CN/HK equities solid on return from holidays, although econ stresses showing amid US trade war

Asia market update: CN/HK equities solid on return from holidays, although econ stresses showing amid US trade war; Asian currencies overshoot eases.

General trend

- Chinese and Hong Kong markets reopened after holidays to outperform Asia (Shanghai outperformed +1%, with Nikkei and Kospi remaining closed). HK stocks said to be rising on optimism about foreign investors buying local assets.

- However, in China some signs of business stress during ongoing US trade war. Warnings that Chinese companies need bank and credit support to insulate against external trade shocks, while China Apr Caixin Services PMI maintained its 27th month of expansion but was the softest since Sept 2024.

- Trade impacts appearing with Hong Kong freight forwarding industry reported to have 41% of container capacity to the US west coast cancelled for the week starting May 12th.

- 46 A-share companies from China said to be planning to list in Hong Kong as of May 5th, described as a ‘swarm’. (Note: this may be a potential source of the funds flowing into HK recently, forcing the HKMA to sell a record amount of HK$ to protect the stronger end of the HK$ trading band at 7.75 v USD [Trading band is trading band between HK$7.75-7.85].

- Concern with Taiwanese life insurers amid TWD sudden burst (as high as 27 overnight, recovered to 30 today) being caught with 20-25% in long naked USD positions. [** Note: potential LTCM ‘black swan’ event and Asian financial crisis of 1998 reprised?].

- In late Monday trading the Korean Won continued its recovery post-martial law (Dec 2nd, 2024) to shoot up to as high as 1,364, highest since Oct 2024.

- China PBOC set the daily Yuan fix for the first time since Apr 30th following extended holidays, keeping the fix steady – only very slightly stronger than the last fix. However, note that in the interim period USD/CNH saw significant strength, rising from 7.28 to as high as 7.18 handle, settling back into the 7.21 handle after today's fix.

- Thai inflation contracted for first time since Mar 2024, for both headline rates m/m and y/y, blamed on fuel prices, govt subsidies, farm products

- In US news, Agriculture Sec Rollins will visit Japan, India, Vietnam, England and Italy - an opportunity to leverage Trump's tariffs to open Asian and some European markets for US food exporters.

- Spot Gold and WTI Crude both continued to recover off recent lows.

- US equity FUTs -0.2% to -0.4% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Tue May 6th (Tue night US Mar Trade Balance).

- Wed May 7th NZ Q1 Jobs (Wed night US FOMC Rate Decision + Powell).

- Thu May 8th JP BOJ Minutes, (Thu eve UK BOE Rate Decision).

- Fri May 9th JP Mar Cash Earnings, CN Apr Trade Balance.

- Sat May 10th CN Apr CPI.

Holidays in Asia this week

- Mon May 5th China, Hong Kong, Japan, South Korea, Thailand.

- Tue May 6th Japan, South Korea.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,154.

- Australia Mar Building Approvals M/M: -8.8% v -1.5%e.

- Australia Mar Household Spending M/M: -0.3% v +0.2%e; Y/Y: 3.5% v 3.9%e.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 87.5 v 83.4 prior.

- Australia sells A$300M v A$300M indicated in 4.75% Jun 2054 Bonds; Avg Yield: 4.9633% v 4.9874% prior; bid-to-cover: 2.48x v 2.71x.

- New Zealand Apr ANZ Commodity Price M/M: 0.0% v -0.4% prior.

China/Hong Kong

- Hang Seng reopens +0.3% at 22,576; Shanghai Composite reopens +0.5% at 3,295.

- CHINA APR CAIXIN PMI SERVICES: 50.7 V 51.8E (27th month of expansion, but softest since Sept 2024).

- HKMA Spokesman: Equity-related investments and appreciation of regional currencies 'back' HKD.

- HK$ HIBOR falls across the curve following interventions by HKMA - financial press.

- HKMA confirms sold $7.8B worth [record amount] of HK$ at 7.75 v USD; HKMA has now sold total HK$116.B over the past few days.

- China A-share cos. said to 'swarm' to list in Hong Kong; cites announcements by companies - China Securities Daily.

- China companies need bank and credit support to insulate against external trade shocks - PBOC-backed Financial News.

