March 2026

Summary

What happened in March?

🔑 Macro Context — The Dominant Theme March started with the coordinated military strikes on Iran - started on 28 February 2026. This triggered the closure of the Strait of Hormuz, through with -20% of the world’s oil & LNG logistics are passing through. IEA has called it the largest supply disruption in the history of the global oil market. March was dominated with this theme; the oil price surge, stagflation risks (and actual hits), central bank paralysis with strategic direction unknown, and diplomatic gyrations define the macro backdrop from the first business date onwards.

Macro Situation - Key Macro Themes

Sector Focus Watchlists

1. Air Transport: Global air transport equities remain under acute sell pressure, driven by the compounding effect of macro uncertainty and elevated ME geopolitical risk; headwinds that appear more persistent than consensus initially priced. Load factor outlook and fuel cost volatility are weighing on near-term earnings revisions. However, intrinsic valuation remain structurally intact; current dislocations are situational rather than fundamental with potential survivorship game. Critically, yield stickiness is under appreciated; fare normalisation post-conflict is unlikely to be swift or deep, supporting a higher revenue-per-ASK floor than pre-conflict cycles. We view this as a duration-of-pain trade, not a structural impairment. The thesis hinges on conflict de-escalation as primary re-rating catalyst, with potential restructuring in the industry where too big to die actually persists, at which point the sector offers asymmetric upside relative to current entry levels. Bias: Accumulate on Weakness Catalyst: Middle East stabilisation Risk: Conflict escalation, sustained oil above $90/bbl
Singapore Airlines Limited (C6L.SI)

Singapore Airlines offers a compelling re-rating case within the sector thesis. SIA's Changi hub positions it as the primary structural beneficiary of ME carrier displacement on East Asia–Europe routing; a share gain dynamic that is situational in origin but potentially sticky in duration, as passenger loyalty and corporate contract rebooking tend to lag conflict cycles. Balance sheet remains sector-leading, with sovereign backing providing a floor on distress risk. Ancillary revenue mix and premium cabin yield further insulate earnings from load factor volatility. We view C6L as the cleanest long expression of the ME normalisation thesis within Asia-Pacific aviation.

Bias: Buy on weakness | Key Catalyst: ME de-escalation + East Asia–Europe pax rerouting | Key Risk: Prolonged conflict sustaining fuel cost elevation; ME carrier capacity re-entry compressing SIA yield on recovery

*Factset	Mar 24	Mar 25	Mar 26(E)
PER	10.51x	8.03x	18.72x
PBR	1.16x	1.29x	1.29x
EV/EBITDA	3.50x	4.34x	4.94x
EV/EBIT	6.64x	6.83x	10.24x

Cathay Pacific Airways Limited (0293.HK)

Cathay presents a dual-catalyst structure — ME de-escalation and China outbound travel recovery — making it one of the more asymmetric setups in the watchlist. As a world-class East-West connector on the Eurasian axis, Cathay stands alongside SIA as a direct beneficiary of ME carrier displacement on long-haul routing, with HK's hub geography providing a natural alternative corridor. Pricing power is decisively elevated at current demand-supply conditions, supporting near-term yield strength even ahead of full volume recovery. However, the HK geopolitical overhang remains a structural discount factor that caps re-rating potential relative to SIA; institutional appetite for HK-listed names carries an idiosyncratic risk premium that is unlikely to fully compress until macro-political visibility improves. Monitor for entry; the thesis is intact but the discount is warranted.

Bias: Monitor / Selective accumulation | Key Catalyst: ME stabilisation + China outbound volume recovery | Key Risk:HK geopolitical re-escalation; China outbound demand disappointment; institutional discount on HK listing persisting

*Factset	Dec 24	Dec 25	Dec 26(E)
PER	7.16x	7.68x	8.96x
PBR	1.17x	1.39x	1.26x
EV/EBITDA	3.03x	-	3.30x
EV/EBIT	5.93x	-	6.74x

International Consolidated Airlines Group (IAG.L)

