Asian equities had a turbulent week of trading, impacted by both positive economic data from China and geopolitical risks from the US. China reported better-than-expected export growth year-over-year, and the Caixin Manufacturing and Services PMIs beat estimates for May. E-commerce and local services giant Meituan also exceeded expectations in its fourth-quarter earnings report. Alibaba’s 6.18 shopping festival kicked off this week, with 28 brands generating $14 million in promotional sales in the festival’s early days.
Mainland China markets saw a slight increase while Hong Kong was lower, with markets closely watching US non-farm payrolls, which surpassed expectations and dampened hopes for rate cuts. There were concerns about congressional proposals to limit purchases of batteries from CATL, the world’s largest battery maker, affecting the electric vehicle ecosystem. However, this is seen as unlikely to have a significant impact due to the influence of Detroit automakers using CATL’s technology in their electric models.
China’s exports increased by +7.6% in May, beating expectations, but failed to boost markets overnight. Regional banks in Guangdong and Guangxi provinces have reportedly lowered mortgage rates to support real estate demand. The clean energy ecosystem received a boost with news of government agencies conducting research on wind and solar power, particularly in remote provinces like Inner Mongolia. In India, markets sold off as the BJP party failed to retain its majority in the legislature, prompting EM investors to consider rotating into other markets such as China.
Meituan experienced a drop overnight, possibly due to profit-taking following its strong earnings performance. Value factors outpaced growth factors significantly in both Hong Kong and Mainland China markets. The Hang Seng and Hang Seng Tech indexes closed lower, while Mainland investors bought a net $461 million worth of Hong Kong-listed stocks and ETFs overnight. Shanghai, Shenzhen, and the STAR Board had mixed performances, with the top-performing sectors being Materials, Utilities, and Industrials, while the worst-performing sectors were Information Technology, Communication Services, and Consumer Staples.
Looking ahead, an upcoming webinar will discuss the potential impact of the US presidential election on US-China relations. Exchange rates and bond yields remained relatively stable, with the CNY per USD at 7.25. Copper and steel prices saw slight increases. Overall, Asian markets navigated a week of mixed signals, balancing positive economic data with geopolitical uncertainties.
