2025-10-21 12:02

Key takeaways China’s Golden Week showed muted spending: per-capita trip spend down 0.6% y-o-y and down 2.6% relative to 2019. Underlying pressures remain in the labour market and property sector. We expect policy support for consumption-driven growth to feature prominently in China’s 15th Five-Year Plan. China data review (September 2025 & Q3) GDP growth eased to 4.8% y-o-y in Q3 amidst trade headwinds and ongoing domestic challenges. September activity data showed a mixed performance in key categories, including Industrial Production, Fixed Asset Investment and retail sales. The strong H1 growth helped round out the first three quarters at 5.2%, suggesting that this year’s growth target of “around 5%” is in reach. Retail sales continued to grow at a more modest pace, up 3.0% y-o-y in September, dragged by tepid consumer confidence. The recent campaign to curb excessive spending by government officials on banquets likely continued to impact catering sales, which declined 1.6% y-o-y. Meanwhile, goods consumption may have been weighed down by a high base following the allocation of RMB150bn in subsidies for the trade-in programme initiated in August 2024. Fixed Asset Investment contracted by 7.1% y-o-y for the second consecutive month. Manufacturing investment was down 1.9% y-o-y as trade uncertainty weighed on investments in electrical machinery and computing. Property investment remained the primary drag, falling 21.3% y-o-y, while infrastructure investment dropped 4% on a lack of funding at the local government level. Industrial Production growth improved to 6.5% y-o-y in September, given better-than-expected exports growth, though we remain cautious that this outperformance can be sustained, given lingering US tariff impacts and potential trade payback. On a brighter note, key drivers will likely continue to stem from equipment and high-tech related manufacturing. CPI fell 0.3% y-o-y in September, dragged down by weaker pork and vegetable prices, while oil prices moved sideways, staying at a relatively low level. Core CPI rose 1.0% y-o-y, supported by ongoing consumption policies and tourism prices. PPI dropped by 2.3% y-o-y, narrowing its year-on-year losses, largely helped by base effects. Meanwhile, its m-o-m reading was flat at 0%. Exports accelerated to 8.3% y-o-y in September, continuing to benefit from trade restructuring. Even as exports to the US remain under pressure (-27% y-o-y in September), those to other markets have seen double-digit growth, e.g., EU +14.2%, ASEAN +15.6% and Africa +56.4%. Meanwhile, imports rose by 7.4%, helped largely by an increase in high-tech goods, which lifted 14.1% y-o-y. China consumption – Pulse check Muted Golden Week With the Golden Week (1-8 October) behind us, it is a fitting time to take stock of the latest trends in Chinese consumer behaviour. The data shows a mixed bag: domestic trips hit a record 888 million and tourism spending reached RMB809bn (Ministry of Culture and Tourism, 9 October), but we estimate the average daily growth was up only 1.6% y-o-y and 1% y-o-y, respectively. On a per-capita trip basis, spending slightly decreased by 0.6% y-o-y, or 2.6% relative to 2019. Tax revenue data showed that the services sector outperformed, helped in part by government support, although movie sales disappointed. Meanwhile, overseas travel picked up, with inbound foreign travel up 20% y-o-y, boosted by China’s visa-free entry programmes, while mainland Chinese residents saw increased international travel of 10% y-o-y. Consumption pressures have increased… The muted Golden Week performance carries on some of the recent trends as seen in softer consumption data. Retail sales, growing under 4% y-o-y in recent months, have faced some headwinds due to lingering labour market and property sector pressures. Wage growth is running below the pre-pandemic level at c5% y-o-y versus c9% in 2019. Consumer confidence has yet to pick up, while the youth unemployment rate reached 18.9% in August. On a brighter note, the government recently announced that the last batch of subsidies for goods trade-ins had been issued as of 29 September (NDRC, 29 September), involving RMB69bn of central government funds and c7bn of local government funds. This likely contributed to the outperformance in the Golden Week data in certain goods, such as consumer electronics, and means we should see some continued support in the rest of the year. Source: Wind, HSBC Source: Wind, HSBC …leading to more policy support for services The push for more services consumption has been clear in recent government policies, most recently with plans for services and sports consumption issued in September. Based on the retail sales breakdown, the increased focus on services consumption seems to be helping sectors, such as cultural goods, and sports and entertainment goods. The next steps are set to bring structural reforms aimed at enhancing social safety nets and urbanisation efforts. Recent policies to boost basic care subsidies, like childcare and elderly care, show a shift towards supporting a broader range of services. Additionally, there is a focus on providing social benefits tied to permanent residence and advancing new urbanisation plans. China’s 15th Five-Year Plan At the time of writing, China’s policymakers are convening for the Forth Plenum (20-23 October) where they will review the 15th Five-Year Plan, setting priorities from 2026 to 2030. We expect a strong emphasis on consumption-driven growth, supported by services consumption and structural reforms to expand social safety net coverage. Other key areas of focus may include fostering innovation, green development and opening-up reforms. Source: LSEG Eikon *Past performance is not an indication of future returns Source: LSEG Eikon. As of 20 October 2025, market close https://www.hsbc.com.my/wealth/insights/market-outlook/china-in-focus/china-consumption-pulse-check/

