APAC Market Wrap - May 25

China Equity Markets: The Shanghai Composite rallied 0.96% to 4,152.57, the Shenzhen Component gained 1.66% to 15,856.61, and the ChiNext Index jumped 2.10% to 4,021.16. Growth sectors led the advance, with semiconductors, telecommunications equipment, and power infrastructure outperforming, while energy, gas, and pharmaceuticals logged mild consolidations.

 

Hong Kong Equity Market: Hong Kong’s benchmark indices logged uniform gains. The Hang Seng Index rose 0.86% to 25,606.03, the Hang Seng Tech Index added 2.11% to 4,869.57, and the H-Share Index advanced 0.89% to 8,550.87. Large-cap tech models moved higher, led by Lenovo (+20%) and NetEase (+5%), while Baidu, Xiaomi, and Kuaishou all gained over 1%. Semiconductors and AI plays remained strong, comfortably offsetting minor weakness in beverages and life sciences.

 

Japan Equity Market: The Nikkei 225 index advanced 2.87% to finish at 65,158.19. Gains were heavily driven by AI-related plays, semiconductors, and electrical equipment, while aviation and paper sectors tracked the broader index higher amid robust risk-on sentiment.

 

South Korea Equity Market: South Korean financial markets were closed in observance of a domestic public holiday.

 

Australia Equity Market: The S&P/ASX 200 index added 0.40% to close at 8,692.00. The advance was spearheaded by a rotation into industrials, mining, and financials, which handily offset minor soft patches across energy and utilities.

 

Singapore Equity Market: The Straits Times Index (STI) finished flat, up 0.05% to 5,070.55. Local banks and industrial components drifted slightly higher, cushioning the index against persistent drag from the telecoms and real estate segments.

 

Malaysia Equity Market: The FTSE Bursa Malaysia KLCI edged down 0.24% to close at 1,708.50.

Key Events

Goldman Sachs: Hang Seng Index Rebalancing to Drive 4.5% Boost in Market Cap

 

The Hang Seng Index’s latest quarterly rebalancing is projected to boost its constituent aggregate market capitalization by 4.5%, directing passive capital inflows into heavyweights including Tencent Holdings and BeiGene, according to Goldman Sachs.

 

The changes will take effect after the close on June 5, with the flagship index adding J&T Global Express, Chalco, and BeiGene to expand its constituent count to 93, widening its sector coverage across logistics, metals, and biopharmaceuticals.

 

Severe Physical Shortage? Asia's Oil Market Nearing Tank Bottom Operational Limits

 

Asia’s physical crude market is rapidly approaching its absolute minimum operational limits due to the global energy shock triggered by the war in Iran, according to Jeff Currie, Chief Strategy Officer of Energy Pathways at Carlyle.

 

Currie warned at a Singapore conference that aggregate global inventory metrics are misleading, as the vast majority of physical stockpiles must remain trapped in pipelines and storage infrastructure to maintain system safety, leaving very little tradeable volume for the market.

 

South Korea to Launch 2x Leveraged Single-Stock ETFs for Samsung Electronics and SK Hynix

 

South Korea will launch single-stock leveraged ETFs tied to semiconductor titans Samsung Electronics and SK Hynix this Wednesday, introducing instruments that allow for daily swings of up to ±60%.

 

Eight major domestic asset managers will list a total of 16 leveraged and inverse ETFs offering 2x exposure, a regulatory rollout aimed at repatriating retail trading volume back to domestic markets by leveraging growing demand for local AI hardware leaders.

Institutional Perspectives

JPMorgan on S&P 500 Targets: The S&P 500 is projected to breach the 9,000-point milestone over the coming year, representing a 22% upside runway.

 

While macro concerns surrounding inflation and Iran persist, the broader structural uptrend should remain intact if the AI super-cycle outpaces consensus, boosting productivity and sustaining corporate earnings growth above 10% without fueling inflation.

 

OCBC on Geopolitical FX Trends: Financial markets remain hesitant to aggressively price out geopolitical risk premiums amid thin holiday liquidity.

 

While signs of a diplomatic de-escalation between the US and Iran should bolster risk metrics early this week, the foreign exchange market may lack the conviction to chase rallies given unresolved nuclear details.

 

High-beta currencies like the AUD and KRW should outperform, while the INR and IDR lag.

 

BofA Securities on AI Productivity Projections: While artificial intelligence has driven significant localized productivity gains in tightly defined operational tasks, these improvements have not yet scaled broadly enough to alter aggregate macroeconomic data.

 

However, over the coming decade, the macro impact of AI on headline productivity is projected to expand tenfold, potentially adding 1.0 percentage point to annual growth and lifting the global baseline expansion rate to 4.5%.