2026-04-27 12:01

Key takeaways Month-to-date, the JPY has been the weakest G10 currency, and the EUR has also underperformed. Our base case remains for USD-JPY to move lower by yearend, but we see potential upside risks over the near term. If energy-related disruptions continue and Eurozone activity weakens further, the EUR is likely to face downside risks. FX markets are likely to remain sensitive to geopolitical developments. Escalating Middle East tensions typically support the USD, while de-escalation tends to weigh on it. Within the G10, the JPY has been the weakest currency month-to-date, with the EUR not far behind (Bloomberg, 23 April). Bearish sentiment towards JPY is consistent with Japan’s macro exposure. Japan is the largest net energy importer among advanced economies (scaled by GDP) and has deep economic ties with the Gulf region. Despite these headwinds, USD-JPY has traded in an unusually narrow range recently. A cautious Bank of Japan (BoJ) and domestic fiscal challenges may delay USD-JPY’s convergence lower towards levels implied by rate differentials (Chart 1). Key fiscal watchpoints include the possibility that funding for fuel subsidies may run out in mid/late May and that a supplementary budget may be proposed. Offsetting factors include net portfolio inflows (foreign buying of Japanese equities and bonds month-to-date in April, alongside Japanese selling of foreign bonds) and firm verbal intervention from the Ministry of Finance (Katayama: “bold action”; Bloomberg, 17 April), may help cap USD-JPY. Our base case remains for USD-JPY to decline by year-end. Near-term upside risks include a more dovish BoJ, a more hawkish Federal Reserve (Fed), escalation in the Middle East conflict and renewed oil-price highs, and further fiscal slippage in Japan. Source: Bloomberg, HSBC Source: Bloomberg, HSBC Turning to the EUR, Middle East developments have been the key driver, but cyclical factors (such as growth, inflation, and policy response) are likely to determine the magnitude of moves. Eurozone flash composite PMI disappointed in April, with the private sector returning to contraction for the first time since December 2024. Price components also point to a stagflationary impulse. If disruption around the Strait of Hormuz persists, the negative impact on Eurozone growth and inflation is likely to intensify, undermining the EUR (Chart 2). https://www.hsbc.com.my/wealth/insights/fx-insights/eur-and-jpy-underperformance-risks/

2026-04-24 12:01

Key takeaways After dipping in March, PMI Flash ticked up in April, led by higher output, new orders, finished goods inventories, and jobs. Even our 100 indicators of growth database suggests manufacturing front-loading and inventory build-up, as firms hedge against the risk of energy input shortages. We expect the ongoing energy crisis to weigh on growth, but the full impact may only emerge after front-loading fades. An unexpected rise After dipping in March, the PMI Flash Manufacturing index rose again in April (from 53.9 to 55.9; see Exhibit 1). Input costs rose at the fastest pace in three years. Output prices picked up pace as well (although not as rapidly as input prices; see Exhibit 2). Survey respondents mentioned that gas shortages are pushing up prices. Yet, all of this did not hurt activity. New orders, output, and employment rose quickly. In fact, the rate of job creation reached a 10-month high (see Exhibit 3 and Exhibit 4). The last time we had a major, though different, supply shock, was during the pandemic. PMI indices contracted over several months then. What caused this unexpected exuberance in April amid an energy crisis? A case of front-loading production ... Our sense is that it is a case of front-loading production. Consumers may want to purchase before retail prices are raised significantly, leading to a rise in new orders. The pump prices of petrol and diesel haven’t been raised yet, and this is protecting purchasing power. Meanwhile, manufacturers may want to build inventories before energy costs rise further. Indeed, input inventories picked up markedly. And holdings of finished goods increased for the first time in six months and at a quicker pace since 2015 (see Exhibit 5). We see this more clearly now compared to previous episodes of oil price increases (eg, 2022). One reason could be that this time it is not just uncertainty around prices, but also availability of energy inputs. Manufacturers may want to produce and stock up before raw materials run out. ... with sectoral differences Having said this, there are sectoral differences that must be noted. Heavy industry versus retail: The recently released core industries data shows that some heavy industries have slowed (see Exhibit 6). These include sectors like fertiliser that are dependent on natural gas, which is in short supply. Quota restrictions around the availability of gas have led to cuts in production. These sectors are not able to partake in production front-loading, as some retail-facing sectors are (continued overleaf). Rural versus urban: Some unrelated developments are also driving new orders. For instance, rural demand is strong on the back of post-harvest incomes from the recently sold winter crop. We see a reflection of this in the spike in currency in circulation and two-wheeler sales (both indicators of rural demand; see Exhibit 7 and Exhibit 8). Formal versus informal: It is also possible that the formal sector is holding up better than the informal sector, as the former has more buffers and access to cheaper energy. Workers in the informal sector may not have the same social security and may be the first to reverse migrate to rural homes during shocks and shutdowns. 100 indicators of growth: Flavours and trajectory We believe the growth shock from the energy crisis will be meaningful as it is not just a price shock, but also an availability of energy issue. We forecast that if oil averages USD80/bbl (USD100/bbl) in FY27, GDP growth could come in at 6.3% (5.7%), lower than the Statistics Office’s 7.6% estimate for the previous year (see key forecasts below). So far, our 100 indicators of growth database shows that, of the data available in March, the proportion growing positively has fallen from 80% to 60% (see Exhibit 9). Much of the fall is in agriculture (which includes fertiliser production), mining (which requires some gas derivatives), and construction (some steel plants are powered by natural gas). Interestingly, overall manufacturing is the only sector continuing to improve, in line with the April Flash PMI and GST revenues for the month. All said, the growth drag can’t be escaped, even though it may show up fully in later quarters, especially when front-loading ends. It will be a tough balancing act for the Reserve Bank of India (RBI) to address rising inflation and slowing growth. We believe the bar for rate hikes is not very low. If oil prices average USD80/bbl in FY27 (and there is a moderate El Niño), inflation will likely remain below the 6% upper bound, and the RBI may not hike rates. However, if average oil prices cross USD100/bbl in FY27, inflation will likely cross 6%, and rate hikes may be in order. https://www.hsbc.com.my/wealth/insights/market-outlook/india-economics/april-pmi-flash-s-intriguing-rise/