IAG's multi-brand architecture — BA, Iberia, and Vueling — provides meaningful route diversification, with relatively limited direct ME exposure compared to Asian hub carriers, making the crude-driven selloff appear technically oversold relative to fundamental impact. BA's transatlantic premium yield recovery remains the core earnings engine, with London Heathrow's structural capacity constraint acting as a durable pricing floor that peers cannot replicate. The oneWorld alliance and Avios ecosystem add loyalty revenue stickiness that is underweighted in current market pricing. The discount appears disproportionate to actual earnings sensitivity — crude headwinds are real but transient, while Heathrow's slot-constrained premium positioning is permanent. Recovery trajectory will be led by BA's Atlantic book, with Iberia and Vueling providing volume optionality on European leisure demand.

Bias: Accumulate | Key Catalyst: Crude normalisation + Heathrow premium re-rating; BA transatlantic yield recovery | Key Risk: Prolonged oil elevation; GBP/EUR volatility on BA cost base; Heathrow operational disruption

*Factset	Dec 24	Dec 25	Dec 26(E)
PER	6.43x	6.96x	5.64x
PBR	2.87x	2.85x	1.88x
EV/EBITDA	2.49x	2.84x	2.32x
EV/EBIT	3.95x	4.44x	3.60x

Ryanair Holdings plc (RYA.IR)

Ryanair is the structural hedge within the watchlist — the only pure-play LCC with minimal direct ME exposure, making the ~10% drawdown from end-February levels a reactive, sentiment-driven dislocation rather than a fundamentally justified re-rating. The irony is precise: Ryanair's disciplined cost architecture and fuel hedging programme are designed exactly for this risk environment, meaning the market is discounting the name that is best operationally positioned to absorb the shock. Intra-Europe discretionary demand remains the core revenue read, and consumer travel appetite has shown material resilience against macro headwinds through recent cycles. Valuation will remain the tightest in the group on a P/E and EV/EBITDAR basis — a perennial characteristic — but the current entry is anomalously wide relative to earnings defensibility. Ryanair wins on ME resolution; it also wins if the conflict drags, as capacity discipline and hedging insulate margins where full-service peers bleed.

Bias: Accumulate | Key Catalyst: Sentiment normalisation + intra-Europe summer demand confirmation | Key Risk:European consumer recession; fuel hedge roll-off at elevated crude; ATC disruption on intra-Europe routes

*Factset	Mar 24	Mar 25	Mar 26(E)
PER	12.56x	12.80x	11.81x
PBR	3.15x	2.82x	3.17x
EV/EBITDA	7.24x	6.67x	6.63x
EV/EBIT	10.97x	11.86x	10.32x

American Airlines Group (AAL.Nasdaq)

AAL is the most binary name in the watchlist — leverage remains the dominant overhang, with the balance sheet structurally limiting re-rating ceiling even in a constructive recovery scenario. However, the revenue base warrants more nuance than the risk profile alone suggests: US domestic demand provides a high-volume, structurally resilient anchor that is largely insulated from ME conflict dynamics, while transatlantic routes offer yield upside on recovery without the same hub-geography dependency as Asian carriers. Intra-Americas connectivity adds a further natural hedge layer, diversifying revenue away from the conflict corridor entirely. Critically, the US as a net crude exporter introduces a structural fuel cost asymmetry that is underappreciated in a sector-wide oil sensitivity read — AAL's effective exposure to crude elevation is arguably narrower than the market's blunt application of sector discount implies. The thesis is not clean, but the diversification profile and domestic demand floor make the current risk-reward worth monitoring for the risk-tolerant allocation.

Bias: Monitor / High-risk allocation only | Key Catalyst: US domestic demand resilience confirmation + crude normalisation; ME de-escalation unlocking transatlantic yield | Key Risk: Balance sheet stress under prolonged high rates; crude spike overwhelming US producer hedge benefit; US consumer softening on recession risk

*Factset	Dec 24	Dec 25	Dec 26(E)
PER	14.86x	91.40x	7.80x
PBR*	-2.88x	-2.72x	-
EV/EBITDA	6.76x	8.39x	6.26x
EV/EBIT	10.74x	19.85x	11.55x

*PBR not meaningful — negative book equity post-COVID leveraged recapitalisation; EV/EBITDA is the relevant valuation anchor