2025-10-20 12:02

Key takeaways The discussion continues on whether the USD has hit its lowest point and is ready to begin an upward trajectory. We think there is still room for the USD to weaken further before bottoming out early next year. EUR-USD may have bottomed for now and could grind higher into 2026, but a longer-term rally seems unlikely. The US Dollar Index (DXY) has remained stable since July but recently surpassed the 99-mark due to heightened policy risks in France and Japan, coupled with escalating US-China trade tensions. However, as the US federal shutdown continues and with French politics stabilising, the DXY is now back to hovering around 98.5 (Bloomberg, 16 October). Markets are debating whether the USD has bottomed and is ready to begin an upward trajectory. We believe there is still room for the USD to fall gradually before bottoming out early next year, particularly given potential rate cuts by the Federal Reserve (Fed). Historical instances of Fed rate cuts without accompanying U.S. recessions (namely, 2002-03, 2H07, and 2H19) have typically resulted in a weaker USD (see chart below), offering insights into the current situation. In addition, US trade policy uncertainty and Fed independence could also weigh on the USD. Source: Bloomberg, HSBC As for EUR-USD, we think that it may have bottomed for now, given that the immediate French political and fiscal risks appear to have receded. On 16 October, French prime minister Sebastien Lecornu survived two no-confidence votes in the National Assembly, indicating that France has avoided the need for new National Assembly elections, at least for now. As the Fed is likely to ease and the European Central Bank is likely to be on hold, EUR-USD could benefit from narrowing rate differentials over the near term and into 2026. That being said, a longer-term rally seems unlikely, as headwinds, like weak domestic demand, could hold EUR-USD back. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/usd-poised-for-an-upswing/

2025-10-15 08:05

Key takeaways US-China trade relations suddenly deteriorated over the weekend… …weighing on Asian currencies, in particular the KRW. China’s FX policy remains steady, with the USD-CNY fixing rate hovering at c7.10, despite the tariffs threat. US-China trade tensions are taking a turn for the worse and are a reminder of the post ‘Liberation Day’ (2 April) blues. This is the latest in a series of US trade-related headwinds for Asian currencies in recent months – a rough doubling of ‘reciprocal’ tariffs compared to earlier for most economies, secondary tariffs for India, and disagreements over the USD350bn investment plan with Korea. But US-China trade tensions have the most potential for broader spillovers, seeing risk aversion in global markets. Apart from trade issues, Asian currencies have also been weighed down by a combination of low domestic yields, unexpected monetary easing, and idiosyncratic political unrest in some places. The immediate underperformers are those currencies which have a stronger link with foreign equity flows, like the KRW due to the sell-off in equities. In contrast, low-yield currencies, like the SGD and RMB, are holding up better for now. Source: Bloomberg, HSBC The USD-CNY fixing rate was at 7.1007 today (13 October), the lowest level since US elections last November. This indicates a steady FX policy, despite the tariffs threat. Ahead of the fourth plenum (20-23 October), the Chinese authorities are probably prioritising domestic market stability. That being said, the low-probability but high-impact risk is that we could see another round of tit-for-tat tariffs (not merely threats), like what happened in early April. Back then, the USD-CNY fixing rate increased from 7.17 to nearly 7.21, with the spot rate moving near the ceiling of the USD-CNY trading band. But on a positive note, US President Trump softened his tone this morning, with Vice President JD Vance casting it all as an ongoing negotiation (Bloomberg, 13 October 2025). https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/rmb-tariffs-again/

