June 2024 Outlook: United States-Neutral | Europe-Slightly Positive | Japan-Neutral | China-Neutral | Asia-Neutral
US inflation has eased, and it is only a matter of time before the US follows suit with interest rate cuts. Europe has already cut interest rates, and various European countries will be holding elections. Japan’s GDP shrank by 2% in the first quarter, but the stock market continues to perform well. The Chinese government has stepped in to rescue the housing market, and Hong Kong’s retail fund also recorded a net inflow of HK$29.6 billion. Overall, the Asian markets have been weighed down by both China and South Korea.

🇺🇸 United States-Neutral
US Inflation Easing, Fed Maintains Watchful Stance
The US personal consumption expenditure (PCE) price index rose 0.3% month-on-month in April and 2.7% year-on-year. The core consumer price index (CPI) rose 3.4% year-on-year, the smallest 12-month change since April 2021, indicating signs of easing inflation. On the other hand, US non-farm payrolls surged by 272,000 in May, far exceeding the expected 185,000, while the unemployment rate rose to 4%, higher than the market expectation of 3.9%. Europe and Canada have already started cutting interest rates, and it is only a matter of time before the US follows suit. Driven by the gains in tech stocks and utilities, the S&P 500 index has for the first time risen above 5,400 points. Investors will need to watch the US election developments in the second half of the year.

🇪🇺 Europe-Slightly Positive
European Central Bank Cuts Rates for the First Time Post-Pandemic With Political Turmoil
The European Central Bank has cut interest rates by 25 basis points for the first time since 2019, heralding a new round of global monetary easing that will benefit the European stock market. The European Parliament elections were completed on June 9th, with a significant increase in the overall far-right forces. It is expected that policies will change dramatically, including the repeal of the ban on the sale of internal combustion engine vehicles by 2035 in the new parliament. After the election defeat in the European Parliament, French President Macron has announced the dissolution of the National Assembly and called for early elections. The UK will also hold a snap general election on July 4th, and polls predict a historic victory for the opposition Labour Party, which is expected to benefit the banking, residential construction, and food retail sectors. Investors still need to watch the election trends across Europe.

🇯🇵 Japan-Neutral
Japan’s Q1 GDP Shrinks 2%, But Stock Market Continues to Perform Well
According to data from the Japanese Cabinet Office, Japan’s annualized real GDP shrank by 2% in the first quarter of 2024. One of the reasons was weak domestic consumption. Private consumption, which accounts for over half of Japan’s economy, declined by 0.7%, a larger drop than the forecast 0.2%, marking the fourth consecutive quarter of decline. Additionally, several major Japanese automakers were embroiled in safety testing violation issues, causing a large number of newly produced vehicles to be unable to be exported. As auto production accounts for around 20% of Japan’s manufacturing exports, this event was also a contributing factor to Japan’s GDP contraction. However, the Japanese stock market has continued to perform well. As of June 13th, the Nikkei Index has risen 16% year-to-date, from 33,288 points to 38,720 points. Although it corrected from 40,888 points in mid-March to 37,068 points, it has since stabilized above the 38,000 point level, reflecting that the Japanese stock market continues to do well after the correction.

🇨🇳 China-Neutral
China Takes Action to Rescue the Real Estate Market, Hong Kong Retail Fund Records HK$29.6 Billion Net Inflows
The real estate issue has been weighing on China’s recovery. To address this, the central government has introduced a series of measures to rescue the real estate market. This includes allowing local governments to purchase commodity housing at reasonable prices for public housing, as well as reducing personal housing provident fund loan interest rates by 0.25% to stimulate the domestic real estate market. While the effects may not be immediate, these measures demonstrate the government’s determination to solve the real estate problem. In Hong Kong, the overall investment sentiment has improved, with the retail fund recording a net inflow of HK$29.6 billion in the first quarter, the highest in three years, indicating there is still room for the Hong Kong market to rise. On the diplomatic front, Russian President Putin visited China and had a dialogue with President Xi Jinping at the end of May, hoping that China can maintain trade and good relations with Russia, which has been subject to international sanctions due to the Russia-Ukraine war. Taiwanese President Lai Ching Te was sworn in on May 20th, and the content of his inauguration speech has heightened tensions between China and Taiwan. China’s diplomatic activities also suggest that the geopolitical situation will become more tense.

Asia-Neutral
The Asian Market Has Underperformed, Weighed Down By The Chinese And South Korean Markets
The MSCI Asia ex-Japan index saw a slowdown in its performance in May, rising only 1.58%. Within this, the MSCI China A-shares index and the South Korean index fell 0.87% and 3.6% respectively. In India, the general election results showed that Prime Minister Modi’s Bharatiya Janata Party (BJP) only won 240 seats, requiring it to form a coalition government, adding uncertainty to India’s political landscape for the next 5 years. The South Korean government also passed a bill in early June to terminate the “9.19 Military Agreement” with North Korea, allowing the resumption of loudspeaker broadcasts and border exercises against North Korea. This suggests that geopolitical tensions in the region will continue to escalate. Overall, the Asian market has been weighed down by the weaker performance of the Chinese and South Korean markets, while geopolitical uncertainties in India and the Korean peninsula have also contributed to the region’s lackluster showing.

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