US Inflation Remains Stubbornly High. The Fed’s December Debate Is Shifting From Whether to Hike to How Much. The latest US inflation report reinforces my concern that inflation is becoming increasingly persistent rather than returning convincingly toward the Federal Reserve’s 2% target, with October headline CPI increasing 0.4% MoM against 0.3% expected, while core CPI increased 0.3% against 0.2% expected, marking another disappointing reading despite some moderation from September’s 0.6% headline increase. What concerns me is not simply that inflation exceeded expectations, but that underlying price pressures remain sufficiently broad to challenge the argument that the earlier inflation shock was primarily temporary, particularly when core inflation has now increased approximately 0.3% for three consecutive months, implying an annualized pace of roughly 3.7% if sustained. That is still materially above the Fed’s target, while the combination of resilient economic activity, relatively stable employment and persistent services inflation means policymakers have considerably less justification for tolerating additional inflation surprises. One particularly important detail is that shelter accounted for more than 30% of October’s headline CPI increase, highlighting the continued importance of housing-related inflation in the broader price environment. Shelter is inherently slow-moving because official rental inflation measures respond with a lag to changes in market rents, meaning that elevated readings today do not necessarily imply that future housing inflation will continue accelerating, but they nevertheless demonstrate how difficult it has become to achieve sustained disinflation across the broader consumption basket. More importantly, the remaining inflation contribution shows that price pressures are not confined exclusively to housing, particularly when businesses continue facing elevated costs across transportation, energy, technology equipment and other inputs. I think this is precisely why the Fed is becoming increasingly uncomfortable with the inflation trajectory, because the problem is no longer simply an isolated commodity-price shock, but the possibility that elevated input costs are being transmitted through the economy and becoming embedded in broader consumer prices. Christopher Waller’s remarks in London this morning are particularly significant because they represent one of the clearest signals yet that the Fed’s policy discussion is shifting from whether to tighten in December toward the appropriate magnitude of the tightening. Waller explicitly indicated that he would lean toward a 25-basis-point increase even if October inflation improved, but that core CPI of approximately 0.3% or higher could justify considering a 50-basis-point increase, particularly because failing to respond convincingly to persistent inflation risks undermining the central bank’s credibility. And that is precisely what today’s data delivered, with core CPI printing at 0.3%, satisfying the threshold Waller identified for considering a larger move. However, I would distinguish his position from the broader FOMC’s decision because one governor’s willingness to consider a 50-basis-point hike does not mean the Committee has already reached that conclusion, particularly when policymakers must weigh inflation persistence against the risks of unnecessarily aggressive tightening. Markets are beginning to reflect this debate, with money-market pricing implying approximately 28 basis points of tightening at the December meeting, effectively incorporating a full quarter-point increase alongside some additional premium for a larger move. Under a simplified framework in which the only outcomes are 25 or 50 basis points, that pricing corresponds to roughly a 12% probability-weighted premium for a half-point hike, although actual market-implied distributions are more complicated and should not be interpreted as precise forecasts. What I find particularly interesting is how quickly the monetary-policy narrative has changed, because earlier market expectations centered on eventual easing as inflation moderated, whereas investors are now being forced to reassess whether the Fed needs to maintain restrictive policy for longer and potentially accelerate tightening. Higher policy rates are one problem for equity valuations, but an unexpected increase in the expected terminal rate is considerably more important because it affects the entire discount-rate structure used to value future corporate earnings. There is, however, an important countervailing development that should not be ignored, which is the sharp decline in crude oil prices following indications that the US administration may be moving toward de-escalation with Iran. Brent has fallen toward US$90 per barrel from approximately US$118 in late October, representing a decline of more than 20%, which should eventually provide meaningful relief to headline inflation through