2026-04-20 08:05

Key takeaways Gold prices have been highly volatile this year, with the nearterm outlook sensitive to Middle East developments. Gold could resume its rally in the post-conflict environment… …supported by rising global public debt and other risks. Gold has been highly volatile this year, rising to a record cUSD5,450 per ounce on 30 January before falling to a 2026 low of cUSD4,405 per ounce on 23 March, and recovering to cUSD4,800 per ounce. The pullback reflects heavy liquidation amid USD strength (Chart 1), higher US yields, elevated oil prices, weaker equities, alongside the ongoing Middle East conflict. Since the escalation, markets have priced out at least 25bp of expected easing from the Federal Reserve (Fed) by end-2026 (Chart 2), which is also a headwind for gold. Over the near term, our precious metals analyst expects gold to remain headlinedriven. FX is also likely to remain sensitive to shifts in geopolitical risk, with increased tensions typically supporting the USD and vice versa. But over the longer term, we still see a soft USD, which should be supportive for gold. Even if energy-market after-effects persist, a post-conflict environment could allow gold to maintain upward momentum, underpinned by geopolitical risk, economic policy uncertainty, potential USD weakness, shifts in the global order, and ongoing central bank demand. Renewed trade frictions may provide additional support, though likely less than in 2025. Source: Bloomberg, HSBC Source: Bloomberg, HSBC A key longer-term tailwind is deteriorating fiscal discipline, in our precious metals analyst’s view. The International Monetary Fund’s (IMF) Fiscal Monitor report released on 15 April notes global public debt rose to just under 94% of GDP in 2025 and is set to reach 100% by 2029, one year earlier than projected in April 2025. High gold prices are reshaping fundamentals: Mine supply is expected to increase modestly in 2026-27, while recycling should rise more meaningfully after a muted response to date. On the demand side, elevated prices are weighing on jewellery and coin purchases, particularly in price-sensitive emerging markets and increasingly in developed markets. These shifts have not yet undermined the broader rally, but risks would increase if investment demand remained subdued for an extended period. https://www.hsbc.com.my/wealth/insights/fx-insights/gold-to-resume-its-rally/

