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Portfolio Performance & Market Updates - 11 Nov 2025_Page_4

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For the first time since Bretton Woods, a coalition of major economies is trying to unseat the US dollar’s dominance, not through confrontation, but through cooperation. The US dollar has been the most dominant reserve currency in global trade and finance since World War II. But today, a 10-member BRICS bloc is looking to uproot the US dollar’s dominance through de-dollarization.

While the BRICS initiative of de-dollarization has gained momentum, how far can the alliance take the agenda forward? In this article, we will explore the limitations of the multipolar world idea. Creating parallel financial systems is easy, but maintaining them without affecting their economic growth is a challenge.

De-Dollarization Agenda: How Far Can BRICS Take It?

The BRICS alliance has already put the spotlight on the de-dollarization agenda on the global financial stage. This includes:

he BRICS alliance has already put the spotlight on the de-dollarization agenda on the global financial stage. This includes:

* Settling trade payments in local currencies.

* Rewriting trade deals to benefit both parties and not rely on the US dollar.

*The New Development Bank (NDB) is issuing bonds in local currencies.

* NDB is disbursing loans in local currencies.

* Initiating currency swaps to reduce US dollar dependence.

* Creating alternative payment options such as CIPS (China), SPFS (Russia), and UPI (India), among others.

* Talks of a BRICS currency is brewing but is yet to see the light.

* Central banks of BRICS countries have been accumulating gold and diversifying their reserves.

So What Next? Can It Go Further?

While the base of the de-dollarization agenda formed by BRICS is strong, the structure remains weak. The weakness comes from their inability to come together and break political barriers. India and China’s geopolitical agendas don’t align and flare up every year. The relationship between the UAE and Iran is complex, with a long-standing friction over three Persian Gulf islands.

Circling back to how far BRICS can take de-dollarization will depend on the depth of their markets. The US dollar has liquidity and stability, and the majority of the global finances are attached to it. Local currencies of BRICS countries like the Chinese yuan, Russian ruble, and Indian rupee are not freely convertible, and most fold under pressure from the volatile forex market.

Local Currencies Cannot Withstand Market Volatility

Since their local currencies cannot withstand volatility, it’s not a viable option for traders. Global consumer goods and commodities, especially in the import and export sector, cannot depend on these currencies. Limited liquidity can stall the flow of business, leading to a disruption in manufacturing and shipping. The BRICS de-dollarization agenda cannot live up to these requirements as local currencies don’t meet the market’s criteria.

In conclusion, the BRICS de-dollarization agenda cannot go far unless the alliance focuses on turning their respective economies into ‘developed countries’ first. Remaining a third-world economy and challenging a century-old system is only wishful thinking. We did not even consider the challenge the US and the West would put up here.

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These are the Risks in Private Credit that I am not comfortable with and I will continue to help my clients to avoid investing in Private Assets.

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These are the Risks in Private Credit that I am not comfortable with and I will continue to help my clients to avoid investing in Private Assets.

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SINGAPORE] With higher-for-longer interest rates, regulatory capital requirements for banks and the lack of a robust public-debt market in Asia, more private companies turning to non-bank lenders for debt financing are exploring higher-risk “payment-in-kind” (PIK) options.

PIK allows borrowers to make interest payments in a form other than cash, such as by adding to the total debt or equity. For instance, interest could be added to the principal loan amount, to be paid off in full upon maturity of the loan.

In the private-credit space, PIK is typically reserved for the distressed and mezzanine segments on account of its higher risks. But now, private credit players are increasingly offering PIK in direct-lending deals.

“Historically, this feature was used almost exclusively in distressed or mezzanine transactions,” said Emmanuel Hadjidakis, principal at law firm Baker McKenzie Wong & Leow.

Preserve liquidity

“It is starting to be more commonly adopted in private credit and some senior financings in our region, given the high interest rate environment and in situations in which a borrower wants to preserve liquidity rather than pay interest,” he added.

Hadjidakis noted the risks to taking on PIK. For one thing, compounding debt could ultimately be too large or unsustainable for the borrower.

But it also provides flexibility for borrowers, and allows lenders to differentiate themselves in tailoring transactions to suit the borrower.

Several variations of PIK have emerged in Asia, said Kaveeta Sandhu, partner at law firm Hogan Lovells.