 

2. Defence industry: Escalating geopolitical tensions across multiple theatres are structurally re-rating sovereign defence budgets, with NATO burden-sharing pressure, Middle East instability, and Indo-Pacific posturing collectively driving a multi-year procurement upcycle that is increasingly difficult for governments to defer. The demand signal is no longer episodic — it is policy-embedded, with several European nations now legislating minimum GDP-percentage defence floors. However, the sector has meaningfully re-rated ahead of earnings delivery; the ~30% run since February demands discipline on entry, as near-term positioning is crowded and sentiment-driven upside is largely captured. The secondary risk is non-trivial: a rapid geopolitical de-escalation — however unlikely in the base case — could trigger a sharp unwind in defence multiples faster than procurement backlogs can provide fundamental support. The thesis remains intact on a 12–24 month horizon, but current levels call for selective accumulation over aggressive chasing. Bias: Selective accumulate / Trim momentum exposure Catalyst: Defence budget legislation + NATO procurement cycle acceleration Risk: Valuation compression on de-escalation; contract delivery delays offsetting order book narrative
Hanwha Aerospace (012450.KS)

The standout pure-play in the Korean defence upcycle, riding a structural trust premium that Korean armament has rapidly earned across multiple theatres. Land Systems order backlog reached KRW 37.2 trillion by end-2025, securing delivery pipeline through ~2030 and providing earnings visibility that most Western peers cannot match at equivalent growth rates. Management reaffirmed 20–25% CAGR revenue growth guidance through 2030, underpinned by K9/Chunmoo export momentum and KF-21 engine ramp commencing 2026. The geopolitical positioning is a under appreciated structural edge: Korea's neutral-adjacent image — a traditional US ally without the colonial or conflict baggage of Western exporters — makes it the path-of-least-resistance supplier for both NATO-aligned European rearmament and Middle Eastern sovereigns navigating the Iran conflict dynamic, opening revenue pipelines that BAE or Rheinmetall cannot access with equivalent ease. Current price ~₩1,308,000, up ~97% over the past year; analyst consensus target at ₩1,610,313 implies ~23% residual upside. Valuation is no longer cheap at 27x trailing P/E, but backlog depth, CAGR visibility, and geopolitical access premium collectively justify a structural accumulation posture on pullbacks.

Bias: Monitor / Accumulate on pullback | Key Catalyst: KF-21 engine mass production (2026 ramp); European NATO export contracts | Key Risk: KRW appreciation compressing export margins; execution risk on simultaneous multi-programme delivery

*Factset	Dec 24	Dec 25	Dec 26(E)
PER	6.99x	32.98x	26.65x
PBR	2.97x	5.00x	5.64x
EV/EBITDA	14.68x	14.71x	14.68x
EV/EBIT	17.45x	18.86x	17.42x

Rolls-Royce Holdings plc (RR.L)

RR is a nuanced defence play where only 1/4 of underlying revenue accounts for defence, making it a partial rather than a pure-play thesis expression. Near term defence read-through is notably via Power Systems not the core aerospace division. The CFO flagged that defence budget growth shows up first in Power Systems, which operates on shorter governmental cycles, where RR holds a leading land and naval positions. FY2025 underlying revenue reached £20.1b with underlying profit of £3.5b; recent Bundeswehr Puma IFV PowerPack contract adds to a strengthening order pipeline.

Bias: Hold / Selective accumulate | Key Catalyst: Power Systems defence order flow acceleration; civil flying hour recovery sustaining MRO revenue | Key Risk: Over-reliance on civil aviation re-rating already priced; defence contribution too small to move the needle independently

Airbus SE (AIR.PA)

Bias: Hold / Long-term accumulate | Key Catalyst: Production rate normalisation; Defence & Space margin recovery | Key Risk: P&W engine shortage persisting; forward P/E ~29x leaves limited room for delivery misses

BAE Systems plc (BA.L)

Summary: Buy at £23.3 current; DCF base case £30.55 (+31%), Iran upside £33.67 (+45%) — underpinned by £83.6bn sole-source backlog and full-spectrum platform coverage (air/land/maritime/EW), positioning BAE as the structural default recipient of NATO's rearmament cycle.

