on debt is above a trend level of nominal GDP growth consistent with the 2% inflation target. These conditions, if sustained, imply an explosive path for the debt to GDP ratio.
Central government interest payments in the 12 months to August were equivalent to 3.4% of the gross debt stock, according to the latest public finances release.
The Bank of England’s Asset Purchase Facility (APF), however, still owned about a fifth of the debt at the end of the period, so received a significant portion of these payments.
The Bank bought its gilts at much higher prices, so is earning an average interest rate of only 2.0% on the purchase cost of its holdings.
It financed its purchases by creating bank reserves on which it pays Bank rate, currently 4.0%.
Accounting for this carry cost of QE, which the Treasury is obliged to cover, the effective interest rate on government debt over the last 12 months was 4.0%.
This is unexceptional by historical standards but well above an average of 2.7% over 2010-19, when QE was delivering an interest gain – see chart 1.
Chart 1
Achievement of the 2% inflation target over the medium term implies nominal GDP growth of no more than about 3.5% pa, assuming trend economic expansion of about 1.5% pa. An effective interest rate above this level requires the government to run a primary surplus to avoid a trend rise in debt to GDP.
The OBR projected a significant decline in the primary deficit in 2025-26 but the 12-month rolling gap has continued to widen – chart 2. A worse starting position, policy retreats and expected changes to the OBR’s economic assumptions cast strong doubt on the previous forecast of a medium-term return to surplus.
Chart 2
The effective interest rate is subject to conflicting influences and may remain above trend nominal GDP growth. Cuts in Bank rate and QT are reducing the APF net interest loss. On the other hand, the current redemption yield on the stock of gilts, of 4.6%, is well above the interest yield of 3.4% on the stock of debt. Unless the yield curve shifts down, the interest yield will trend higher as existing gilts mature and are refinanced.
The Chancellor’s fiscal rules place emphasis on the current budget but the primary balance is key for stabilising the debt to GDP ratio. Budget measures need to deliver an early return to a primary surplus to calm fears of a fiscal doom loop.
A simple model of the Fed’s historical behaviour suggests that the window for rate cuts will close in early 2026 if the economy evolves in line with the median FOMC forecast.
The model classifies the Fed as being in tightening or easing mode depending on whether a probability estimate is above or below 0.5. The estimate is based on currently reported and lagged values of core PCE inflation, the unemployment rate and the ISM manufacturing delivery delays indicator. Despite the small number of inputs, the model does a satisfactory job of “explaining” the Fed’s past actions*.
The probability estimate rose above 0.5 in March, confirming that the Fed was no longer in easing mode. It moved back below that level in August / September ahead of last week’s rate cut – see chart 1.
Chart 1
The September reading of 0.44 would also have been consistent with a hold, suggesting that easing was partly precautionary and / or influenced by Trump administration pressure.
The median FOMC projections for 2026 have shifted hawkishly since June. Annual core PCE inflation is now 2.6% in Q4 2026 from 2.4% previously, while the unemployment rate declines from 4.5% to 4.4% between Q4 2025 and Q4 2026.
The model forecast shown in the chart is based on quarterly paths for core inflation and the jobless rate interpolated from the FOMC Q4 projections, along with an assumption that the ISM deliveries index stabilises at its August level.
The probability estimate edges back above 0.5 in October, returns to the easing zone over November-January but then embarks on a sustained rise above 0.5.
The shift into the tightening zone is unsurprising given the forecast of sustained above-target core inflation and a firming labour market.
The suggestion of a short window for further rate cuts is at odds with market expectations of an extended easing cycle. The market path presumably reflects a more dovish economic view but may also incorporate some probability of a change in the Fed’s reaction function under a new Chair.
*A previous post contained a chart showing a 60-year history.
Toronto, ON – MidStar Capital Corp. a annoncé aujourd’hui avoir conclu une facilité de crédit à terme de premier rang en appui à Eos Management L.P. pour le refinancement de Legacy Supply Chain Holdings, Inc.
MidStar Capital a agi à titre d’arrangeur principal unique et d’agent administratif dans le cadre de cette transaction.