2026-04-20 07:04

Key takeaways Global markets have shown remarkable resilience to the recent energy shock. Following the outbreak of the US-Iran conflict, the S&P 500 didn’t just recover in line with historical norms for geopolitical shocks – it subsequently surged. Trade relations took top billing at Presidents Xi and Trump’s meeting in Beijing last week. The talks took place against a backdrop of surging Chinese exports reminiscent of the early 2000s boom – but this time with an increasingly high-tech focus. With the Middle East conflict in its third month, the impact on Asia-centric AI supply chains is showing. Asia’s tech imports are in high demand from US firms, given the intensity of the AI buildout. But potential disruption caused by Asia’s high reliance on Hormuz-linked oil and gas flows could begin to feed back into US prices. Chart of the week – Blissful markets Analysts are talking about a new investment narrative: “the Bliss Trade”. It’s a world where markets behave as if governments will always step in, spend big, and cushion every shock. In short, it’s BLISS: Big Lasting State Support. The telltale price action for the Bliss Trade is simple: stocks up, bonds down. Sector leadership is “K shaped” and industrial policy-led, while fiscal pressure pushes up term premia and keeps bond vigilantes alert. So, are markets past the point of maximum bliss? Or heading for euphoria? There are a few signals to watch: First, profit growth is going gangbusters in the US and North Asia. But much of it is in the technology sector, and investors worry that earnings are too narrow. Yet, order books look full, and the AI boom is spilling into other sectors. The Bliss Trade only holds if profits stay strong and broaden out. Second, ballistic profits mean that forward price/earnings ratios aren’t yet a constraint on the Bliss Trade. But trailing metrics look more stretched: the US price/book is above 5x, and above 8x for the NASDAQ. If profits wobble, valuations could quickly matter again for market direction. Finally, capex booms normally push up the cost of capital – but not in this cycle, so far. Treasury yields remain in a 4.0%-4.5% range, and credit spreads are near multi-decade lows. But there are other constraints. AI compute costs have almost doubled. Energy prices have spiked. Crowding out can show up in different places and upset the Bliss Trade. For investors, a market cycle powered by fiscal and industrial policy – not monetary policy – feels unfamiliar. But for now, markets appear BLISSfully confident that state intervention will support valuations and keep price and profits momentum intact. Market Spotlight What’s on the menu? Diversification is famously called “the only free lunch in investing”. But investors need to be picky. That’s because correlations in asset performance have been on the rise, and in recent bouts of stock market volatility, traditional sources of protection haven’t always been reliable. The macro outlook is complicated and recent market gains have been narrow, so thinking more broadly about how to defend against potential volatility makes sense. At the heart of this is the stock-bond correlation. When that correlation is negative, government bonds can be a hedge against stock volatility. But when inflation risk, rising real rates, or fiscal uncertainty dominate, stocks and bonds can fall in tandem. Post-pandemic, we’ve seen more of this – with market volatility in March being a good example. In the search for havens, there are other ways to diversify within risk assets. They include defensive sectors (e.g. utilities), equity factors (e.g. value), FX and commodities, and options. But in each case, the macro backdrop has a big influence. Assets that were defensive in one episode have not always played the same role in the next. So, rather than seeking an evergreen hedge for all conditions, investors need to think flexibly about their free lunch. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. Past performance does not predict future returns. