GUM: May 2024 Outlook

May 13, 2024
Reading Time: 5 minutes

May 2024 Outlook: United States-Neutral | Europe-Slightly Positive | Japan-Slightly Positive | China-Slightly Positive | Asia-Neutral
The U.S. inflation index exceeded expectations, leading to a cooling of rate cut expectations. The European economy continues to perform well, and the market expects that the European Central Bank will cut interest rates in June. Both China and Hong Kong have experienced stronger-than-expected economic growth, triggering a rebound in the Hong Kong stock market. However, the Asian economy shows divergent trends, and a wait-and-see attitude is currently prevailing.

🇺🇸 United States-Neutral
Inflation Index Exceeded Expectations Again, Leading To a Cooling of Rate Cut Expectations
The U.S. Consumer Price Index (CPI) rose to 3.5% year-on-year in March, exceeding expectations. In addition, Personal Consumption Expenditures (PCE) for the first quarter remained high, with a quarterly increase of 3.4%, marking the largest gain in a year. Persistent inflation will dampen expectations of rate cuts, with an anticipated 1-2 rate cuts expected in 2024. The non-farm payroll figures for April in the U.S. fell short of expectations, with an increase of only 175,000 jobs, but the market still anticipates that rate cuts will not begin until September. Although the U.S. stock market experienced some adjustments in April, it is still in an upward trend and is expected to remain at high levels. However, further evaluation of the market conditions will be necessary based on the performance in May.

🇪🇺 Europe-Slightly Positive
Europe Economy Started The Year On a Positive Note; Expects Interest Rate Cut in June
In the first quarter of 2024, the Eurozone’s Gross Domestic Product (GDP) exceeded expectations, recording a growth of 0.3%. The Composite Purchasing Managers’ Index (PMI) for April also surpassed the threshold for the second consecutive month, indicating strong manufacturing activity. Additionally, inflation has declined to 2.4%, leading to market expectations that the European Central Bank (ECB) will cut interest rates earlier than the United States. ECB Vice President Kinduros has stated that there is a high likelihood of rate cuts in June, which is beneficial for the performance of European stock markets.

🇯🇵 Japan-Slightly Positive
Japanese Econnony Data Remains Favorable With The Yen Slightly Weak
Despite a slight adjustment in the Japanese market in April this year, with the Nikkei index pulling back from 40,646 points to 38,312 points, it has remained at high levels. Additionally, Japan’s Gross Domestic Product (GDP) has shown positive year-on-year performance, and the Consumer Price Index (CPI) has increased by 2.7% compared to the previous year, in line with market expectations, indicating favorable economic data in Japan. However, investors need to be mindful of the volatility in the exchange rate of the Japanese yen. The USD/JPY exchange rate briefly rose to the 158 level in April before stabilizing around the 155 level.

🇨🇳 China-Slightly Positive
China & HK Q1 GDP Growth Surpassed Expectations, CSRC Supports HK Stock Market With New Measures
China’s economy grew by 5.3% year-on-year in the first quarter of 2024, surpassing the market expectation of 4.8%. Hong Kong also experienced economic growth of 2.7% in the first quarter of this year. Despite the previous sluggish performance of the Hong Kong stock market, the central government has taken measures to enhance market liquidity by expanding policies. For example, they have relaxed the eligibility criteria for stock ETF products under the Shanghai-Hong Kong Stock Connect program, attracting more investor attention. As a result, the market has shown a significant rebound, with the Hang Seng Index returning to the 18,000-point level. It is believed that the rebound in the Chinese and Hong Kong markets will continue for some time. However, in the long run, it is still necessary to closely monitor the issues related to the housing crisis and changes in the economic situation.

China Leads Asia’s Economy Recovery; Regional Economies Differentiate
Benefiting from the rebound in the Chinese market, the overall Asian market has also seen an upswing. However, the performance of Asian countries has been uneven. Vietnam has been affected by weak overseas demand, and the recovery of its exports and manufacturing activities has been less than ideal, resulting in a slowdown in GDP growth to 5.66% in the first quarter. Meanwhile, the Indian stock market has experienced a recent setback, compounded by ongoing elections in India, leading investors to adopt a wait-and-see approach for the time being.