For example, in a holding company PIK, interest is incurred at the holding company level; in a split PIK, a portion of the interest is accrued; in a toggle PIK, the borrower can choose between cash interest and PIK interest.

Andrew Tan, chief executive officer for the Asia-Pacific at Muzinich & Co, noted that PIK deals are not new in Asia.

But now, people are asking for deals to be fully PIK, rather than with a cash portion, he said.

He noted that PIK has been linked to private-credit deals in distress in the West, as borrowers choose to defer the cash payment. But this might not always be the case.

“I think there has to be a distinction between the company choosing to PIK because they have spending obligations they want to prioritise – there has to be a distinction in terms of what is happening on the underlying,” said Tan.

There are ways that private-credit firms protect themselves against the PIK downside. For instance, they could offer PIK as part of a loan against collateralised assets, he added. To manage risks, borrowers are also required to report their financials to the lenders.

“If you are PIK-ing, you need to look at the underlying business to ensure that it’s at a healthy level to keep up with the amount of obligation that is back-ended,” said Tan.

For now, full PIK structures are not as evident in the Asia-Pacific, he added.

Lack of deep public-debt markets

In Asia, private credit’s expansion beyond special situations and mezzanine debt has been driven by factors such as regulatory capital pressures on banks, and the demand for development capital in the region. The lack of deep public-debt markets in Asia has also bolstered the expansion, said Thomas Kim, partner at Hogan Lovells.

Capital-intensive sectors such as infrastructure logistics and data centres are looking for new sources of quick, tailored and flexible credit, which banks might find challenging to accommodate.

Coupled with regulatory pressures and higher capital costs, banks have also retreated from providing small and medium-sized enterprises with credit, choosing instead to focus on investment-grade clients.

But as the adage goes: If you can’t beat them, join them. Banks are now also looking to raise dedicated pools of private-credit funds to invest into direct lending opportunities in Asia.

“By tapping third-party capital to make such loans, banks are able to shift higher-risk lending off the balance sheet and gain access to high-quality opportunities that may not fit their usual underwriting criteria – while staying relevant to the financing needs of their key client constituents,” said Kim.

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·        Hong Kong bankers and regulators are signaling growing concern over the city’s deepest real estate downturn since the Asian financial crisis.

·        The de facto central bank has intensified scrutiny of lenders’ decisions on distressed loans and called banks more frequently to gauge their willingness to extend credit lines to smaller developers.

·        Bankers are reassessing the valuations assigned to collateral that backs property loans, with some expressing concerns about inflated valuations of commercial properties used as loan collateral.

Hong Kong bankers and regulators are signaling growing concern over the city’s deepest real estate downturn since the Asian financial crisis.

The de facto central bank has intensified scrutiny of lenders’ decisions on distressed loans and called banks more frequently to gauge their willingness to extend credit lines to smaller developers.

Bankers are reassessing the valuations assigned to collateral that backs property loans, with some expressing concerns about inflated valuations of commercial properties used as loan collateral.

“What surprised me is the possibility that protections are now extending even to smaller players,” said Jason Bedford, a visiting senior research fellow at the East Asian Institute of the National University of Singapore, referring to regulatory interest in credit lines for smaller developers. “That’s a pretty alarming signal. It raises the risk that we may be entering a broader extend-and-pretend phase.”

In response to Bloomberg’s queries, a Hong Kong Monetary Authority spokesperson said the regulator does not comment on individual companies’ affairs. “It is the HKMA’s long-standing supervisory requirements that banks must manage credit risk prudently,” said the spokesperson. “In general, banks in Hong Kong have been pragmatic in providing credit support to customers.”

Commercial real estate loans account for approximately 8% of about HK$10 trillion ($1.3 trillion) in total lending in the city’s banking system, according to data from S&P Global Ratings. Latest government figures show that local office prices have plunged about 50% from their 2018 peak.

HKMA Calls

While the HKMA has repeatedly described the city’s banking system as well capitalized, it has in recent months become notably more proactive in scrutinizing lenders’ loan decisions.

Since May, a number of banks have received at least three calls from HKMA officials who questioned them on issues such as reasons for not participating in a property refinancing deal, according to people familiar with the matter. Previously, the regulator would call those lenders once or twice a year at most, checking factual details on specific transactions only, said the people.