gasoline, transportation and certain energy-intensive goods. I think this is important because inflation is not necessarily destined to accelerate indefinitely, particularly if the geopolitical risk premium continues declining and global energy supply conditions normalize. Lower oil prices can improve household purchasing power, reduce transportation costs and relieve some pressure on corporate margins, potentially allowing headline inflation to moderate over the coming months without requiring the Fed to engineer a substantial deterioration in economic activity. Nevertheless, falling crude oil prices should not be confused with an immediate normalization of the entire inflation environment, particularly when refinery margins, diesel prices, shipping costs and insurance premiums may remain elevated even as benchmark crude declines. Waller specifically warned that the recent energy shock could have more persistent effects on underlying inflation than central bankers traditionally assume, while also highlighting emerging price pressures associated with the extraordinary AI infrastructure investment cycle. I find this increasingly relevant because the enormous demand for semiconductors, memory, electricity, power equipment and data-center infrastructure is creating genuine supply constraints across several industries, and those constraints can increase costs for businesses outside the AI ecosystem even when broader commodity prices are falling. In other words, the same AI investment cycle supporting exceptional growth among technology infrastructure companies may simultaneously be contributing to inflationary pressures elsewhere in the economy, complicating the Fed’s task of restoring price stability without undermining investment and economic growth. From an investment perspective, I would expect continued upward pressure on short-duration Treasury yields if markets increasingly price a more aggressive Fed, while the direction of longer-term yields will depend on whether investors focus primarily on persistent inflation and elevated term premiums or begin anticipating slower economic growth as monetary conditions tighten. This distinction matters enormously for equities because higher real yields mechanically reduce the present value of future earnings, particularly for long-duration growth companies whose valuations depend heavily on profits expected several years into the future. I remain structurally bullish on artificial intelligence, but I would distinguish companies generating exceptional current earnings and free cash flow from businesses whose valuations require many years of uninterrupted growth to justify today’s prices, particularly when the market is already reassessing enormous AI capital commitments and increasingly demanding tangible economic returns. I would also remain cautious toward emerging-market assets because a more hawkish Fed can strengthen the dollar, increase the relative attractiveness of US fixed income and reduce the willingness of international investors to allocate capital to markets offering weaker liquidity, less predictable earnings and greater currency risk. At the same time, the decline in oil prices is potentially supportive for energy-importing economies such as Indonesia by reducing pressure on import costs, fuel subsidies and external balances, although those benefits could be partly offset if higher US yields increase domestic financing costs and encourage additional capital outflows. This is why I believe the interaction between US inflation, Treasury yields, the dollar and crude oil prices will remain particularly important for emerging-market performance over the coming months. My conclusion is that today’s CPI report strengthens the case for additional monetary tightening, with a 25-basis-point December hike increasingly embedded in market expectations while a 50-basis-point increase has become a credible policy discussion rather than a remote theoretical possibility. However, the recent collapse in crude oil prices introduces an important potential disinflationary offset, meaning that the Fed should be careful about responding too aggressively to inflation pressures that may begin moderating as the earlier energy shock fades. The next inflation readings, labor-market developments and evidence of whether higher producer costs are being passed through to consumers will therefore be critical in determining whether December ultimately requires a conventional quarter-point increase or something larger. I continue to believe that inflation will prove more persistent than the market previously anticipated, and the biggest risk for financial assets is not necessarily another 25-basis-point hike, but the possibility that the entire expected path of interest rates needs to be revised higher. The AI structural bull market can survive higher interest rates, but elevated valuations will become increasingly difficult to defend unless earnings growth continues delivering.

