Post-Holiday Rebound Driven By Consumer Stocks

Key News

Asian equities were mixed overnight as Hong Kong and Mainland China returned from holiday refreshed and in good spirits (similar to how I feel post-vacation!), and Indonesia outperformed while Thailand underperformed.

Japan was closed for Greenery Day, a holiday “dedicated to appreciating nature and expressing gratitude for its blessings.” South Korea was closed for Vesak Day, which is also Buddha’s Birthday.

Hong Kong and Mainland China were driven higher by green shoots in US-China trade talks last Friday and over the weekend, as well as Treasury Secretary Bessent’s positive comments yesterday. Asian currencies have made monster moves versus the US dollar. The Taiwan dollar is up +7.29% and the offshore CNY (CNH) is up +0.96% since April 28^th.

The Chinese people were on the move during the May Day holiday, with 101.7 million railway passengers and 11.15 million airline passengers, while 10.896 million foreigners visited China, according to Mainland media sources. According to the South China Morning Post, people opened their wallets, with 60,000 auto trade-in subsidy applications. Meanwhile, home appliance sales during the holiday were up +15.5% year-over-year (YoY), auto sales were up +13.7% YoY, communication equipment sales were up+10.5% YoY, and home and apartment sales data appear strong in the top 30 major cities.

The April Caixin Services PMI was 50.7 versus expectations of 51.8 and March’s 51.9 as the month-over-month indicator declines from tariff front running. Hong Kong soft technology (internet), airlines, hotels, restaurants, and Macau casino stocks outperformed overnight. Hardware technology stocks, including biotechnology, and semiconductors, underperformed, led by index heavyweight Xiaomi, which was down -2.92%.

Mainland investors bought a healthy $1.7 billion worth of Hong Kong-listed stocks and ETFs today as Meituan and Alibaba saw an inflow, while Tencent saw a small outflow. From a breadth perspective, Mainland China had a very strong day led by growth stocks, with 4,677 advancing stocks and only 396 declining stocks. Unlike Hong Kong, hard technology stocks had a very strong day, led by electronic equipment, semiconductors, software, and travel and consumer plays, such as airlines. Hopefully, the positive momentum continues!

Investor’s Business Daily had an insightful article over the weekend titled “The Trade War Comes Ashore,” providing a timeline of the coming tariff tsunami effect on store shelves and retail employment. Maritime consulting firm Drewry anticipates 2025 cargo volumes will decline for only the third time since 1979. The only two declines were the 2009 Global Financial Crisis and the 2020 coronavirus pandemic. Apollo Global Management believes that domestic freight and retail companies will begin layoffs by early June as “most retailers will have run through their stockpiled inventory.”

Companies anticipating inventory issues mentioned in the article include Amazon, Target, and Walmart, though the list is far more expansive. Even if the US and China governments make significant progress over the next few weeks, the American people will likely discover how reliant and intertwined our two economies are.

I suspect most Americans don’t want their kids working in low-end manufacturing versus high-end manufacturing and innovation industries (brain versus brawn industries). Obviously, there are things that should be made here in the US for national security reasons, but the vast majority of what is made in China and Asia more broadly and sold in US stores doesn’t fit that criteria. Ultimately, not even politicians can overpower economic laws, just as President Hoover and Senators Smoot and Hawley learned nearly a century ago.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.21
• CNY per EUR 8.16
• Yield on 10-Year Government Bond 1.63%
• Yield on 10-Year China Development Bank Bond 1.66%
• Copper Price +0.15%
• Steel Price -0.13%