Consumer & Health Care Stocks Outperform Despite More Trade Drama

Key News

Asian equities were mostly higher overnight as Korea and Taiwan outperformed while the Philippines and Thailand underperformed, as most local currencies gained against the US dollar.

Hong Kong gained overnight and was one of the top-performing regional markets amid optimism about a trade deal despite Trump’s comments about Xi being “extremely hard” to deal with. The market also shrugged off the increase in steel tariffs by the US overnight.

While the situation appears to be deteriorating, Trump did also heap praise on the Chinese leader, saying he “always liked him”. The president apparently recognizes Xi as a tough negotiator, just as he presents himself to be. Fingers crossed for a deal soon! Though, they can also always extend the truce and exemptions.

After lowering its growth expectations for the US, the OECD also lowered growth expectations for China’s economy on trade issues, but left its GDP growth estimate for 2024 unchanged at 4.7%. Remember exports to the US represent only 2% of China’s GDP, and they definitely will not even be going to zero! Combined with stimulus, the hit to GDP will be very minimal. Nonetheless, I cannot emphasize enough investors should focus on growth and technology and companies focused on domestic demand! We saw this play out overnight as consumer-oriented names outperformed significantly.

Healthcare was a top-performing sector in both Hong Kong and Mainland China. Innovent Biologics gained +14% after the first phase of a trial of its new obesity medication. Meanwhile, nuclear energy company CGN Mining surged +23%, consumer names such as Pop Mart and Miniso were especially strong, and the electric vehicle (EV) ecosystem rebounded as investors finally realized that May sales data were strong.

The Ministry of Industry and Information Technology (MIIT) announced new support for the use of electric vehicles, especially in rural areas in Western China. This is a key a market for growth but is plagued by the lack of charging infrastructure.

South Korea’s decisive election result calmed its markets and represents a return of political stability in the nation after martial law was introduced this past December. South Korea’s markets and currency have been volatile, despite companies like SK Hynix being important players in global AI development.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.19 versus 7.19 yesterday
• CNY per EUR 8.19 versus 8.18 yesterday
• Yield on 10-Year Government Bond 1.67% versus 1.67% yesterday
• Yield on 10-Year China Development Bank Bond 1.71% versus 1.72% yesterday
• Copper Price 0.53%
• Steel Price 1.57%