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Source: HSBC Asset Management, Factset, Bloomberg, Macrobond. Data as at 7.30am UK time 15 May 2026. Lens on… What energy shock? Global markets have shown remarkable resilience to the recent energy shock. Following the outbreak of the US-Iran conflict, the S&P 500 didn’t just recover in line with historical norms for geopolitical shocks – it subsequently surged. This momentum is largely driven by the AI boom, which has provided a massive boost to US earnings performance. Meanwhile, strong gains in tech-heavy markets, such as Taiwan and South Korea, coupled with a stable US dollar, have helped the MSCI EM index outpace developed markets (DM) year-to-date. This is not the 2022 playbook. Impressive performance in EM assets extends to fixed income markets. EM Bond Index (EMBI) spreads – capturing USD-denominated bonds issued by EM governments and corporates – are back at levels last seen before the global financial crisis, but their DM counterparts have remained elevated. The EMBI has a much more diversified country mix and lower tech-weighting than the MSCI EM index, and highlights how robust underlying macro and structural fundamentals, policy credibility, and country diversification are helping to keep volatility low and insulate against economic shocks. Tech-tonic shift Trade relations took top billing at Presidents Xi and Trump’s meeting in Beijing last week. The talks took place against a backdrop of surging Chinese exports reminiscent of the early 2000s boom – but this time with an increasingly high-tech focus. Exports remain a key growth driver for China, and the pick-up can be seen in a substantial widening of its trade surplus. A major reason for this has been a structural shift towards high-tech and green energy, moving the focus from low-cost consumer goods to advanced manufacturing. Robust state support, subsidies and low-interest loans have been key catalysts. Given weak domestic demand, manufacturers have opted to redirect overcapacity to foreign markets, particularly in Asia and Europe. For global investors, the export boom is a major challenge to advanced manufacturers in the West. But it could have the benefit of acting as a significant disinflationary force, offsetting upside inflation risks from the Middle East energy shock. Either way, China’s relentless manufacturing push and strategic focus on high-tech and “new quality productive forces”, will likely continue. When the chips are down… With the Middle East conflict in its third month, the impact on Asia-centric AI supply chains is showing. Asia’s tech imports are in high demand from US firms, given the intensity of the AI buildout. But potential disruption caused by Asia’s high reliance on Hormuz-linked oil and gas flows could begin to feed back into US prices. Energy remains a binding constraint on scaling AI infrastructure. Data centres and chip fabs are power-hungry, and capacity growth is already lagging demand. Qatar is now a dual chokepoint: a major LNG supplier and the source of over a third of global helium, which is critical in silicon wafer production. Reports suggest damage to Qatar’s capacity could mean a repair window of up to five years, signalling a persistent shock. The semiconductor industry is no stranger to supply disruptions. Some companies have already taken mitigating steps, such as helium recycling. But if bottlenecks persist, dwindling inventories could stymie AI memory and hardware production. That could be a headwind to the AI buildout and weigh on the recent surge in tech profits, potentially leading to a repricing of large-cap tech stocks, and leave economies like Taiwan and South Korea – and by extension, the US – exposed. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Costs may vary with fluctuations in the exchange rate. Source: HSBC Asset Management. Macrobond, Bloomberg, Refinitiv, Factset. Data as at 7.30am UK time 15 May 2026. Key Events and Data Releases Last week This week For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Source: HSBC Asset Management. Data as at 7.30am UK time 15 May 2026. Market review Global equities were mixed as investors weighed strong Q1 US earnings against ongoing geopolitical uncertainty. The meeting between the US and Chinese leaders was also a focus. In the US, AI-driven euphoria lifted the S&P 500 and Nasdaq indices to fresh highs. The Euro Stoxx 50 edged higher, alongside the rebound in the UK FTSE 100. Conversely, the Nikkei 225 retreated as JGB yields climbed further to new multi-decade highs. Other Asian markets diverged, with the tech-heavy Kospi hitting a new high on continued earnings optimism. In rates markets, US Treasury yields rallied on rising inflation worries, while UK Gilt yields were on course to end a volatile week higher amid lingering political uncertainty. In FX markets, the US dollar strengthened against major peers. In commodities, oil prices advanced, while gold prices weakened. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-weekly/

