2026-02-23 08:04

Key takeaways There’s been plenty of talk about China’s anti-involution campaign, but so far tangible progress remains limited. The authorities are committed to this agenda but must balance it with other priorities like keeping the labour market stable. Industrial consolidation is still at an early stage: green transition, merger and acquisition activity will contribute; fair competition is key. China data review (Jan 2026) China’s first inflation print in 2026 shows a mixed performance. CPI growth slowed to 0.2% y-o-y in January amidst a high base from last year, given distortions from the Chinese New Year (January 2025 versus February 2026). This suggests a rosier CPI figure ahead in February. Meanwhile, PPI dropped 1.4% y-o-y, but strong non-ferrous metals prices and the ongoing anti-involution campaign helped cushion the fall, with the rate of decline easing to its slowest pace since August 2024. China’s January NBS PMI print suggests some renewed pressure as both the manufacturing (49.3) and non-manufacturing (49.4) gauges fell back to contractionary territory after a temporary reprieve in December 2025. A key drag on the manufacturing front stemmed from new orders, which dropped to 49.2. Although recent local GDP targets indicate that China may adopt a more cautious stance for this year’s national GDP goal, this NBS reading again highlights that proactive fiscal policy and “moderately loose” monetary policy are needed to help boost domestic demand. China’s January credit data showed an economy that remained on a relatively weak footing as real demand stayed muted. Total Social Financing came in at RMB7.2trn in January, up 8.2% y-o-y, driven by government support, but new bank lending stayed muted at RMB4.7trn. Accelerated government bond issuance will help to kickstart projects, given that this year is the first of the 15th Five Year Plan. Household and business confidence still need more support to transmit into a broader improvement in investment this year. China anti-involution push – Stepping up a gear China’s anti-involution campaign was launched in July 2025 to much fanfare and was aimed at combating the intense “race-to-the-bottom” price wars and supporting sustainable industry growth. It initially worked with producer price inflation turning positive in sequential terms from October, led by a few sectors like aluminium, copper, and coking coal. To date though, guidance has been largely advisory rather than compulsory, and included voluntary production cuts by industry associations, regulatory reforms, such as amendments to the anti-unfair competition law, and National Development and Reform Commission (NDRC) meetings on the criteria for disorderly price competition. However, in the absence of robust monitoring and enforcement mechanisms, progress in industrial consolidation and enhancements to profit margins remain limited. The 15th FYP shows the government’s commitment The anti-involution campaign is far more than just a slogan; Chinese authorities are working towards a unified national market and promoting fair competition. This strategic focus is highlighted in the draft of the 15th Five-Year Plan, which stresses the urgent need to curb “involutionary competition” and rebalance the economy. Indeed, involution frequently manifests as ‘predatory’ pricing that undercuts competitors with unsustainably low prices. To address this, we expect the government to step up endorsing and enforcing competition law principles and implement further measures to restore market order, while simultaneously balancing other policy objectives, including labour market stability and sustained economic growth. Next steps The 15th Five-Year Plan stresses the need to increase domestic consumption as a proportion of GDP, necessitating policy measures that foster sustainable consumer demand growth. Presently, the most significant deflationary pressure originates from the Producer Price Index (PPI). Source: CEIC, HSBC Source: CEIC, HSBC Meanwhile, supply-side reductions are underway, and these can be complemented by targeted demand-side initiatives, particularly those with a strong pull effect on upstream sectors. For instance, infrastructure investment focused on improving human well-being and quality of life, such as better intra- and inter-regional connectivity, and expanding social housing, can effectively reflate the economy. Source: LSEG Eikon * Past performance is not an indication of future returns Source: LSEG Eikon. As of 11 February 2026 market close https://www.hsbc.com.my/wealth/insights/market-outlook/china-in-focus/china-anti-involution-push-stepping-up-a-gear/

