Key News

Asian equities were mostly lower overnight on light volumes as Korea and the Philippines outperformed.

The privately calculated Caixin China Services PMI was released overnight. The reading of 54 beat an estimate of 52.5. China’s consumer continues to rebound while, at the same time, the removal of restrictions on real estate purchases have been lifted in nearly all jurisdictions. This is immensely positive for China’s markets, though performance overnight was mostly flat.

Geely Automotive gained +1.34% overnight, along with gains in BYD, though battery maker CATL was lower. The company reported increasing its sales of vehicles by nearly +50% year-over-year in the first quarter. Geely has also signed a strategic agreement to use STM Microelectronics for its supply chain. Geely is the only China-based automaker that sells cars in the US. The automaker makes the Polestar electric vehicle in a partnership with Volvo. The electric vehicle ecosystem in China is mostly shrugging off the 100% US tariffs. It remains to be seen whether Geely will be impacted by the new tariffs.

Expectations for US rate cuts next year or later this year have improved with recent jobs and inflation data. This could also be positive for China as some estimate that China will not cut rates significantly until the US cuts. Nonetheless, China has instituted multiple, albeit small, rate cuts over the past year.

Reuters reported that some China-based chip companies are designing lower-end chip models that are potentially more capable, though they fall below the US restriction threshold. This allows them to continue to access TSMC for their manufacturing needs.

Growth stocks saw slight gains in Hong Kong, while value factors outperformed slightly on the Mainland.

Copper fell significantly overnight, dragging Materials names lower, on anticipation of slightly lower demand and a stockpile that has built up at the Shanghai Futures Exchange. This is reportedly the highest copper stock at the exchange since 2020.

The Hang Seng and Hang Seng Tech indexes diverged to close -0.10% and 0.30%, respectively, overnight on flat volume from yesterday. Mainland investors bought a net $562 million worth of Hong Kong-listed stocks and ETFs overnight via Southbound Stock Connect. The top-performing sectors overnight were Health Care, which gained 1.06%, Communication Services, which gained 0.90%, and Consumer Staples, which gained 0.33%. Meanwhile, the worst-performing sectors were Materials, which fell -2.94%, Real Estate, which fell -1.65%, and Energy, which fell -0.84%.

Shanghai, Shenzhen, and the STAR Board all closed lower by -0.83%, -1.19%, and -0.21%, respectively, on volume that decreased -8% from yesterday. The top-performing sectors overnight were Utilities, which gained 0.62%, Health Care, which gained 0.02%, and Information Technology, which fell -0.23%. Meanwhile, the worst-performing sectors were Real Estate, which fell -2.12%, Communication Services, which fell -1.56%, and Materials, which fell -1.35%.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.25 versus 7.24 yesterday
• CNY per EUR 7.87 versus 7.88 yesterday
• Yield on 1-Day Government Bond 1.30% versus 1.30% yesterday
• Yield on 10-Year Government Bond 2.28% versus 2.29% yesterday
• Yield on 10-Year China Development Bank Bond 2.39% versus 2.40% yesterday
• Copper Price -2.44%
• Steel Price -0.68%