2026-05-19 12:01

Key takeaways The constructive tone at the first China-US presidential summit of the year was backed by concrete actions. Upside surprises from possible tariff cuts on “non-critical” goods and progress on a Board of Investment. The summit should boost business confidence, with more engagement scheduled later this year. China data review (April 2026) Retail sales slowed to 0.2% y-o-y in April, mainly due to a high base from last year and some pullback in the scale of trade-in subsidies. The weakness was concentrated in goods, with auto sales (-15.3% y-o-y) the biggest drag, weighed down by the partial removal of new energy vehicle purchase tax exemptions. By contrast, services consumption remained more resilient, with the services production index up 4.3% y-o-y in April. Fixed asset investment fell 9.4% y-o-y in April, marking a clear loss of momentum after a stronger Q1. The slowdown was broad-based, with manufacturing (-4.3%) weighed down by global uncertainties and softer domestic demand, infrastructure (-3.0%) affected by a softening of the pace of government bond issuance, and property (-19.6%) continuing to stay weak. Industrial production moderated to 4.1% y-o-y in April (from 5.7% in March) largely reflecting still weak domestic demand and a stronger pass-through from higher oil costs. Instead, external demand and high-tech manufacturing were primary drivers, as seen in the outperformance in auto and electronics production, consistent with the ongoing export strength. CPI was broadly stable in April, up 1.2% y-o-y, with the impact of the energy shock mainly concentrated on energy components while food items turned into a drag. PPI surged to 2.8% y-o-y driven by rapid oil price pass-through, AIdemand and anti-involution measures. Early signs of cost pass-through suggest downstream sector responses to core CPI will be key to monitor. Exports rose 14.1% y-o-y in April, regaining momentum as seasonal distortions faded, with strength supported by global AI demand, China’s competitiveness in transport-related goods and lower US tariffs. Imports increased 25.3% y-o-y driven by AI-driven demand and industrial upgrading while rising energy and copper prices also pushed up their import values. China-US summit: Trade and investment boosts The first China-US presidential summit of the year was to all intents and purposes a success, with President Xi noting that relations had reached “constructive strategic stability” and President Trump stating that the relations would be “better than ever before”. The positive messaging is supported by concrete actions, although some details still need to be hashed out. Agreements and discussions were broad-based, covering areas from trade and investment to market access, fentanyl and geopolitics (Table 1). Source: White House, Xinhua, CNBC, Bloomberg, Reuters, HSBC The themes were within our expectations, but there were still some upside surprises. For one, a potential reduction in tariffs in areas deemed “non-critical and non-strategic” could cover c10% of US imports from China (based on 2025 figures). This could help revitalise some direct exports to the US, which have fallen 10% year-to-date y-o-y (albeit a softer pace than last year’s 20% decline). Secondly, more concrete discussions around the setting up of a Board of Investment exceeded our expectations – we originally thought it would take more exchanges to reach such an understanding. The US administration is open to more Chinese investment in its manufacturing industries provided it does not involve sensitive areas. Ultimately, there will still need to be more details and sufficient guardrails around investments, but we see more potential for re-engagement along this front. Outbound Direct Investment (ODI) flows to the US accounted for 3.5% of total Chinese ODI in 2024, compared with a peak of 8.7% in 2016. President Trump’s business delegation included CEOs and leadership of some of US’s largest companies, ranging from technology and semiconductor companies to agriculture and finance. The White House readout emphasised discussions on improving market access for US firms, in line with China’s medium and longer-term goals of higher-level opening up, as highlighted in the 15th Five Year Plan. By the end of President Trump’s visit, no major deals had been signed, but we expect agreements to be finalised in the coming days and weeks. Ultimately, the successful summit should help restore some business confidence, with broad-based discussions and agreements building on the momentum established in Busan six months ago. This sets the stage for more constructive engagement, including potentially at least three more presidential summits this year: an invitation for President Xi to visit the White House on 24 September, the APEC summit in November in Shenzhen, and the G20 summit in December in Miami. Source: LSEG Eikon * Past performance is not an indication of future returns Source: LSEG Eikon. As of 15 May 2026, market close https://www.hsbc.com.my/wealth/insights/market-outlook/china-in-focus/china-us-summit-trade-and-investment-boosts/