- Hong Kong freight forwarding industry negatively impacted by trade war, 41% of container capacity from the city to North America’s west coast cancelled for the week starting May 12th – SCMP.

- China May holidays inbound & outbound trips +28.7% y/y.

- China said to boost fiscal funding for data infrastructure - press.

- China PBOC Gov Pan Gongsheng: Calls on other Asian nations to work together on US tariffs [overnight update].

- Hong Kong Monetary Authority (HKMA) said to have sold $56.1B to defend FX peg [overnight update].

- China PBOC sets Yuan reference rate: 7.2008 v 7.2014 prior (Apr 30th).

- China PBOC Open Market Operation (OMO): Injects CNY405B in 7-day reverse repos; Net drains CNY682B v injects CNY423B prior (Apr 30th).

Japan

- Nikkei 225 closed for holiday.

- Japan's ruling party (LDP) said to object to importing US rice as part of tariff deal - Nikkei Asia.

- US rejects full exemption of Japan from 'reciprocal' tariffs; Would consider lowering 14% Japan-specific tariff - Japanese press.

Korea

- Kospi closed for holiday.

Other Asia

- Follow Up: Taiwan regulator said to meet with life insurance companies amid TWD rise - US financial press.

- Philippines Apr CPI M/M: -0.4% v -0.1%e; Y/Y: 1.4% v 1.8%e (2nd month below target range).

- Singapore Apr PMI (whole economy): 52.8 v 52.7 prior.

- India said to offer zero-for-zero tariffs on auto parts and steel from US – press.

- Vietnam Apr Retail Sales Y/Y: 11.1% v 10.8% prior.

- Vietnam Apr Industrial Production Y/Y: 8.9% v 8.6% prior.

- Vietnam Apr Trade Balance: $0.58B v $0.8Be.

- Taiwan Central Bank Gov Yang Chin-Long: Will not manipulate the currency; will try our best to maintain market stability; Recent TWD currency appreciation fueled by foreign capital inflows into local markets [overnight update].

- Taiwan Trade Office: Tariff talks with U.S. last week did not discuss FX rate or include Taiwan Central Bank [overnight update].

North America

- US President Trump: Will announce over next 2 weeks [comments on tariff decisions]; will announce over next 2 weeks [comments on pharma tariffs].

- US Pres Trump to sign EO streamlining Pharma production rules to encourage domestic drug production - press.

- (US) Speaker Johnson (R): GOP remains on pace to pass Trump agenda by Memorial Day or shortly thereafter; Agenda is not facing any setbacks in the House.

- (US) Pres Trump: Film industry has been decimated by other countries; Will meet with some film industry officials; Wants to make sure industry is happy with tariffs idea - comments to media.

- (US) White House Spokesperson: Although no final decision on foreign film tariffs have been made, the administration is exploring all options to deliver on Pres Trump's directive.

- US Treasury Sec Bessent: We're getting close to some trade deals, maybe as early as this week; Highly confident that 17 important trading partners ex-China have presented very good trading proposals.

- US Treasury Sec Bessent: Trumps tariffs, tax cuts and deregulation agenda are interlocking parts to drive long-term investment to the US; Lauds US resilience; US Will solidify position as 'Home of global capital' - Milken Institute.

- (US) Treasury's $58B 3-year note auction results: draws 3.824% V 3.784% prior; BTC 2.56 V 2.47 prior.

Europe

- (IE) Ireland Apr PMI Services: 52.8 v 55.3 prior (49th month of expansion).

- (IE) Ireland Apr Consumer Confidence Index: 58.7 v 67.5 prior.

- French PM Bayrou said not to be ruling out referendum on budget given concerns that big cost-cutting plans could result in widespread protests.

Levels as of 01:20 ET

- Nikkei 225 closed, ASX 200 flat, Hang Seng +0.8%; Shanghai Composite +1.0%; Kospi closed.

- Equity S&P500 Futures -0.2%; Nasdaq100 -0.4%; DAX -0.2%; FTSE100 -0.2%.

- EUR 112.80-1.1328; JPY 143.56-144.28; AUD 0.6443-0.6472; NZD 0.5944-0.5984.

- Gold +1.4% at $3,367/oz; Crude Oil +1.7% $58.07/bbl; Copper +0.7% at $4.7390/lb.