« Nous sommes heureux d’avoir négocié notre premier accord avec MidStar Capital. L’approche ordonnée de MidStar Capital et son engagement envers le partenariat a rendu le processus harmonieux et efficace. Nous serons ravis de travailler encore avec la société dans l’avenir », a déclaré Adam Gruber, président-directeur général, Eos Management.
« La stratégie de croissance de Legacy ne peut se faire sans partenaires stratégiques », a précisé Mike Glodziak, président et chef de la direction de Legacy Supply Chain. « Tout au long du processus, MidStar nous a prouvé qu’elle était la partenaire tout indiquée pour contribuer à notre croissance ».
À propos d’Eos Management L.P.
Fondée en 1994, Eos Management est une société de placement qui se démarque depuis des décennies dans le capital-investissement sur le marché intermédiaire. Eos Management s’associe avec des équipes de direction dans le but de développer et de renforcer leurs capacités, d’accélérer la croissance, tant à l’interne qu’au moyen d’acquisitions, et de transformer ces entreprises en chefs de file de plus grande envergure.
À propos de Legacy Supply Chain Holdings, Inc.
Depuis plus de 40 ans, Legacy Supply Chain est un partenaire de choix pour les entreprises qui souhaitent avoir plus de contrôle sur leurs chaînes d’approvisionnement en constante évolution. Exploitant plus de 30 sites opérationnels aux États-Unis et au Canada, Legacy Supply Chain est un fournisseur de services logistiques tiers qui propose des solutions sur mesure d’entreposage et de distribution, d’exécution de commerce électronique et de transport. Ces solutions donnent plus de contrôle aux entreprises sur leurs chaînes d’approvisionnement omnicanales dynamiques, ce qui leur permet d’offrir une expérience client exceptionnelle.
À propos de MidStar Capital Corp.
MidStar Capital offre des solutions de financement structuré de prêts privés visant des emprunteurs dont le BAIIA est de 5 millions de dollars à 50 millions de dollars. Lancée en 2017, MidStar est une société de personnes détenue conjointement par l’équipe de MidStar Management et Groupe financier Connor, Clark & Lunn Ltée (Groupe financier CC&L).
MidStar Capital est une société affiliée de Groupe financier CC&L, une société de gestion d’actifs diversifiée et indépendante détenue par ses employés qui existe depuis plus de 40 ans. Gérant collectivement des actifs d’une valeur de plus de 154 milliards de dollars canadiens, Groupe financier CC&L et ses sociétés affiliées offrent une gamme diversifiée de produits et de solutions de placement à des clients institutionnels, à valeur nette élevée et individuels.
Pour toute question, communiquez avec :
MidStar Capital
Tanya Taggart
Cofondatrice
416-862-6182
[email protected]
The broad market in China now trades in line with the long-term average valuations. Which begs the question, is there any fuel left in this rally?
Chinese state-owned enterprises have driven market valuations to their long-term average
Note: MSCI weighted. Source: Jeffries, FactSet
Our kind of businesses remain cheap
Note: MSCI weighted. Source: Jeffries, FactSet
MSCI China private sector is trading at just 14x, close to the -1 standard deviation level and c.15% below the long-term average.
Prior to the recent rally, investors had abandoned quality names despite improving profitability, cheap valuations, increasing buybacks and dividends. We are now seeing start to reverse.
China quality now ahead year to date following years of underperformance
Source: NS Partners and LSEG
Improving returns are fuelling the rally
Source: Jeffries, FactSet. Note: Based on current MSCI ex-fin & REITs universe.
China’s electricity demand is scaling up rapidly, driven by AI, EVs, air conditioning and industrial upgrading. Renewables – especially solar and wind – are central to meeting this demand, with China uniquely positioned to scale capacity.
The rise of renewables necessitates a massive build-out of energy storage (30× increase by 2050) and grid infrastructure.
AI is a particularly powerful driver, with data centre electricity demand set to multiply several times over the next few decades. These trends are supported by robust investment and policy momentum, positioning China as the world’s largest “electrostate” by 2050.
Annual power capacity in major countries – China is on track to add over 500 GW of solar and wind capacity this year.
Source: Berstein and government data (2025)
With rising capacity and increasing penetration of renewables, a massive scale-up in energy storage capacity through batteries will be crucial to ensuring grid stability.