2026-02-23 08:04

Key takeaways The US Supreme Court ruled 6–3 that President Trump couldn't use the International Emergency Economic Powers Act (IEEPA) of 1977, but the administration will continue tariff policy under alternative statutory powers. Using section 122, a new 10% global tariff was announced on Friday but already changed to 15% on Saturday. This comes on top of existing measures and will remain in place for up to 150 days. The financial market reaction was muted but constructive so far, particularly in import-reliant sectors such as retail, consumer discretionary, autos, and select industrials, reflecting lower near-term cost pressures and reduced legal uncertainty. For fixed income and FX, the effects are more nuanced. Lower effective import taxes may ease goods inflation at the margin over time, providing modest support for bonds, while reduced trade tension offers limited near-term support to risk sentiment. USD could be slightly weaker on positive global sentiment. Please refer to the full report for details about the event and our investment view. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/our-thoughts-on-the-us-supreme-court-ruling-and-market-implications/

2026-02-16 07:03

Key takeaways The AUD leads G10 currencies; this is likely to continue in the Year of the Horse… …but conditions have yet to materialise for a lasting JPY recovery, in our view. Resilience could be found in the RMB throughout the year. AUD: G10’s top performer The AUD has appreciated by more than 6.0% against the USD so far this year, outperforming other G10 currencies, with the NOK and NZD following closely behind (Bloomberg, 12 February). The AUD’s robust performance is largely attributed to the Reserve Bank of Australia’s (RBA) rate hike on 3 February − the first such move among G10 central banks in 2026. Additional momentum has come from external drivers, such as a soft USD and strong commodity and equity markets. Looking ahead, expectations of further rate increases, and Australia’s favourable structural fundamentals are likely to underpin continued AUD strength, even if external tailwinds subside. Notably, net inflows from portfolio investment and foreign direct investment (FDI) are more than sufficient to offset the current account deficit (Chart 1). Furthermore, Australia’s debt profile provides resilience against fiscal vulnerabilities, despite rising public sector demand. Collectively, these factors suggest the AUD is well positioned for ongoing outperformance. JPY: Post-election volatility remains Market attention has also shifted to the JPY, following Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP) securing a supermajority in Japan’s Lower House snap election. Japan’s Ministry of Finance’s (MoF) persistent verbal FX intervention and a soft broad USD backdrop may set a ceiling for USD-JPY over the near term, but a lasting JPY recovery will probably require more rate hikes from the Bank of Japan, fiscal discipline from the authorities or supportive capital flows. We still think that USD-JPY will remain choppy this year. Source: CEIC, HSBC Source: Bloomberg, HSBC RMB: Resilience The RMB has strengthened by more than 1% against the USD year-to-date, with USD-RMB breaking below 6.90 for the first time in 33 months (Chart 2). China’s domestic agenda, particularly RMB internationalisation, and favourable seasonal flows are expected to continue supporting the currency throughout 2026. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/fx-highlights-into-the-year-of-the-horse/