2026-05-18 12:01

Key takeaways The Trump-Xi summit, which was held in Beijing on 14-15 May, concluded as an event with a mix of symbolism and selective progress. It appeared to reinforce market expectations that both countries remain focused on preventing renewed escalation in trade and technology competition, which should help limit downside sentiment. President Xi has been invited to visit the US on 24 September 2026, along with two other key international summits (APEC in November and G20 in December), setting the stage for more positive engagement between the US and China throughout the year. For the Chinese economy, the summit offers tactical relief but no structural shift. The continuation of the trade truce prevents renewed escalation and preserves the current effective tariff rate on Chinese goods at around 29%, based on our estimation in late February, 0.1% lower than pre-ruling of the IEEPA. While the US granted approval for Nvidia’s H200 chips to China, a symbolic positive for China’s AI sector, reports indicated that China has yet to finalise any order. Meanwhile, US export controls on cutting-edge chips remain firmly in place. US concerns over critical minerals supply were addressed at the summit, but no detailed resolution has been announced at this point. For equity investors, we think the appropriate posture is constructive but selective. Sector-wise, the technology and AI complex remains the most asymmetric opportunity, and we want to continue highlighting the opportunities that come alongside China’s industrial resilience. Please refer to the full report for details about the event and our investment view. “Overweight” implies a positive tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio. “Underweight” implies a negative tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio. “Neutral” implies neither a particularly negative nor a positive tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/trump-xi-summit-managed-rivalry-helps-stabilise-expectations/

2026-05-18 08:05

Key takeaways The GBP has remained resilient within its one-year range despite multiple market shocks. Cyclical support should persist, though further GBP upside may be capped by current market pricing. Key downside risks are a prolonged closure of the Strait of Hormuz and any credible weakening of UK fiscal discipline. The GBP has remained relatively steady, with GBP-USD trading within its 1-year range (Chart 1) even as markets faced several shocks. This resilience has been supported by a mix of stronger global risk sentiment, favourable interest rate differentials (Chart 1 again), and tighter GBP liquidity conditions via the Bank of England’s (BoE) balance sheet reduction, even as geopolitical and UK political risks have continued to build. Geopolitical developments in the Middle East have been a key test. While GBPUSD has held up so far, uncertainty remains, particularly around the risk of disruption to Gulf commodity supplies. A prolonged closure of the Strait of Hormuz could trigger a broader move into “safe-haven” assets, likely supporting the USD and putting downward pressure on the GBP. Domestically, political uncertainty has also resurfaced, with Prime Minister Sir Keir Starmer reportedly facing increasing pressure from within the Labour Party (The Times, 12 May). Confidence in the GBP remains closely tied to perceptions of UK fiscal discipline. The last major loss of fiscal credibility, in Autumn 2022, coincided with a sharp rise in UK government bond yields and a marked fall in the GBP (Chart 2), prompting temporary BoE intervention in the gilt market. If credible leadership contenders were to signal a willingness to loosen fiscal discipline, the GBP is likely to come under renewed pressure. Source: Bloomberg, HSBC Source: Bloomberg, HSBC Overall, the two most important risks that could undermine the GBP’s resilience are: (1) an extended closure of the Strait of Hormuz, and (2) any credible shift away from UK fiscal discipline. Even so, we expect the GBP to remain supported through the rest of the year by cyclical drivers, particularly the BoE’s tightening bias, with our economists forecasting two 25bp rate increases in July and September. However, the scope for further GBP appreciation may be limited, as a sizeable portion of this tightening outlook is already reflected in market pricing. In fact, markets are pricing at least two BoE rate hikes by end-2026 (Bloomberg, 14 May). https://www.hsbc.com.my/wealth/insights/fx-insights/gbp-resilient-but-two-key-risks/