Link to the below:

3. Emerging Markets Finance
Rising US and global inflation, driven by ME geopolitical risk, has materially shifted the expected rate cycle narrative — the Fed, once under sustained pressure from the Trump administration to cut, has notably changed its tone since the last FOMC; zero cuts in 2026 are now an entirely plausible outcome, effectively closing the door on the USD easing thesis that underpinned conventional EM financial re-rating calls entering year-end 2025. However, the two names in this watchlist are compelling precisely because their investment theses contain structural gaps with that narrative. Singapore operates a fundamentally distinct monetary framework — MAS uses currency appreciation as its primary inflation tool, making SGD strength a policy response to the oil shock rather than a casualty of it; with SGD outperforming Asian peers significantly since conflict onset, the macro headwind inverts into a capital flow tailwind as regional wealth seeks safe haven jurisdiction. India presents a Fed-independent domestic compounding story — GS forecasts 2026 real GDP growth at 6.9% YoY with private consumption accelerating to 7.7%, above consensus, driven by domestic policy easing and structural demand expansion substantially insulated from external rate cycle dynamics. The thesis here is not EM beta — it is two structurally differentiated franchises that win in a prolonged high-rate, strong-USD environment for separate and non-overlapping reasons.
Bias: Selective accumulate Key Catalyst: SGD safe haven capital inflow → DBS wealth AUM expansion; India domestic credit acceleration → ICICI loan book compounding Key Risk: Iran escalation to full Hormuz closure triggering global recession — the one scenario that impairs both theses simultaneously; INR depreciation eroding IBN's USD-reported returns
DBS Group Holdings Ltd (D05.SI)

DBS is best reframed not as a rate play but as a structural beneficiary of safe haven capital reallocation. As ME instability deepens, HNW flows and family office capital are accelerating their concentration into Singapore — directly feeding DBS's wealth management fee income line, which is increasingly the earnings engine replacing NII as the primary growth driver. MAS's exchange rate-centric policy framework creates a self-reinforcing dynamic: capital inflows strengthen SGD, a stronger SGD attracts further inflows, and MAS welcomes the appreciation as its primary tool for containing imported inflation — a policy posture that meaningfully differentiates Singapore from every other Asian central bank in the current oil shock environment. NIM compression is real but manageable; the structural shift from rate-driven to fee-driven earnings is the 2026 thesis anchor, with wealth management and transaction banking providing the offset. A ~6% forward dividend yield and active S$8bn capital return programme defend the downside through the transition.

Bias: Accumulate on weakness | Key Catalyst: ME capital flight into Singapore → wealth AUM expansion; MAS SGD appreciation posture sustained | Key Risk: Full Hormuz closure impairing Singapore's trade and aviation hub function; MAS capital surcharge on DBS persisting longer than expected

ICICI Bank Limited (IBN.BA)

ICICI carries the most Fed-independent thesis in the watchlist. Fitch raised India's FY26 GDP forecast to 7.5%, explicitly citing low external dependency as insulation from US tariff and geopolitical dynamics — a structural buffer that peers in more trade-exposed EM economies cannot credibly claim. RBI concluded its easing cycle at repo rate 5.25% in February, maintaining a neutral stance and operating an entirely independent policy cycle from the Fed — meaning the prolonged US hold scenario that pressures other EM central banks creates no direct transmission risk for India's domestic credit environment. Loan momentum remains robust — total advances grew 11.5% YoY in Q3-FY26 with gross NPA at 1.53% and net NPA at 0.37%, among the strongest asset quality metrics in Asian banking. India's domestic credit growth is a structural story driven by consumption penetration and financial inclusion policy, not by global rate direction — making IBN the rate-agnostic compounder in the pair.

Bias: Accumulate | Key Catalyst: India domestic consumption acceleration; private credit penetration expansion; RBI independent cycle maintained | Key Risk: INR depreciation diluting USD-reported returns (USD/INR YTD +4.2%); sustained high oil prices pressuring India's current account; unsecured lending deterioration on consumer stress