MONTHLY HIGHLIGHT - AUG 2025 Reflections from Germany: Mittelstand, Family Succession, and the Strategic Shift Toward Asia
- SEONWOO LEE
- 5 days ago
- 6 min read
Updated: 4 days ago
Thank you for reading our Newsletter!
For more timely updates and insights into our macro thoughts, we invite you to subscribe to our newsletter.
Welcome to this August edition of the Pine Capital newsletter — a space where we share reflections, insights, and ideas from conversations with families and founders across the globe.
As part of a recent business trip through Germany, I spent time on the ground visiting industrial cities and meeting with long-term capital allocators and operators. For the drive from Frankfurt to Ludwigsburg, I opted to rent a Mercedes-Benz EQA — a compact all-electric SUV that reflects both tradition and transition. The drive was quiet, precise, and efficient — in many ways, a fitting metaphor for Germany’s industrial evolution.
Germany remains a global industrial powerhouse, home to brands like Bosch, Siemens, SAP, ZF, and Continental. Its auto sector continues to lead globally, with Mercedes-Benz, BMW, and Porsche all maintaining top-tier brand value and expanding rapidly into electric mobility. Yet behind the household names, the real engine of the economy is the Mittelstand — over 3.5 million small and mid-sized enterprises that generate more than half of Germany’s GDP and employ over 60 percent of its workforce. These firms are often family-owned, deeply specialized, and remarkably resilient, operating with strong margins and multi-decade outlooks.
What stood out in conversations across the country was how these businesses approach succession, growth, and culture. Succession is not reactive; it’s planned patiently, often years in advance. Growth is rarely driven by rapid capital deployment — instead, it’s measured, margin-conscious, and rooted in operational mastery. And perhaps most distinctively, many of these firms see culture not as a byproduct of business, but as a strategic moat — built through apprenticeship, local loyalty, and intergenerational stewardship.
In several cases, we heard of century-old firms being acquired by other prominent families — not for financial engineering, but to preserve legacy, restore financial health, and rebuild brand equity over time. These transitions reflect a quiet but powerful principle: resilience is often inherited, but also intentionally rebuilt.
One broader pattern emerging from these dialogues is the reorientation of long-term capital — a strategic shift in attention toward Asia. Families and institutions are no longer thinking of the region as just a business diversification play, but as a central pillar for future investment growth. With rising consumer markets, expanding industrial capacity, and accelerating innovation, Asia is becoming an integral part of operating strategies and capital deployment plans.
At a macro level, Germany faces headwinds that are becoming increasingly familiar across developed markets: a tightening labor pool, energy volatility, inflation and industrial sectors navigating a complex transition toward green and AI/digital economies.
As always, these reflections serve as reminders of what matters most in our own work: long-term thinking, disciplined execution, and thoughtful expansion. We’ll be sharing more updates soon — including observations and insights from Stockholm, London, New York, San Francisco, Seoul — as we continue to engage with families and founders shaping the future.
Warm regards,
Hyuk-Tae Kwon
Founder and CEO
Portfolio Spotlight
Little Farms: Open at One Raffles Place — your new CBD neighbour.
Gush: A Sustainable Paint Revolution
by Investment Manager Joel Kam
Pine Capital invested in Gush because we believe the construction industry is overdue for a materials revolution: one grounded in health, sustainability, and high performance. Gush is leading that change. What began as a direct-to-consumer brand has rapidly evolved into one of Southeast Asia’s leading enterprise paint companies, with its products now specified across a growing portfolio of government and commercial developments in just one year.
Gush has also recently gained approval for inclusion in all relevant HDB (Housing & Development Board) product lists, an industry milestone in and of itself. Its Cool X paint was officially announced and accepted by HDB, opening the door for its use in public housing tenders. Gush is also emerging as a strong challenger in MCST (condominium management teams) and town council tenders.