Contemporary Amperex Technology (CATL) is a vital player in providing energy storage to address power intermittency issues as China ramps up zero-carbon renewables. The company boasts a number of competitive strengths supporting sustainable earnings growth:
You can see this dynamic in the charts below, with increasing scale unlocking a sustainable R&D edge over the competition, while capex intensity falls and free cash flows improve.
Cash generation
Source: NS Partners and Bloomberg
Working capital
Source: NS Partners and Bloomberg
Pricing power and constant technological innovation through scale is becoming a moat that looks increasingly insurmountable for competitors around the world.
In April this year, CATL announced that it was developing fast-charge technology which can deliver 520km range in five minutes.
Source: Financial Times April 2025
This was followed in May by the unveiling of its Freevoy battery which boasts a 1500km range.
Source: Contemporary Amperex Technology Presentation May 2025.
Fears over weak demand for EVs dragging on battery pricing and trade war concerns have hit the stock in recent years. This is a high-quality company trading at a very reasonable valuation, trading at trough 14.6x fwd P/E multiple.
Source: NS Partners and Bloomberg
CATL is just one example of the kinds of opportunities on offer in China. The exodus of foreign investors from the market has left bargains everywhere among well-run, growing companies with lots of cash, next to no debt, with many buying back shares or announcing aggressive dividend plans.
Our portfolio is full of high-quality compounders across sectors trading at very attractive valuations. While it has been the value names, SOEs, small caps and high dividend stocks that have led the first phase of the China bull market, we think that the real gems in this phase on offer for investors remain cheap and look poised to outperform.
The Global Alpha team has just attended a pair of conferences in Japan. The BofA Japan Conference and the Mizuho Japan Alpha Conference. We attended numerous panel discussions on topics ranging from trade and tariffs to the changing geopolitical and defence world order to the AI boom. We met with over 40 Japanese companies including many of our holdings and completed a few onsite visits.
At the time of writing, Prime Minister Ishiba announced his resignation, less than a year after succeeding Kishida. His position was untenable after the humiliating defeat of his party in the spring. Political instability is not new in Japan, nor in most countries these days – something investors do not seem to have yet fully factored into risk premiums. And the rise of extremism, both right and left, is further colouring political landscapes globally.
Here are some takeaways from the conference:
However, the inspiration for this week’s commentary came from a meeting with a Japanese forest product company called Oji Holdings. The company was established in 1873 and over the next one hundred years became a leader in the production of newsprint and printing paper.
We well know what happened to the Canadian and US forest industries. To respond to a secular decline in newsprint demand, they merged and eventually went bankrupt, with assets being closed or sold. No company can shrink to greatness.
Oji is not immune to the decline in newsprint and paper demand. However, in the seventies, it started migrating to tissue and packaging. And more recently, it accelerated its diversification, still using its expertise transforming wood to pulp, but using that pulp for sustainable packaging and to make biomass plastics from the green ethanol produced. The company is also using biomass to produce advanced semiconductor photoresist, eliminating all perfluorinated substances commonly used by current processes. Oji also established Oji Pharma in 2020 to develop and commercialize plant-based medicinal products such as Heparin, currently produced with animal proteins and banned in many Muslim countries. By 2030, these new divisions will have grown more than the decline in paper.
Including Oji, there are over 20,000 companies in Japan that are more than one hundred years old. Even more impressive, over 3,000 companies are more than two hundred years old and around six hundred are more than three hundred years old.
With regard to company longevity, over 50% of the companies in Japan are over one hundred years old. Europe follows with its number of century-old companies. The United States has less than 5%.
The oldest known, continuously operating company in the world is a Japanese construction firm specializing in Buddhist temples and shrines called Kongo Gumi. It was established in 578 AD and operated for over 1,400 years before becoming a subsidiary of a larger group in 2006.
This incredible longevity is attributed to a combination of cultural, business and historical factors, but most important is the emphasis on continuity and legacy. This comes from fostering a long-term perspective and not necessarily maximizing short-term profit. Other factors contributing to longevity success are the focus on core competency, resilience and adaptation, as demonstrated by Oji.
It will be interesting to see how Japanese companies can continue to adopt this long-term focus yet at the same time respond to shorter-term shareholder objectives.