A case in point is Lai Sun Development Co., a cash-strapped builder that began talks with lenders to refinance a HK$3.6 billion loan in January.

After negotiations for almost six months, only about half of the original loan’s 20 lenders expressed willingness to extend the credit line, said people with knowledge of the matter.

Then weeks before the loan’s maturity on Oct. 6, at least five banks in the consortium received calls from HKMA officials, with the latter seeking feedback including hesitation or concerns about offering refinancing to Lai Sun, said the people. The regulator reiterated general encouragement for more sympathy toward struggling borrowers.

The calls were widely interpreted as signaling the HKMA’s intention to give the developer a lifeline, the people said. Shortly after, Lai Sun secured a HK$3.46 billion refinancing deal.

The regulator has made its presence increasingly felt in such deals, following its involvement in prominent developer New World Development Co.’s efforts to avert a debt crisis in June. Other borrowers that have drawn similar scrutiny from the HKMA include defaulted developer Emperor International Holdings Ltd., real estate asset manager Gaw Capital Partners, and Spring Real Estate Investment Trust, according to people familiar with the situation.

Spring REIT said it has completed refinancing a loan for a Beijing project “in its ordinary course of business.”

Gaw declined to comment, while Lai Sun and Emperor didn’t immediately respond to requests for comment.

The HKMA’s increased engagement has come as the city’s commercial real estate sector has emerged as a growing threat to banks.

HSBC Holdings Plc, for one, took the unusual step to push its Hong Kong subsidiary, Hang Seng Bank Ltd., to offload portfolios of bad real estate debt, Bloomberg News reported in September. HSBC proposed last month to take Hang Seng private and warned separately that the city’s commercial property sector continues to face “downward pressure.”

Frothy Valuations

In another sign of angst, bankers are increasingly taking aim at real estate consultancy firms, expressing concerns about what they consider inflated valuations of commercial properties used as loan collateral.

Despite the sharp drop in commercial real estate prices in recent years, some of the assessments from valuation providers have failed to reflect that, according to people familiar with the matter.

One such example is the YF Life Tower, an office building on the outskirts of Hong Kong’s central business district. The tower’s owner managed to refinance a loan at end-2023, based on a HK$6.24 billion valuation provided by CBRE Group Inc., a figure similar to its 2018 levels, people familiar with the matter said.

The lenders were skeptical because the assessment used a comparable property in a much more central location with a harbor view, the people said. As a result, the banks reduced the loan-to-value ratio and cut the loan size to about HK$2.5 billion from HK$3.1 billion, they said.

Even so, a subsequent valuation by Jones Lang LaSalle Inc. earlier this year arrived at HK$6.21 billion.

Jones Lang LaSalle declined to comment while CBRE didn’t immediately respond to requests for comment.

Another example is the Worfu Mall, collateral for a roughly HK$1.5 billion loan that suffered a default earlier this year. Currently under receivership, the shopping center has been up for sale since January.

Interested buyers of the mall have made indicative bids as low as less than half of the loan, according to people familiar with the situation.

“Valuation practices in Hong Kong fall short of global standards,” said Leo Lo, founder of property consultancy firm CHFT Advisory and Appraisal. “Landlords, not banks, control the process here. They shop around for the most optimistic valuations, and surveyors who don’t play along risk losing business.”

The expanding list of such incidents has prompted some lenders to run monthly, rather than semi-annual, health checks on valuations, bankers say.

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Imagine fund managers of Private Equity and Private Credit are working hand in hand to get themselves paid through maintaining the dividend payout they promise to investors – by forcing more debts to the companies they are holding. And if these fail………it will be bad. So, at all costs, avoid investing in Private Assets.

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Imagine fund managers of Private Equity and Private Credit are working hand in hand to get themselves paid through maintaining the dividend payout they promise to investors – by forcing more debts to the companies they are holding. And if these fail………it will be bad. So, at all costs, avoid investing in Private Assets.

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Private equity firms, struggling to find buyers for their investments, are turning to an old playbook like never before.

Financial sponsors are extracting cash from their portfolio companies by raising debt to fund payouts to themselves and their investors at an unprecedented clip. Such dividend loans have hit $28.7 billion so far this year, putting them on track to surpass 2021’s record $28.8 billion, according to data compiled by Bloomberg.

