MONTHLY HIGHLIGHT - Jun 2026 Caught in the Middle
- 17 hours ago
- 8 min read
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Dear friends of Pine Capital Management, I spent the first week of May in Los Angeles for the Milken Global Conference, four days at the Beverly Hilton under the banner “Leading in a New Era.” Nobody agreed on what the new era is, only that the old one is over. The line I kept hearing in my head was Mark Carney’s, from Davos in January: the American-led order has suffered “a rupture, not a transition,” and the middle powers should stop waiting for it to heal. Here is the frame I came home with. The world is pulled by two gravities that want different things. China’s weapon is scale and speed; it makes around 85% of the world’s batteries and is exporting its overcapacity, often below cost, through its longest deflation since the 1990s. America’s weapon is innovation and capital; it is where the AI build-out gets financed and where the memory supercycle just pushed DRAM prices up roughly 90% in a single quarter. If you are a middle power, Korea, Japan, Germany, the UK, Canada, you live in the gap: open, trade-dependent, aging, leaning on an American security umbrella that now comes with invoices. Survival means owning a capability the giants cannot copy quickly, climbing the value chain rather than defending its crowded middle, and fixing your own capital markets so value reaches the owners. Korea is my favorite case. It is the gatekeeper of the one input AI cannot live without: SK Hynix holds about 60% of high-bandwidth memory and has sold out 2026. The strength runs broader than memory: Hyundai is putting Boston Dynamics’ robots to work in its own plants, Samsung is building a 2-nanometer fab in Texas, and the country exported $15.4 billion of defense equipment last year, won an $18.6 billion nuclear deal in the Czech Republic, and launched the world’s first ammonia-powered ship. Two arguments from the Korea panel stuck with me. As intelligence gets cheap faster than compute does, the profits flow to whoever supplies the picks and shovels — memory, chips, power — which is exactly where Korea sits; and in physical AI the real moat is data, where Korea’s edge is decades of quality operations, not algorithms. Yet it stays cheap: even after the KOSPI nearly tripled in a year to a record 8,476, surging profits keep Korean stocks near 6–7x forward earnings against the S&P’s 21–22x, the “Korea discount” the Value-up reforms are only starting to close. What it still lacks is the top of the stack (no frontier model, no GPUs of its own), clean energy, and people: a 0.80 fertility rate, the world’s lowest. The rupture also opens a second door, and it is where I spent much of late May. A growing part of our advisory work is helping Korean clients and partners turn their existing businesses into investors, a “dual-engine” model, the way the great Japanese trading houses did a generation ago. The logic is the same fracture in miniature: as the US and China pull apart, Southeast Asia is actively designing China out and looking for Korean partners. The opportunities are unglamorous and real, AI data centers spilling from Singapore into Johor, power, copper and scrap recycling, green steel, water treatment, defense. Use trading relationships to source and de-risk deals, start with small pilots, phase capital in against milestones, and let AI do the heavy analysis so people can spend their time on judgment and the human work of building relationships and negotiating deals. That is the thread for me this year: the same fracture that squeezes the middle is also where the next decade of returns is hiding, if you are close enough to the ground to see it. I am in London and Germany this month, two more middle powers wrestling with the same question. More then. Until next month, Hyuktae |
Sources & further reading Macro and Korea figures are drawn from the sources below; the valuation and advisory points reflect the Milken Korea session and my own May 2026 client work. Data current as of mid-2026. – Milken Institute, 2026 Global Conference (Los Angeles, May 3–6; “Leading in a New Era”): Milken Institute – Mark Carney, Davos 2026 — “a rupture, not a transition”: Wikipedia · Lowy Institute – China’s overcapacity, deflation and export surge: MERICS · CFR – The AI-driven memory supercycle (DRAM +~90% in Q1): Tom’s Hardware · S&P Global – SK Hynix — HBM leadership, 2026 output sold out: CNBC · TrendForce – Samsung’s 2-nanometer fab in Taylor, Texas: KED Global – Hyundai, Boston Dynamics and the new Atlas robot: Boston Dynamics · Hyundai – Korea’s defense exports ($15.4bn in 2025; Poland >40%): Seoul Economic Daily · CNN – KHNP’s $18.6bn Czech nuclear deal (Dukovany 5 & 6): World Nuclear News · Korea Herald – HD Hyundai’s world-first ammonia-powered vessel: Hydrocarbon Processing – The “Korea discount,” Value-up reform and the KOSPI’s record May (8,476, up ~190% in a year): AMRO · Korea Herald · Seoul Economic Daily – Korea’s fertility rate (0.80) and demographic outlook: CNBC · TIME To discuss any of the themes in this newsletter or learn more about Pine Capital’s strategies, please reach out to Hyuk-Tae Kwon at ir@pinevp.com. |
Hyuk-Tae Kwon
Founder and CEO
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Singapore’s Green Buildings: The Next Phase of Decarbonisation
by Investment Manager Joel Kam
Singapore has made strong progress in greening its built environment. Under the Singapore Green Building Masterplan, the country has set its “80-80-80 in 2030” targets: to green 80% of buildings by gross floor area, have 80% of new developments meet Super Low Energy standards from 2030, and achieve 80% improvement in energy efficiency for best-in-class green buildings. The country is broadly moving in the right direction, with close to two-thirds of building floor area already greened. However, the focus so far has been largely on operational efficiency, with a focus on reducing the energy consumed by buildings after they are completed, particularly through better cooling, lighting, sensors, and building management systems.