2026-05-14 12:01

Key takeaways There have been some signs of resilience heading into the latest shock… …but sentiment has tumbled as price pressures intensify. The BoE is focused on the risk that this latest bout of inflation becomes embedded in wages. The UK economy reported the fastest pace of growth since April 2025 in the three months to February. That means the UK had a firm base heading into the latest period of uncertainty. In fact, activity surveys in April continued to report a degree of demand momentum. The manufacturing sector PMI jumped to 53.7, bolstered by new order growth, while the services sector reported higher business activity with a PMI of 52.0. However, reports of inventory accumulation ahead of expected supply disruption likely overstate activity momentum. Retail sales demand was also flattered by a degree of panic buying of motor fuel, +3.2% m-o-m in March, while overall, retail sales volumes excluding fuel grew a meagre 0.2% m-o-m. Elsewhere, consumer confidence fell further in April, taking sentiment to its lowest level in more than two years. It’s no surprise that facing another inflation shock has left consumers particularly cautious about the future state of the economy, and their own personal financial situations, for the latter, the net balance fell back negative. Savings intentions also rose, new-buyer enquiries for home purchases fell to their lowest level since August 2023 in March, and medium-term inflation expectations have spiked higher. While the initial volatility across both household and business surveys may subside in the coming months, energy prices and supply disruption will continue to pass through the global economy for a while yet. And early indicators suggest agents have a greater sensitivity to price rises with a degree of pass-through evident despite the prospect of softer demand – see chart. For the Bank of England (BoE), the extent to which the latest price shock translates into domestically driven inflation will determine the policy response. In our view, the risk of any second-round inflationary effects is smaller than in recent years, and at its latest policy meeting, the BoE seemed to agree. Nonetheless, the BoE’s scenarios showed how different assumptions on second-round effects, namely through higher wage growth, would require greater interest rate hikes. Such effects can take well over a year to materialise, but if the central bank were to wait for that, it may need to respond more aggressively than otherwise needed; therefore, hikes sooner to mitigate the risk are more likely. For now, market expectations of rate hikes have tightened financial conditions, meaning the BoE may opt to wait and see, in the hope of greater clarity on the outcome of the Middle East conflict, and to see how households and businesses respond. That being said, unless there is a swift resolution to the conflict and a reopening of the Strait of Hormuz, we expect the BoE will need to raise Bank Rate in the summer. The rate of inflation is set to accelerate, and with households and businesses more sensitive to higher prices, we think policymakers are likely to opt to lean against the risk that higher inflation now becomes embedded within household and business price expectations. https://www.hsbc.com.my/wealth/insights/market-outlook/uk-in-focus/some-demand-resilience-but-price-pressures-intensify/

2026-05-11 08:04

Key takeaways “Risk-on” currencies gained notably against the USD amid improved market sentiment. Rate hikes may also have supported the AUD and NOK. In our view, a sustained JPY recovery likely needs stronger fundamentals beyond FX intervention. So far this quarter, “risk-on” G10 currencies, such as the AUD, NOK, and NZD have outperformed against the USD (Chart 1), helped by renewed optimism around a potential de-escalation of tensions in the Middle East. In addition to the broader shift in risk appetite, both the AUD and NOK appear to have benefited from domestic policy developments. On 5 May, the Reserve Bank of Australia (RBA) delivered a third consecutive 25bp rate hike, taking the policy rate to 4.35%, in line with market expectations. This keeps the RBA an outlier among G10 central banks (Chart 2). Our economists expect the RBA to remain on hold in a “wait-and-see” mode; however, further domestic fiscal support could increase the likelihood of additional tightening. Data as of 7 May 2026 at 18:00 HKT Source: Bloomberg, HSBC Source: Bloomberg, HSBC The Norges Bank surprised markets on 7 May by raising its policy rate by 25bp to 4.25%, marking its first hike since 2023. As the Norwegian central bank indicated that its policy outlook has not changed materially, our economists view a prolonged hiking cycle as unlikely. In contrast, regional peers, including the European Central Bank, the Bank of England and the Riksbank, still adopt a wait-and-see approach. While recent price action is broadly consistent with these developments, it is important to monitor any sustained energy disruption that could trigger a renewed “risk-off” shift and strengthen the USD. Meanwhile, the JPY has been among the weakest G10 performers quarter-todate (marginally ahead of the USD), despite potential support from FX intervention. While neither Japan’s Ministry of Finance nor the Bank of Japan (BoJ) has confirmed any recent action, we believe USD-JPY may stay capped over the near term. That being said, a more durable JPY recovery will likely require stronger underlying fundamentals, most notably further BoJ rate hikes and lower oil prices (see FX Viewpoint Flash – JPY: FX Intervention? for details). https://www.hsbc.com.my/wealth/insights/fx-insights/risk-on-rally-but-questions-remain/