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SEA LIMITED $SE JUST DELIVERED 43% REVENUE GROWTH. THE STOCK TRADES AT ONLY 14.1x NEXT YEAR'S EARNINGS. I think this is one of the more interesting opportunities in Southeast Asian technology. Look at Q3'26. Revenue: $8.58B, +43% YoY Net income: $502.5M, +34% YoY Adjusted EBITDA: $931.3M, +28.9% YoY EPS: $0.78 vs. $0.79 expected But the real story is underneath the headline numbers. SHOPEE IS BECOMING A MONETIZATION MACHINE. GMV: $39.7B, +23.3% YoY Revenue: $6.1B, +41.3% YoY Core marketplace revenue: +50.6% YoY Adjusted EBITDA: +44.7% YoY Revenue is growing substantially faster than GMV, suggesting that Shopee is extracting more value from every dollar transacted on its platform. And the other businesses are growing. MONEE: Revenue +63.9% YoY, with a $12.6B loan book growing 60%. GARENA: Adjusted EBITDA +45.9% YoY to $458.2M, despite bookings increasing only 5.9%. Sea now has three different earnings engines: e-commerce, digital finance and gaming. And management repurchased approximately $1 BILLION of shares, while authorizing another $1 billion. Now look at the valuation. 2026F P/E: 19.4x 2027F P/E: 14.1x EV/Revenue: ~1.1x Compare that with MercadoLibre at approximately 28–29x FY27 earnings. For a company growing revenue above 40%, Sea looks increasingly attractive. BUT THERE IS ONE COMPARISON THAT MAKES ME CAUTIOUS. PDD Holdings $PDD trades at just 6.1x FY27 earnings and 0.6x EV/revenue. That's less than half Sea's forward earnings multiple. And PDD's Temu represents a genuine competitive threat, particularly through aggressive pricing, Chinese manufacturing relationships and increasingly efficient cross-border logistics. Meanwhile, Monee's 90+ day NPL has risen to 1.3%, and consolidated EBITDA growth is lagging revenue growth. These are risks investors should not ignore. Still, I believe Sea's competitive position, growing monetization and improving earnings profile justify a premium to PDD, although the valuation gap is substantial. MY VIEW: BUY $SE FOR PATIENT INVESTORS. At 14.1x FY27 earnings, the market may be underestimating the earnings potential of Southeast Asia's digital economy. But patience matters. Competition will remain intense, and the company's profitability will not improve in a straight line. A GREAT BUSINESS IS NOT ALWAYS A GREAT INVESTMENT. THE PRICE YOU PAY MATTERS. At the current valuation, I believe Sea offers an attractive risk-reward proposition for investors willing to look beyond the next quarter. BUY $SE. LONG SOUTHEAST ASIA'S DIGITAL ECONOMY.

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383 Stocks Flagged for Concentrated Ownership. Where Has the Indonesia Stock Exchange Been All This Time? I genuinely find the latest announcement from the Indonesia Stock Exchange (IDX) astonishing, because following the escalating scrutiny from MSCI over Indonesia’s market investability, IDX has now revealed that 383 listed companies will be classified as High Shareholding Concentration (HSC) stocks, including approximately 300 newly identified companies, after the exchange decided to expand its screening methodology to cover the entire listed market rather than limiting its review to companies above a certain market capitalization threshold. Let that sink in for a moment. Just last week, IDX removed 81 HSC stocks from the calculation of the Jakarta Composite Index (JCI), and now the exchange is preparing to expand the list to 383 companies, meaning that the number of flagged stocks has increased almost fivefold following a methodological overhaul. The newly identified companies represent approximately 6.16% of JCI market capitalization, according to IDX, and the exchange intends to exclude the broader HSC list from the benchmark once the necessary operational and data-vendor adjustments have been completed. Under the revised methodology, any listed company in which 10 shareholders or fewer collectively control at least 92.5% of outstanding shares will be classified as HSC, while the previous Rp5 trillion market capitalization screening threshold has been removed, meaning that the exchange is finally examining ownership concentration across the entire market. IDX has also eliminated the previous price-impact-ratio criterion, which means that companies no longer need to exhibit particular share-price movements before potentially being identified as having excessively concentrated ownership. I actually think these methodological changes are sensible, and frankly, long overdue, because ownership concentration is fundamentally a question of market structure and the distribution of beneficial ownership, not something that should be investigated only after a company’s market capitalization becomes sufficiently large or its share price begins exhibiting unusual behavior. But my biggest question is very simple: where has IDX been all this time? Why did it take escalating pressure from MSCI, deteriorating international investor confidence and the possibility of Indonesia losing its emerging-market classification before the exchange decided to screen its entire listed universe for concentrated ownership? If the infrastructure and ownership data necessary to identify these companies already existed, why was the previous surveillance framework restricted by market capitalization thresholds that could leave hundreds of smaller companies outside the screening universe? And if the previous methodology was insufficiently comprehensive, investors deserve to understand how the exchange concluded that the resulting benchmark was an adequate representation of Indonesia’s equity market, particularly when international investors were using that benchmark to evaluate market performance, liquidity and investability. To be clear, HSC classification does not automatically mean that a company is fraudulent, that its shares have been manipulated or that its reported free float is fictitious, because concentrated ownership can arise legitimately in family-controlled businesses, subsidiaries and companies with strategic shareholders. Nevertheless, a market in which hundreds of listed companies are sufficiently concentrated to trigger exclusion from its flagship index raises serious questions about whether reported market capitalization and headline trading activity adequately represent the amount of equity genuinely available to independent investors. This matters because the distinction between market capitalization