This has created meaningful progress, but it also leaves an important gap. A building can be energy-efficient in operation while still carrying a significant carbon footprint from the materials and processes used to construct, renovate, and eventually demolish it. Singapore’s green-building efforts have historically focused more on energy savings than on embodied carbon. As a result, materials such as concrete, steel, glass, paint, wallboards, and other construction inputs remain a major area where deeper decarbonisation is still needed.
Several emerging technologies can help address this gap. Companies such as Gush are developing functional paints and surface coatings that can improve indoor environments and reduce cooling loads. Adaptavate is working on lower-carbon wallboard solutions that target one of the most widely used materials in buildings. Beyond these examples, wider use of green steel, low-carbon cement, recycled aggregates, and other alternative construction materials can reduce emissions from the building process itself, not just from daily operations.
The challenge is adoption. First, the industry needs a more innovation-centric mindset, with developers, contractors, and asset owners more willing to test-bed new technologies. Second, cost remains a major barrier. Many promising startups offer “game-changing” solutions, but these are often too expensive for wide deployment in a thin-margin construction sector. Third, there needs to be greater end-user awareness. Asset owners must better understand how green materials and technologies can support lower operating costs, higher asset value, regulatory readiness, and long-term resilience.
At Pine Capital, we believe the next phase of green-building innovation will require collaboration across startups, asset owners, developers, contractors, and investors. Cost will remain front and centre for the construction industry, so the most scalable solutions will be those that balance sustainability with clear economic viability. We are keen to work with companies developing practical, commercially adoptable technologies, as well as partners who are open to test-bedding and scaling new solutions. For those interested in exploring how we can work together to drive this change, reach out to us and we’ll happily welcome the conversation!
There is a time for α and there is a time for β
by Investment Director Larry Lau
Successful investing is not just about picking the right companies. It is about knowing when to express conviction aggressively, when to dial it back, and when to simply let the market (beta) do the work. At Pine Capital, this discipline is embedded into our investment process.
The principle is simple: when the odds are best in our single-stock ideas, we pursue alpha. As those ideas rally and become extended, we incrementally take profits and lean into beta. When the market becomes stretched, we raise cash and wait for the next opportunity.
We understand this approach is unconventional. But we are proud of this DNA as it is built on capital preservation at its core. It is also difficult to execute, requiring not only intellectual rigour but also emotional discipline, as we must consistently fade both fear and greed. We believe this underpins our long-term investment edge.
In practice, we think through the lens of "offence" and "defence", starting with an assessment of market structure at the benchmark level (e.g. S&P 500). When the S&P 500’s market structure is negative, our focus shifts to defence.
Defence means reducing single-stock exposure and dynamically rebalancing between beta and cash. A recent example was 12th March, when the S&P 500’s market structure turned negative. We raised cash incrementally to ~30% by mid-March. This defensive posture generated +2.1% outperformance that month, simply by declining less than the market.
Offence means buying quality businesses on weakness, particularly when pullbacks occur on low volume with no identifiable fundamental catalyst. We have seen more of these dislocations as market flows increasingly dominate fundamentals in day-to-day price action. We also assess the market structure of each single-stock idea and only buy the stock if that remains positive.
April and May showed how difficult this can be in practice. On 8th April, the S&P 500’s market structure turned positive, signalling a shift from defence back to offence. Yet the unprecedented V-shaped rebound meant most of our best single-stock ideas never presented an attractive risk-reward entry. The resulting cash drag contributed to -2.1% underperformance in April.
Rather than chase, we remained patient and waited for consolidation. That opportunity arrived in the final week of April and we were fully redeployed by 30th April. The shift back to offence contributed to +3.5% outperformance in May.
At some point, markets begin pricing in too much optimism and the risk-reward skew shifts. That is when we transition from an alpha-generation mindset toward beta participation and eventually raising cash at some point.
As I write this on 2nd June, we have raised cash to 4.2%. Being early in this industry is often the same as being wrong. We do not raise cash simply because valuations look expensive or markets “feel” euphoric. We only do so when our proprietary signals (sentiment, positioning, technicals) confirm increasingly overbought conditions and we will raise cash incrementally.
Markets do not move in a straight line. When the next pullback offers a better entry point, we will have the flexibility to act.
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