Their efforts come as the private equity machine hits snarls at nearly every turn: Attractive takeover targets are sparse and it’s harder to cash out old investments and deliver the returns once promised to pension managers, foundations and wealthy individuals. To quell impatient investors, buyout shops are increasingly layering extra borrowing on their companies and funneling the proceeds of debt sales to their stakeholders instead.

“All the stars are aligned for dividend recaps; rates are coming down, spreads are tight, the market is open — yet the IPO market and M&A are still subdued,” Bill Zox, a portfolio manager at Brandywine Global Investment Management, said. “Investors want distributions, and dividend recaps can buy PE firms more time to wait for a better environment for exits.”

Private equity firms have routinely used dividend recapitalizations to book profits and take skin out of the game after they acquire companies. Such deals can be seen as controversial and aggressive, often leading debt investors — fearing the strain of the additional debt — to push back. But with demand for loans likely outpacing supply of new debt this year, borrowers have an upper hand.

This month, private equity firm Thoma Bravo priced a $750 million loan for cybersecurity firm Darktrace to fund a distribution to shareholders, in what Fitch Ratings called “an aggressive financial policy with high leverage.”

In October, Thoma Bravo raised debt on Ping Identity Holding Corp. to help fund a roughly $1 billion payout. Earlier this year, another one of its portfolio companies, Proofpoint Inc., obtained a $1.35 billion loan to fund a payment to the buyout firm and employees. Other recent deals included a $1.35 billion leveraged loan by yogurt maker Chobani Inc. to partly finance a payout.

Buyout firms and their clients are relying on alternative methods to unlock cash. They’re shuffling assets out of older vehicles into what are known as continuation funds, selling stakes on the secondary market and borrowing against holdings through complex loans with high interest rates.

The industry’s fund distributions have slowed so drastically that, at the current rate, it would take about nine years for customers to collect their money from the more than 12,000 companies held by US buyout funds, according to Pitchbook. That’s making limited partners reluctant to step up fresh capital, with Bain & Co. estimating in a mid-year report that there were more than 18,000 private capital funds seeking $3.3 trillion.

“The reason that sponsors are doing it, and driving most of this, is realistically because they have struggled to monetize their investments,” Matthew Mish, head of public and private credit strategy at UBS Group AG, said. “The IPO market has started to thaw but is not really providing an exit. The LPs are not getting their money back.”

Scarce Supply

Helping fuel the dividend deals is the market’s supply-demand dynamic. Roughly $915 billion of loans have been sold in 2025, about 16% lower than the same period last year. Of that debt, some 80% has been for loan refinancings and repricings, meaning there has been relatively little new debt to buy.

Another driver is collateralized loan obligations, structured credit vehicles that are the largest buyers of leveraged loans. CLOs are financed by issuing bonds. There have been more than $151 billion of the debt backed by syndicated loans sold in 2025, up about 4.7% from the same time last year, according to the Bloomberg data.

“The problem is the deals aren’t performing. And so when they don’t perform, even if I want to sell mine, I’m not going to sell it to the other PE guy that knows that he has his own deals that aren’t performing and he doesn’t want mine,” Mish said. “The easiest thing to do is to do a recapitalization and sell it to a less credit discriminate investor, which is a CLO.”

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In Investment - There will always be two schools of thought.

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In Investment - There will always be two schools of thought.

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One is pessimistic about the market and economy. They thinks that the market and the economy will be going through.....

A Great Depression

A U-Shaped Recovery

A L-Shape Recovery

Or Never Ever Recover

I belong to the other school of thought that are Cautiously Optimistic. Since bull market lasted much longer than bear market, we should always be optimistic about the stock market while investing for the long haul........

Liquidity Fuels Stock Market

And Huge Amount of Liquidity May Fuels A True Bull Run (Non-Guaranteed) 😊

We are Optimistic but we are Caution in our investment approach. We only invest in Big Global Companies with businesses whose competitive advantage are difficult to replicate and these companies also do not need significant leverage to generate their returns.

Still Waiting To Invest.....,

“It’s a terrible mistake to think of stocks as something that bob up and down and that you should pay attention to those bobs up and down,” Buffett said

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Invest Global, Not Local

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