and investable market capitalization is enormous. A company can theoretically command a multibillion-dollar valuation while only a small proportion of its shares is genuinely available for trading, meaning that relatively limited transactions can have a disproportionate influence on the quoted share price and, by extension, the apparent wealth of controlling shareholders. If a large number of companies exhibit this structure, the headline market capitalization of the exchange can become a poor proxy for the actual depth and capacity of the domestic equity market. The implications extend beyond individual stocks, because benchmark construction directly influences passive investment flows, institutional portfolio allocation and how international investors assess market performance. When highly concentrated companies enter major indices, their quoted valuations can influence benchmark weights even though the underlying shares may be difficult to accumulate or liquidate in meaningful size without materially affecting prices, creating a disconnect between the theoretical value represented by an index and the actual investable opportunity available to institutional capital. This is precisely why MSCI’s concerns about ownership transparency, free-float reliability and potentially coordinated trading deserve to be taken seriously, rather than dismissed as technical disagreements over index methodology. MSCI has already frozen certain index changes and opened a consultation on potentially reclassifying Indonesia from emerging-market to standalone-market status, reflecting concerns that extend beyond individual company valuations to the credibility and accessibility of the market itself. The problem is not merely that Indonesia has too many stocks with concentrated ownership. The problem is that the exchange is only now undertaking a comprehensive review after international index providers have begun questioning the integrity of the underlying market structure. There is also an uncomfortable implication for the historical performance of the JCI, because if a meaningful portion of the benchmark previously consisted of companies with highly concentrated ownership and limited genuine investability, investors have every reason to question how representative past index levels were of the broader market. Removing these companies may improve the quality of the benchmark going forward, but it does not retroactively resolve concerns about historical index composition, nor does it establish whether past price movements reflected genuine independent price discovery. And I think this is where the distinction between an index reform and an actual market reform becomes critical, because excluding HSC stocks from the JCI does not eliminate ownership concentration, improve their liquidity, establish the identity of ultimate beneficial owners or prevent potentially coordinated trading activity. These companies remain listed and tradable, and the underlying structural risks remain unless the exchange and regulators strengthen disclosure requirements, investigate suspicious ownership arrangements and enforce existing rules consistently. The revised HSC framework is therefore a necessary first step, but it should not be mistaken for a comprehensive solution. What international investors ultimately need is credible evidence that reported free floats correspond to genuinely independent and accessible shareholdings, that nominee structures are not being used to obscure concentrated beneficial ownership, that suspicious trading activity is investigated effectively and that enforcement applies consistently regardless of the identity or influence of controlling shareholders. For years, Indonesian equities have been promoted through narratives about attractive demographics, domestic consumption, commodity resources and long-term economic growth, yet those narratives become considerably less persuasive when investors begin questioning whether the underlying equity market provides sufficiently transparent ownership, reliable price discovery and adequate liquidity to deploy institutional capital. I have repeatedly argued that Indonesia’s equity risk premium should be structurally higher when investors face uncertainty over governance, liquidity, ownership transparency and the reliability of market prices, because these are not peripheral considerations that can simply be ignored when calculating fair value. They directly affect the ability to enter and exit positions, the probability of recovering invested capital and the discount rate that international investors should apply to future corporate earnings. The latest HSC announcement reinforces that concern, particularly because a market can appear large on paper while remaining remarkably shallow in terms of genuinely investable liquidity, and this mismatch becomes especially dangerous when foreign investors begin reducing exposure simultaneously. I welcome IDX’s decision to expand the screening methodology, because greater transparency and more representative benchmark construction are necessary if Indonesia wants to rebuild institutional confidence. But the timing raises legitimate questions about regulatory oversight, and the sudden expansion from 81 to 383 flagged companies suggests that the previous methodology was materially narrower than the one now considered appropriate. It should not require an international index provider threatening Indonesia’s market classification for the domestic exchange to begin examining ownership concentration across its entire listed universe. And while I would not label hundreds of companies fraudulent simply because they meet an HSC threshold, I find it deeply concerning that such a substantial part of the listed market is only now being subjected to this level of scrutiny. The real test will not be how many companies IDX removes from the JCI, but how effectively it establishes beneficial ownership transparency, improves genuine public share distribution, investigates questionable trading practices and demonstrates that market rules are enforced consistently. Because if 383 listed companies can suddenly be flagged under a more comprehensive ownership-concentration screen, investors are entitled to ask what else the previous surveillance framework has been missing. And perhaps the most uncomfortable question of all is this: would any of these reforms have happened with the same urgency if MSCI had never intervened?