2026-02-12 07:05

Key takeaways There are signs that demand is stabilising, but subdued consumer confidence points to a fragile outlook. Bank Rate was left unchanged at 3.75%, and although further cuts are expected… …the timing and scale of rate reductions is more uncertain. Fragile with a hint of potential The year has started with mixed and volatile data, so it’s unclear how much underlying momentum in the economy has improved. Measures of business activity reported a sharp rebound in activity in January, most notably across services firms. However, consumer confidence ticked only 1pt higher, as improved confidence in personal finances was offset by lower expectations of the economy for this year. Those dynamics left consumers to continue to prefer saving. Elsewhere, there were signs that demand conditions are, at least, stabilising, house prices rose 0.3% m-o-m and manufacturers reported the fastest pace of new order growth since May 2022. While the outlook is a fragile one, there is scope for a more marked improvement in demand. But we need to see a stable policy environment and a more sustained improvement in confidence to support underlying growth. Source: HSBC Bank of England hints at further rate cuts At its latest policy meeting the Bank of England’s (BoE) Monetary Policy Committee left Bank Rate unchanged at 3.75%. Four of the nine-strong Committee voted for a cut, while more broadly, policymakers appear to be gaining confidence in the disinflationary process. The prospect of lower inflation reflects weak demand in the economy, a higher rate of unemployment, and policy measures announced at the Autumn Budget. Governor Andrew Bailey, who voted for unchanged rates this month, will be key in determining the timing of the next cut, given his relatively middle ground stance. Mr Bailey suggested that he needed to see a further falls in inflation expectations alongside the expected moderation in the current inflation rate. That would help to further alleviate concerns of upside risks to inflation over the medium term. It is widely expected that the CPI inflation rate will fall to around 2% in April 2026. Then there is the question of how many more rate cuts are in prospect, and where Bank Rate may settle. That will be determined by how restrictive the Committee currently views interest rates to be on economic growth and inflation and whether any restrictiveness should remain in place for a more prolonged period. The latest BoE forecasts point to lower inflation, relative to its November forecast, and while the upside risks to inflation are judged to have diminished, they remain a source of uncertainty. Ultimately, after six rate cuts since August 2024, and with Bank Rate closer to its ‘neutral’ level, decisions on further rate cuts are likely to be finely balanced. Source: Macrobond, S&P Global, HSBC Source: Macrobond, Bloomberg, HSBC forecast https://www.hsbc.com.my/wealth/insights/market-outlook/uk-in-focus/fragile-with-a-hint-of-potential/

2026-02-12 07:05

Key takeaways The rollercoaster ride for geopolitical and trade uncertainty continues, but the global macro picture remains firm… …even as financial markets try to second guess the policy implications of Fed Chair nominee, Kevin Warsh. US tariff threats abound, but few have been delivered, with the main trade news coming from US or European trade deals. Six weeks into 2026, the twists and turns in geopolitics continue, but while they had continued to drive precious metals sharply higher for much of January, the announcement of Kevin Warsh as the next Federal Reserve (Fed) chair saw much of the early 2026 moves unwind. Currencies continue to swing around with the appreciation of the EUR raising questions for the European Central Bank (ECB) rate path, especially given January’s 1.7% inflation print. JPY bounced sharply as news of a snap election triggered FX intervention chatter. Divergent central banks There is much discussion on potential implications for the size of the Fed’s balance sheet with Mr Warsh as Chair, but market expectations of two more Fed rate cuts in 2026 are little changed. Our forecast remains for unchanged rates given robust activity set to be bolstered further by tax cuts, inflation looking sticky, and mixed labour market signals. Other central bank action has been hugely divergent: the Reserve Bank of Australia (RBA) delivered a hawkish rate rise; Colombia a bigger-than-expected 100bp rate hike; Brazil is set to revert back to cutting in March; and the Bank of England (BoE) points to further loosening soon. Source: Bloomberg, HSBC; Note: OIS = Overnight Index Swap Source: Macrobond Firm global activity Globally, inflation is stable or slowing in many places but not all, and various input price pressures have emerged, from some key industrial metals, to memory prices, to natural gas. Global activity has stayed firm with US consumer spending, eurozone GDP and German industrial orders surprising to the upside in Q4, and global manufacturing and service sector PMIs firming in January. In Asia, mainland China GDP growth slowed in Q4, but elsewhere in the region, growth has surprised on the upside with policy generally supportive and India’s recent FY27 budget – projecting a fiscal deficit of 4.3% of GDP – represents the slowest consolidation in six years. Source: Macrobond, Redbook Source: Eurostat, Bloomberg New tariffs On the trade side, there has been no shortage of US tariff noise: US ambitions for Greenland – and associated warning of 25% tariffs on Europe – de-escalated post-Davos. Tariff threats against Canada and Korea, on any country selling oil to Cuba and – following recent protests – any country doing business with Iran, have all followed. But the only new US tariffs imposed so far this year are the 25% tariffs on a very narrow category of semiconductors and even those are lower than feared. Trade deals The more significant news has been the progress on bilateral trade deals both with and without the US. The EU has signed trade agreements with Mercosur and India, both pending approval by the European Parliament. Mainland China has engaged in negotiations with the UK and Canada, resulting in limited tariff agreements for both. A US-India trade deal has also been announced under which tariffs on Indian imports will fall to 18%, down from 50%. 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/global-activity-on-a-firm-footing/

