- Equities: Worries over higher-for-longer rates negatively impacted global stock markets
- Credit: Strong US households imply that the mortgage market is healthy despite widening spreads. MBS a unique opportunity for government-backed yields
- FX: Stay vigilant of downside risks in the USD in June; EUR/USD to break above 1.08-1.09 range if ECB delivers hawkish interest rate cut at 6 June meeting
- Rates: Steepening for US 2Y/10Y curve is still at play; Expect ongoing steepening of CGB curve alongside commencement of CNY1tn ultra-long special sovereign bond issuance
- The Week Ahead: Keep a lookout for US Change in Nonfarm Payrolls; China Trade Balance
Related insights
Hawkish Fed rhetoric affected global equity markets. The Dow Jones, S&P 500, and the NASDAQ dropped 1.0%, 0.5%, and 1.1%, respectively for the week. Technology stocks did not perform well, while US 10Y Treasuries hit a recent high. Even though inflation data was in line with market expectations, hawkish comments from US Minneapolis Federal Reserve (Fed) President Neel Kashkari cast a pall over markets. Higher-than-expected inflation in Europe also dragged markets lower. The Stoxx 600 and the FTSE both retreated 0.5% for the week. The Nikkei 225 dropped 0.4% amid news that Japan’s industrial output fell in April. The HSI fell 2.8%, but Hong Kong markets might have retraced due to profit taking after the sharp increase in the beginning of the month. The SHCOMP dipped 0.1% as China’s PMI fell to 49.5 in May.
Topic in focus: ASEAN – A growth engine for the global economy. ASEAN's economic recovery is expected to continue in 2024, underpinned by resilient domestic demand and the easing of supply chain disruptions. While monitoring China's growth is prudent given its links with the region, ASEAN's growth outlook remains positive, supported by trade-oriented economies, recovery in the electronics cycle, and tailwinds from travel and tourism. The robust 4.7% GDP growth forecast and bottoming exports provide fundamental support. Urbanisation, demographics, and integration tailwinds also bode well for businesses expanding in ASEAN, cementing its status as a major global growth engine. Longer-term, we see opportunities in supply chain reconfiguration beneficiaries and critical infrastructure providers, particularly for commodities and steel.
Key investment themes include consumer and telecom sectors in Indonesia; Thailand's tourism and industrial names that will benefit from the visa waiver and resurgence in FDI applications; and Singapore banks, as well as retail and hospitality REITs benefitting from events. Bright spots also include Malaysia's construction industry and Vietnam’s potential re-rating due to rapid growth, low urbanisation, and possible index inclusion.
Figure 1: Tourism trends in ASEAN are on the rise
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