2025-10-14 12:02

Key takeaways Inflation came in at a multi-year low of 1.5% y-o-y as food prices slipped into deflation; a c50% y-o-y rise in gold prices kept core inflation elevated. The underlying inflation momentum is likely to remain subdued over the next few months, thanks to a strong cereal production, well stocked granaries, lower oil prices,and cheaper exports from China. We expect the RBI to cut policy rates by 25bp in 4Q as growth may see renewed weakness due to weaker new export orders and slower fiscal impulse in 2HFY26. September CPI inflation came in at 1.5% y-o-y, the lowest since June 2017, in line with market expectations. Sequential momentum slowed to 0.2% m-o-m sa (vs 0.5% last month). Excluding vegetables, headline inflation came in at 3.6% y-o-y (vs 3.7% previously). Average inflation for 3Q came in at 1.7%, slightly below the RBI’s forecast of 1.8%. Food prices slipped into the red on an annual basis. In sequential terms, too, food prices deflated 0.3% m-o-m sa (vs +0.7% in August). Recall, excessive rains in August had caused a sharp rise in vegetable prices. This appears to have reversed as vegetable prices are back in deflation. Apart from that, heavyweight cereals (weight: 9.7%) and pulses, alsoremained in sequential contraction. Gold prices keep core inflation high. Recall, gold has a weight of 1.1% in the CPI basket, and was up 47% y-o-y in September. It alone contributed c50bp of the rise in headline CPI. Our preferred definition of core (excluding food, energy, housing,and gold) has been steady at 3.2% y-o-y in 3Q25. Sequential momentum, too, remains under the long-term average. That being said, the uptick in personal care items (excluding gold) is worth noting (+0.7% m-o-m sa). Hopefully, a pick up in the pass-through of GST rate cuts will soften its momentum. October’s inflation print is trending below 1%, even lower than September’s low reading of 1.5%. Vegetable prices during the first 10 days of October have eased in the range of 3-5%. Strong cereal production and well stocked granaries are likely to help keep a lid on food inflation over the near term. And it is not just easing food prices, the high base of last year is likely to keep CPI inflation soft over the next few months. Global oil prices have been low, too, notwithstanding the volatility. Weaker growth, and cheaper exports from China arelikely to ensure inflation remains soft. To sum it all up, we are not too concernedabout the underlying inflation momentum. Growth may see renewed weakness.The PMI index for September showed a fall in new export orders,which was being offset by new domestic orders. But this could change post Diwali when domestic orders slow. Government spending, particularly capex, which has been growing 43%y-o-y y-t-d (April-August) may also begin to slow in 2HFY26 to settle close to the budgeted growth of 10%. The single deflator boost, too, may begin to fade by the end of the year. We believe that if the 50% tariff sticks until the end of the year, the RBI will cut rates by 25bp in December, taking the repo rate to 5.25%. And we may also see a fiscal package for exporters around then, along with more economic reforms. https://www.hsbc.com.my/wealth/insights/market-outlook/india-economics/low-and-behold/

2025-10-13 12:02

Key takeaways Gold hits new highs despite a stronger USD. The rally could continue into 2026… …but may ebb later when the Fed’s easing cycle ends alongside lower physical demand and greater supply. On 8 October, gold smashed above USD4,000 an ounce for the first time, bolstered by uncertainties (Chart 1), like the ongoing US government shutdown, renewed tariff concerns, and growing political uncertainty in France. Markets are also becoming more concerned over fiscal challenges not just in the US but also in other economies, such as France, the UK, and Japan, all of which likely contributed to the price of gold moving higher. Perhaps, the “fear of missing out” (FOMO) can explain a good portion of the recent gold rally, in our precious metal analyst’s view. It is worth noting that gold has been rallying alongside a stronger (not weaker) USD, with the US Dollar Index (DXY) rising to a two-month high (Bloomberg, 9 October). The two generally move inversely. The fact that gold can rally in the face of a stronger USD could be a sign of risk aversion, driving demand for “safe haven” assets, whether for hedging or diversification. This is unusual, but it did happen during the Global Financial Crisis (Chart 2), for example. Note: Geopolitical Risk Index (GRI) is compiled by Fed economists Dario Caldara and Matteo Iacoviello, while US Economic Policy Uncertainty Index (EPUI) based on newspaper archives from Access World New's NewsBank service, is developed by Baker, Bloom and Davis. Source: Bloomberg, HSBC Source: Bloomberg, HSBC Our precious metal analyst thinks that gold could trend higher over the near term and such a rally can continue into 2026, supported by hedging and diversification demand against a backdrop of elevated geopolitics, trade, and fiscal risks. Nevertheless, global central banks, in light of an increase in the percentage of gold in their foreign reserves as a result of the gold rally, may feel less compelled to add to gold reserves. High gold prices are also encouraging gold supply (via mining and recycling) but curbing physical demand (in particular jewellery demand). Other potential factors that could curb the gold rally include a soaring USD that drives portfolio flows away from gold, an equity market correction that invokes gold selling to cover margin and raise cash, a rise in longer-end US yields, which increases the opportunity cost of holding gold, the Federal Reserve’s (Fed) rate cutting cycle that pauses or even ends, and a drop in uncertainties. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/gold-smashed-through-usd4000-oz/

2025-10-13 07:04

Key takeaways While some investors have been worrying about the sharp rally in AI and tech stocks, the US announcement of an additional 100% tariff on Chinese goods and export controls on ‘any and all critical software’ from 1 November provided a good excuse for profit taking. The political uncertainty could extend the volatility in the coming weeks. We think the surprise effect is now much less than around Liberation Day – the market impact should therefore also be less pronounced (implied volatility is less than half the April level). Markets should be further supported by the US Q3 earnings season, where we expect to see positive surprises, and by the October Fed rate cut. In the short term, volatility needs to be managed and our overweight positions on gold and investment grade bonds should continue to benefit. Given our confidence in US economic growth, earnings expansion, AI innovation and Fed cuts, we remain overweight on US equities and would take any pronounced tactical market pullback as a longer-term buying opportunity. Please refer to the full report for details about the event and our investment view. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/what-is-causing-the-current-market-volatility-and-how-far-can-it-go/