2026-02-11 07:05

Key takeaways US tariffs on India cut from 50% to 18% and likely to benefit investor sentiment, growth, and macro stability. The trade deal adds to a list of ongoing reforms, bringing exports to the centre of India’s growth strategy. Improving sentiment and rising capital inflows could lower the balance of payments deficit and support the INR. Godot arrives. The wait for an India-US trade deal has been long. But it finally arrived on 2 February, though we are still awaiting details. The US has agreed to lower the 50% tariff on India’s goods to 18%. This comes in two parts. One, President Trump announced that under a trade deal, India’s “reciprocal tariffs” will be set at 18% instead of 25%, effective immediately. Two, US officials said the extra 25% tariff related to Russian oil will also be removed, as India has reportedly agreed to stop buying Russian oil (Reuters, 2 February 2026). An official press release with details has not been released. There are three areas in which more clarity is needed: One, will India have to stop all Russian oil purchases? Import data shows India has already scaled down Russian purchases (Exhibit1). We also believe that the discount on Russian oil has fallen, so switching to other sources may not be too costly. Two, what’s the timeline for the USD500bn of US goods (energy, technology, agriculture,and coal) that the US said India has agreed to buy? We believe India would switch suppliers rather than raise its overall import bill (Exhibit 2). Three, the US President also mentioned that India will lower all tariff and non-tariff barriers on US goods to zero. The details are not out, but the India-EU trade deal could provide a framework under which both parties could safeguard some sectors. Short-term growth impact. The US accounts for 20% of India’s goods exports (2.2% of GDP). In an earlier report we had calculated that the 50% tariff could shave off up to 0.7ppt from India’s GDP growth. With the tariff now more than halved, we believe the growth drag will halve to about 0.3ppt. These numbers assume that one-third of exports remain exempt from tariffs (e.g. pharmaceuticals, critical minerals, and fuels), and some sectors face differential tariffs (autos, steel, and aluminium). The items that were most at risk were the labour-intensive jewellery, textile, and food items. These could get some reprieve (Exhibit 3). At the new 18% tariff rate, India has a rate marginally lower than the 19% levied on most ASEAN economies (excluding Singapore). Medium-term growth impact.This is where we expect to see the most benefit. The US-India trade pact adds to a string of external reforms India has undertaken last year – completing FTAs with the EU and the UK, lowering some customs duties, and becoming more open to FDI. With these, India is putting exports centre stage as a key driver of growth, and benefitting from the China+1 theme. Separately, it is also diversifying itsgrowth strategy as was clear from the just concluded Budget speech. From being focused on just high-tech goods and services exports, such as electronics and professional services, it is now also focusing on re-energising mid-tech exports, such as textiles. Given India’s wage advantage, this is a welcome strategy. Lastly, external reforms are being complemented by domestic reforms, such as the ongoing government deregulation drive. Of course, much depends on implementation. Inflation and BoP impact. There are several moving parts on inflation. Lower import tariffs and a more stable currency should lower inflation. However, switching to more expensive oil, and a change in the CPI base year could marginally raise inflation in FY27. The impact of none of these factors, we believe, will be large. And in most parts will offset each other. The excess capacity from China driving disinflation remains strong. And we continue to believe that inflation will remain close to the 4% RBI target. All of this means that the central bank should be able to hold the repo rate steady for the foreseeable future, while focusing on providing enough liquidity. Meanwhile, if the improvement in sentiment and push for exports raises capital inflows, the balance of payments deficit would fall, supporting the currency. https://www.hsbc.com.my/wealth/insights/market-outlook/india-economics/economic-implications/