Wednesday, February 25, 2026

Vietnam's power sector is experiencing a structural decoupling from GDP growth—electricity demand grew only 4.9% in 2025 versus 8.02% GDP growth—driven by a shift toward higher-value services and energy efficiency rather than a demand slowdown. In response, the government has prioritized energy security through regulatory reforms (Resolution 253/2025), liberalized direct power purchase agreements to enable renewable bankability, and is formally restarting its nuclear program as a long-term zero-carbon baseload solution. The investment opportunity has shifted from pure volume growth to positioning along the reliability premium through transmission, flexible gas capacity, renewable projects with anchor industrial loads, and strategic baseload diversification. ---

China's hospitality sector showed strengthened growth during the 2026 Lunar New Year Golden Week, with domestic visitors and tourism revenue rising 5.7% and 5.5% year-over-year respectively, significantly outpacing the prior National Day holiday. However, tourism revenue per capita remained below pre-pandemic levels at 8.8% lower, indicating weak consumer spending power despite robust travel volumes driven by the extended holiday and expanded visa-free policies. While travel remains a bright spot in an otherwise subdued consumption environment hampered by labor market weakness and property downturn, upcoming policy announcements at the March "Two Sessions" will be critical in revealing Beijing's consumption-boosting plans. ---

Software stocks are experiencing a severe market sell-off similar to the asbestos panic of the 1980s, as investors view AI-driven knowledge commoditization as an existential threat to their business models. This has created a dangerous disconnect where semiconductor stocks remain at all-time highs despite their software company clients being in distress, mirroring the dot-com bubble when hardware providers continued soaring even as their customers collapsed. The market appears to be shifting from betting on AI winners (scenario 2) toward "HALO trades"—simple, tangible assets like energy and materials—driven by fear of backing the next worthless tech company, a dynamic that could unravel if hyperscalers announce AI capex cuts. ---

The U.S. Supreme Court invalidated IEEPA-based tariffs, forcing the administration to invoke Section 122 of the Trade Act of 1974, establishing a universal 15% tariff floor that paradoxically disadvantages countries like Vietnam whose negotiated bilateral rates (20%) now exceed the new baseline, turning hard-won trade concessions into liabilities. This shift from country-specific to flat-rate tariffs creates persistent uncertainty for trading partners, with resolution unlikely in the near term, while the overall policy orientation toward elevated trade barriers remains structurally intact despite the legal recalibration. ---

Consumer confidence rebounded in February to 91.2, exceeding expectations, driven primarily by improved future expectations (+4.8pt) despite a slight dip in current conditions, signaling cautious optimism about the economic outlook. The labor market differential strengthened to 7.4, reflecting more respondents viewing jobs as plentiful, though it remains well below pre-pandemic levels, suggesting structural labor market tightness persists. Despite these improvements, consumers remain focused on inflation concerns and elevated price expectations (5.5%), indicating that cost-of-living pressures continue to weigh on overall sentiment despite modest confidence gains. ---

The forecast projects 2.5% GDP growth for 2026, supported by tax cuts and easier financial conditions, but faces five key downside risks: a stock market correction (−0.5pp growth impact), AI-driven labor market disruption (−0.4pp if productivity gains don't materialize), higher tariffs (−0.4pp), oil price spikes (−0.05pp), and private credit losses (−0.2pp). While individual risks are manageable, a simultaneous combination—particularly equity selloffs coupled with AI-driven unemployment without offsetting productivity gains—could create meaningful headwinds that would likely trigger more aggressive Fed rate cuts. ---

The equity market's late-cycle positioning creates modest downside risk, but current levels of geopolitical and AI-disruption concerns remain below historical thresholds that typically precede significant drawdowns. The optimistic macro baseline and supportive sentiment should contain losses, warranting a modestly pro-risk stance with diversification into defensive styles and selective hedging for 2026. ---

US bank stocks fell sharply on unfounded concerns about private credit exposure and AI-related earnings pressure, but banks are strategically positioned to benefit from the Trump administration's intersection of national security and deregulation priorities. The Treasury Secretary's directive to prioritize economic growth over financial vulnerability identification signals an acceleration in banking deregulation, creating an implicit quid pro quo where banks financing national security initiatives—exemplified by JP Morgan's $1.5 trillion commitment—may receive lenient regulatory oversight and fast-tracked M&A approvals. Banks represent more attractive national security plays than traditional defense contractors or struggling domestic industries like shipbuilding, making recent underperformance a potential buying opportunity.