Key Points

• China-focused hedge funds outperform with double-digit returns: The Greater China Equities Hedge Fund Index gained 15% in H1 2025, driven by Hong Kong stock rebounds and strategic bets on AI and consumer sectors, with Triata Capital posting a 62% return by mid-July.
• Private credit giants target Asia as funding gaps widen: Private credit AUM in Asia surged to $62.3B, with global players like Apollo and Hillhouse increasing exposure as banks retreat, particularly in mid-market lending, infrastructure, and renewable energy.
• Futures muted; Alphabet and Tesla earnings in focus: U.S. futures traded mixed as investors digested Alphabet’s 14% revenue jump on AI-driven growth and Tesla’s weaker earnings amid slowing EV sales, while optimism over EU-U.S. trade talks supported sentiment.
• European stocks surge on trade optimism and earnings beats: The Stoxx 600 rose 1.1%, led by auto stocks on hopes of a U.S.-EU trade deal; Deutsche Bank, BNP Paribas, and Nestlé posted upbeat earnings, while German consumer sentiment and EU car sales weakened.

China-focused Hedge Funds Outperform with Double-Digit Returns

China-focused hedge funds outperformed global peers in the first half of 2025, buoyed by a rebound in Hong Kong equities and targeted bets on artificial intelligence and consumer-driven sectors. The Greater China Equities Hedge Fund Index rose 15% in the first six months, outpacing regional benchmarks, while Triata Capital led with a 45% return, surging to 62% by mid-July.

Managers cited strategic allocations to AI software, data centers, and consumer stocks, coupled with effective hedging during April’s market turbulence sparked by U.S. “reciprocal tariffs,” as key to their strong performance.

Private Credit Giants Target Asia Amid Widening Funding Gaps

Private credit firms are increasingly shifting to Asia as traditional bank lending contracts, creating a widening funding gap and lucrative opportunities in mid-market financing. Assets under management surged to $62.3 billion in Q1 2024, with players like Apollo and Hillhouse deploying billions in the region. India, Southeast Asia, and infrastructure-focused sectors lead the growth, while Japan and South Korea offer stable mid-market plays.

Despite legal and currency risks, firms see Asia as a long-term growth hub, with Standard Chartered projecting sustained double-digit growth and KKR estimating a $700 billion potential market expansion.

Futures Muted as Alphabet and Tesla Earnings Take Center Stage

U.S. stock futures traded flat to slightly lower Thursday as investors digested corporate earnings and trade developments. Alphabet surged over 2% in after-hours trading after posting record revenue of $96.4 billion, driven by strong search and cloud growth, though heavy AI-related spending weighed on sentiment. Tesla fell more than 4% as weak auto sales dragged revenue down 12% year-on-year, with Elon Musk warning of “rough quarters” ahead.

Hopes for an EU-U.S. trade deal helped sustain risk appetite, while markets awaited U.S. PMI data and the ECB’s policy decision, with rates expected to remain unchanged at 2%.

European Stocks Surge on Trade Deal Hopes and Earnings Momentum

European equities advanced sharply Thursday as optimism over a potential EU-U.S. trade deal buoyed sentiment, following the U.S.-Japan agreement earlier this week. The Stoxx 600 climbed 1.1%, led by auto stocks up 3.6% as hopes grew for reduced tariffs on European imports. Deutsche Bank reaffirmed its 2025 guidance with stronger-than-expected Q2 earnings, while Nestlé beat sales forecasts and BNP Paribas projected revenue acceleration in H2.

However, German consumer sentiment weakened for a second month, and new car sales in Europe fell over 5% in June. Brent crude rose 0.6% to $68.94, supported by a sharper-than-expected U.S. stockpile drawdown.

Conclusion

As global markets navigate a mix of trade optimism, central bank caution, and robust corporate earnings, investor focus pivots to policy signals and macro data. US–Japan trade progress and tentative EU talks bolster sentiment, yet uncertainty lingers ahead of the August tariffs deadline. Treasury yields edge higher in anticipation of Fed Chair Powell’s remarks, while gold-backed Chinese hedge funds and Asia private-credit growth highlight shifting asset flows.

Meanwhile, European earnings and ECB signals will guide next moves. Now is a time for disciplined positioning—balancing exposure to trade-sensitive equities with yield-sensitive bonds, while monitoring policy catalysts closely.

Investment Insights

• China-focused Hedge Funds: Strong double-digit returns highlight renewed investor confidence in Chinese tech and consumption sectors; select exposure to AI and consumer stocks may offer alpha but requires hedging against tariff risks.
• Private Credit in Asia: Rapidly expanding AUM and widening funding gaps present long-term opportunities, particularly in mid-market lending and infrastructure; investors should account for regulatory and FX risks through disciplined due diligence.
• U.S. Tech Earnings: Alphabet’s strong revenue growth reinforces AI-driven advertising and cloud opportunities, while Tesla’s weak auto sales suggest caution until autonomous driving revenues materialize.
• Trade Deal Momentum: Growing optimism around U.S.-EU negotiations supports cyclical sectors, particularly autos; watch for tariff announcements as a catalyst for short-term volatility in European equities.

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Disclaimer

This newsletter provides financial insights for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.