2026-04-17 12:01

Key takeaways Stoking domestic demand and rebalancing trade are key priorities for China’s government this year. Fixed asset investment is showing signs of a recovery while manufacturing may gain from reduced tariff uncertainty. Fiscal and monetary measures, alongside structural reforms, are expected to support consumption. China data review (Q1 & March 2026) GDP rose by 5% y-o-y in Q1, putting growth on track for this year’s government target, but global geopolitical uncertainties may still pose challenges. Growth was largely helped by outperforming exports in Jan-Feb and accelerated fiscal policy. We expect China to keep its focus on “doing one’s own thing well” with continued policy support, primarily via fiscal policy and new spending tools. Fixed Asset Investment rose 1.6% y-o-y in March. Infrastructure investment remained a bright spot, up 7.4%; however, property continued to drag, with overall investment falling by 11% y-o-y. Nonetheless, some property indicators improved a touch: New primary home sales by volume fell 10% y-o-y versus a 16% decline in Jan-Feb, helped by demand in tier-1 cities. Industrial Production rose 5.7% y-o-y in March, softer than Jan-Feb owing to lower exports in March, Chinese New Year effects and drags from the Middle East conflict. Sector data indicates resilience in electronics and transport goods, which supported the better-than-expected headline growth. This underscores China’s strong price and quality competitiveness across related sectors. Retail Sales slowed to 1.7% y-o-y in March, mainly weighed down by a high base and a pullback in the scale of trade-in subsidies. Auto sales (-12% y-o-y) remained the key drag as the purchase tax for new energy vehicles was adjusted from a full exemption to a 50% reduction this year. Communications appliances posted double-digit growth, remaining a structural bright spot. PPI returned to the positive y-o-y territory for the first time since October 2022, rising 0.5% y-o-y in March. The primary drivers were the energy and non-ferrous metals sectors along with the ongoing anti-involution campaign. On the consumer side, CPI rose 1.0% y-o-y, partly lifted by vehicle fuel prices while gold products likely also remained a key driver. Exports eased to 2.5% y-o-y in March amidst an unfavourable base and distortions caused by some seasonal factors. However, imports rose by 27.8% y-o-y, likely driven by domestic policy push for technological upgrading and infrastructure investment, as well as strong global AI-related demand. A great rebalancing China’s 2026 growth target of 4.5-5.0% reflects a maturing economy and a strategic pivot towards sustainable, high-quality growth. The government’s focus is clear: domestic demand will be the primary engine, while there will be deliberate efforts to balance trade. On the up Recent data show fixed asset investment (FAI) is starting to recover after a rare contraction in 2025 across manufacturing, infrastructure, and property. The turnaround is driven by new government funding, RMB800bn in policy-related financial tools, and front-loaded bond quotas from the 2026 budget. Local governments now have more “seed capital” for infrastructure and urban development – last year’s RMB500bn unlocked RMB7trn in projects (people.com.cn, 2 November 2025), and a similar multiplier is expected this year. Ongoing local government debt swaps and repayments of local arrears should further ease liquidity pressure, boost business confidence, and attract more private capital for public projects. Manufacturing investment stands to benefit from reduced tariff uncertainty: following recent US policy changes – including the removal of International Emergency Economic Powers Act (IEEPA) tariffs and the introduction of a Section 122 10% tariff – China’s trade-weighted tariff rate has dropped by c10 percentage points to c25%, narrowing the gap with other major exporters. Diplomatic momentum is also building: China’s foreign minister has described 2026 as a potential ‘landmark year’ for US-China relations, with up to four presidential meetings anticipated, starting with President Trump’s visit to China (South China Morning Post, 23 March 2026). On the consumption side, support will remain robust, with another batch of RMB250bn consumer goods trade-in subsidy and a new RMB100bn fiscal-financial coordination tool to broaden support beyond goods to services and providers. Structural reforms – such as improved social welfare, pension reform, and urbanisation – are also in the pipeline to boost disposable income and raise the share of consumption in GDP over the medium term. Trade is expected to be more balanced. As outbound direct investment grows, it will partially replace direct exports, but supply chain-related trade will expand. During the National People’s Congress in March, officials pledged to “balance trade” and expand imports, e.g., agricultural products, premium consumer goods, and advanced equipment and key components (Gov.cn, 7 March). The government’s commitment to further opening-up, especially in services sectors, should help reduce frictions. Source: Wind, HSBC Source: Wind, HSBC Source: LSEG Eikon * Past performance is not an indication of future returns Source: LSEG Eikon. As of 16 April 2026, market close https://www.hsbc.com.my/wealth/insights/market-outlook/china-in-focus/a-great-rebalancing/

2026-04-17 07:04

Key takeaways US stocks and Treasuries fell. European stocks were mixed; government bonds fell. Asian stocks were mixed. Markets US stocks declined on Tuesday amid higher bond yields and rate volatility. The S&P 500 fell 0.7%. US Treasuries fell on renewed investor concerns over inflation and policy tightening risks. 10-year yields rose 8bp to 4.67%. European stocks traded mixed on Tuesday as solid corporate earnings offset geopolitical and inflation worries. The Euro Stoxx 50 ended flat. The German DAX rose 0.4% and the French CAC edged 0.1% lower. The UK FTSE 100 was up 0.1%. European government bonds fell. 10-year German bund yields rose 4bp to 3.19% while 10-year French bond yields climbed 5bp to 3.83%. In the UK, 10-year gilt yields gained 3bp to 5.13%. Asian stock markets lacked clear direction on Tuesday as investors weighed ongoing geopolitical risks and higher sovereign bond yields, with tech stocks pulling back. Japan’s Nikkei 225 fell 0.4% while Korea’s Kospi dropped 3.3%. India’s Sensex also edged 0.2% lower. Meanwhile, Hong Kong’s Hang Seng and China’s Shanghai Composite rose 0.5% and 0.9% respectively. Crude oil prices retreated on Tuesday. WTI crude for June delivery settled 0.8% lower at USD107.8 a barrel. Key Data Releases and Events Releases yesterday No major releases yesterday. Releases due today (20 May 2026 ) Bank Indonesia is expected to hike policy rates to preserve its policy credibility in prioritising FX stability. In the UK, headline inflation should be little changed as higher petrol prices are offset by a lower OFGEM energy price cap. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-daily/