2026-05-07 12:01

Key takeaways Despite ongoing peace talks, traffic through the Strait of Hormuz has yet to pick up… …meaning the risk of shortages is rising and energy prices are staying elevated… …rippling into inflation data, and eventually into growth. The Middle East conflict has now dragged on for more than two months, and the ripples into the global economy continue to build. The US is maintaining a naval blockade in the Strait of Hormuz, and traffic remains limited. Equity markets have recovered, but bond markets are still pointing to higher rates in the coming months. Clearer impacts That said, the economic impact is starting to be clearer. Oil and gas prices remain high and volatile, while Asian economies, such as India, Thailand, and the Philippines, are seeing government policy focusing on limiting energy usage. It’s not just energy, either. Prices for a range of commodities, including fertilisers, urea, sulphur, aluminium, and copper, are also rising, which is making life harder for both industry and consumers. For now, much of this is in supply chains, but the risks are clear for filtering through into consumer prices as well. Source: World Bank. Latest data April 2026. Note: TSP = Triple Superphosphate Source: Bloomberg. Latest data 17 April. Note: ADNOC = Abu Dhabi National Oil Company; NOLA = New Orleans, Louisiana; CFR = Cost and Freight Some of this is already showing up in the CPI data. March and April CPI prints point to a sharp rise in headline inflation, driven by higher energy costs. While some countries are providing fiscal support for retail energy prices, that is not an easy lever for policymakers to pull, especially with public debt already high. On hold All of this complicates the policy mix. With fiscal ammunition more limited, central banks are largely in a wait-and-see mode. Higher price pressures have taken rate cuts off the table for now, but rate hikes also look unlikely in most economies, given that this kind of price shock is likely to weigh on activity as well. Source: Bloomberg. Latest data: 5 May 2026. Note: OIS = overnight index swap Source: Bloomberg. Latest data: 5 May 2026 The growth impact may take some time to be seen. In the US, Q1 GDP accelerated to 2.0% q-o-q (annualised), partly reflecting a rebound in government expenditure after the government shutdown in Q4 2025 and strong AI-driven investment. In Asia, Q1 GDP in mainland China surprised to the upside, while eurozone GDP saw a slowdown. Price hikes However, the PMI surveys, our first tell on the global data, are painting a painful picture of what is to come. While we may have seen some better headline data on the manufacturing front, services PMI data have been much softer. Pricing indices are up across the board, and it may take time for the inflationary shock to filter through to household and business decisionmaking, and with it, the hard economic data on inflation and activity. The risk is, however, that the longer the Strait of Hormuz is closed, the greater the chance of acute shortages or price shocks – something the global economy is ill-prepared for. Source: S&P Global Latest data：April 2026 Source: S&P Global Latest data：April 2026 Source: Bloomberg, HSBC. ⬆ Positive surprise – actual is higher than consensus, ⬇ Negative surprise – actual is lower than consensus, ➡ Actual is in line with consensus Source: LSEG Eikon, HSBC https://www.hsbc.com.my/wealth/insights/market-outlook/macro-monthly/inflation-reawakens/