Brent crude is now trading close to US$90/bbl, providing some much-needed relief for Indonesia’s fiscal outlook and potentially helping explain the recent rebound in Indonesian equities. As a net oil importer, Indonesia is particularly vulnerable to elevated energy prices, which increase the fiscal burden of fuel subsidies, put additional pressure on the rupiah and raise the risk of higher domestic inflation. A sustained decline in oil prices would therefore ease some of these pressures, improve investor sentiment and reduce the immediate risk of further fiscal deterioration. But will this relief last? Ultimately, much depends on Trump. There is growing speculation that Trump may be losing the political appetite to sustain a prolonged confrontation with Iran, particularly as the economic consequences of elevated oil prices become increasingly difficult to ignore. However, speculation about his intentions should not be confused with a confirmed change in US policy, and the trajectory of the conflict remains highly uncertain. For Indonesia, the distinction between a temporary correction in crude prices and a sustained normalization of global energy markets is critical. A short-lived decline in Brent may provide some breathing room for the government and financial markets, but it would do little to resolve the underlying fiscal and external vulnerabilities if geopolitical tensions escalate again. For now, we will continue monitoring developments closely, particularly Trump’s next moves, before drawing any conclusions about whether the rebound in Indonesian equities is sustainable.

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TSMC $TSM JUST REPORTED ANOTHER RECORD MONTH. THE AI BOOM IS ACCELERATING, NOT SLOWING DOWN. TSMC’s October 2026 revenue surged to NT$586.9 billion, up 14.7% MoM and 59.7% YoY, representing another record high and a remarkable acceleration from September’s 54.6% YoY growth. What makes these numbers particularly impressive is that the sequential increase came from an already exceptionally high revenue base, suggesting that demand for advanced semiconductor manufacturing continues expanding at an extraordinary pace rather than merely benefiting from favorable comparisons. I think this reinforces our structural AI investment thesis because TSMC sits at the center of the global advanced semiconductor supply chain, manufacturing leading-edge chips for companies such as NVIDIA, Apple, AMD and other major technology players, while increasingly sophisticated AI accelerators, custom silicon and advanced packaging continue driving demand for scarce manufacturing capacity. October alone represented approximately 34.6% of the midpoint of TSMC’s fourth-quarter revenue guidance, suggesting a strong start to the quarter, although monthly revenue can fluctuate and one month does not guarantee a guidance beat. The most important distinction is that this is not simply a semiconductor industry recovering from a cyclical downturn, but an increasingly powerful structural investment cycle driven by the enormous expansion of AI computing infrastructure. TSMC remains one of the clearest ways to gain exposure to that opportunity because it benefits from the capital spending of multiple competing chip designers rather than depending on any single AI architecture. We remain long TSMC. As long as AI computing demand continues expanding faster than the industry’s ability to supply advanced chips, I believe the company remains exceptionally well positioned to benefit. Long $TSM. Long AI.