Gush’s products are already featured in prominent projects: BCA Academy, the Zero-Energy Eco-Train at City Square Mall (HydroPro Cool Enamel), the F1 Paddock Club (Ultra X), 12 Tai Seng (Cool X), and The Robertson House (Ultra Cool X).
Driven by deep R&D and a mission to improve both indoor environments and environmental outcomes, Gush has accelerated its product innovation pipeline:
Ultra Cool X: The region’s first one-coat, solar-reflective exterior paint that reduces labour cost and heat absorption.
HydroPro Cool Enamel: A water-based, heat-reflective enamel for wood and metal which can help to expand sustainable options beyond walls.
What sets Gush apart is its commitment to healthier, climate-conscious chemistry. All Gush products are zero-formaldehyde and use low-to-zero VOC formulations. This means they’re not just safer to apply… they actively improve indoor air quality. Through the CDL Queen Bee Programme, Gush also completed a cradle-to-gate carbon footprint study, solidifying its leadership in low-carbon construction materials.
Gush is brining a future-forward model into an industry due for change: one that prioritizes performance, human health, and planetary impact. Pine Capital sees Gush not just as a product company, but as a platform for change delivering scalable innovation in a $100B+ regional coatings market that’s overdue for disruption.
Our friends at Gush are painting a cleaner, cooler, and more responsible future and we’re proud to back them.
👍 Trump's Unpredictable Behavior Has Its Benefits
by Investment Director Larry Lau
The S&P 500 gained +2.17% in July, closing at another all-time high. Performance concentrated in two interconnected themes — artificial-intelligence beneficiaries and the mega-capitalisation cohort. A perfect example fulfilling both criteria is Nvidia, which gained +12.6% for the month. Conversely, the equal-weighted S&P 500 (SPXEW) has trailed the capitalisation-weighted index by more than six percentage points since April, a gap that also reflects its much lower technology sector exposure (~14% in SPXEW versus ~34% in SPX).
Investor confidence was supported by robust corporate earnings and resilient macro data. Approximately one third of the companies in the S&P 500 have reported earnings so far. Of these companies, ~80% have reported earnings above estimates, which is above the 5-year average of 78% and 10-year average of 75% respectively, according to Factset data. The S&P Global’s Flash PMI data series is a very useful indicator for getting an early read on the latest pulse of the US economy. The July data suggests that the US economy remain robust — composite PMI rose to a 7 month high of 54.6, a significant rise from 52.9 in June. The strength of the services sector more than offset the slight weakness seen in the manufacturing sector. Broadly speaking, the data continue to support our view since May 2025, that the US economy is “slowing, but not recessionary”.
Trump's unpredictable behavior on Tariffs and Powell had a useful benefit — it gave the market a period of time in early July to digest the strong upward moves (i.e. price consolidation). This prevented the market from entering into a technical overbought situation and was the main reason why we kept portfolio cash levels low in the month of July, allowing the portfolios we manage to participate in the strong rally. We remain constructive on the markets but will now use further rallies to trim risk as we enter August and September which are historically weak months.
This material is provided for general information purposes only and does not take into account the specific investment objectives, financial circumstances, or particular needs of any individual. You are encouraged to consult a qualified financial adviser before making any investment decisions. Historical performance and any forward-looking statements regarding the economy, stock, bond market, economic or industry trends should not be relied upon as indicators of future results. Past performance is not indicative of future returns. Opinions expressed may change without notice and should not be interpreted as personalised advice or a recommendation. Any references to specific securities (if applicable) are for illustrative purposes only. This publication has not been reviewed by the Monetary Authority of Singapore.
![[Special Report] Global Competition Meets Flexible Labour — Singapore’s Double-Edged Sword for Lower Entry Costs and Sharper Performance](https://static.wixstatic.com/media/291f4d_6d1343d9e0b344dcbb2828c0c30ec313~mv2.png/v1/fill/w_980,h_317,al_c,q_85,usm_0.66_1.00_0.01,enc_avif,quality_auto/291f4d_6d1343d9e0b344dcbb2828c0c30ec313~mv2.png)
