Summary
The Trump administration's "Big and Beautiful Act" has sparked controversy, on one hand, raising market concerns over the burden of government spending, and on the other hand, the Article 899 is brewing a potential capital tax storm.
After the outbreak of the tariff war, Asian currencies have generally appreciated, and "de-dollarization" has become a trend in Asian markets, with most Asian stock markets performing well.
The Korean presidential election has concluded, and investors are optimistic that the new president will introduce stimulus policies and market reforms to boost the economy. The KOSPI has entered a technical bull market, with large-cap stocks like Samsung benefiting.
Market volatility has increased, creating opportunities for swing trading. Following the launch of the first batch of leveraged and inverse products of individual US stocks in Asia, the world's only pair of Samsung Electronics leveraged and inverse products has been listed in Hong Kong.
Focus Products
CSOP Samsung Electronics Leveraged and Inverse Products ( $XL2CSOPSMSN(07747)$ $XI2CSOPSMSN(07347)$ )
CSOP Tesla Leveraged and Inverse Products ( $XL2CSOPTSLA(07766)$ $CSOP Tesla Daily (-2x) Inverse Product(07366)$)
CSOP Gold Futures Daily Leveraged (2x) Product ( $FL2CSOPGOLD(07299)$ )
CSOP Bitcoin Futures ETF ( $FA CSOP BTC(03066)$)
CSOP FTSE US Treasury 20+ Year Index ETF ( $CSOP UST20(03433)$)
CSOP Hang Seng Tech Index ETF ( $CSOP HS TECH(03033)$ )
Macroeconomic Outlook
June Macroeconomic Keywords: US Tariffs; Big and Beautiful Act; Korean Presidential Election
The Trump administration's "Big and Beautiful Act" has sparked controversy. On one hand, it raises market concerns over the burden of government spending. On the other hand, Article 899 is brewing a potential capital tax storm. The "Big and Beautiful Act (One Big Beautiful Bill Act, OBBBA)" is a fiscal policy tool of the Trump administration, covering a comprehensive bill with multiple aspects, including tax cuts, increased defense spending, restrictions on medical support, revocation of clean energy projects, and an increase in the debt ceiling by four trillion dollars. The bill has passed the House of Representatives and will next need to pass the Senate.
Fiscal Spending Concerns: According to estimates by various US institutions*, the Big Bill is expected to add at least 3.4 trillion dollars (or 5 trillion dollars) in debt to the US government over the next decade and 15.3 trillion dollars in debt over the next 30 years.
Potential Capital Tax Storm: Article 899 of the OBBBA has raised widespread concerns on Wall Street. The clause aims to impose "retaliatory" taxes on non-US individuals, companies, and governments of specific countries that are deemed to impose "discriminatory" taxes on US entities, starting with a 5% tax rate that increases annually up to a maximum of 20%. Given that European countries frequently impose taxes on the US in the service trade sector, the probability of EU countries being subject to retaliatory taxes is higher.
If the bill is successfully implemented, the historic high spending may lead to a strong US dollar, strong US stocks, and weak US bonds.
Interlude: Musk appears to have distanced himself from Trump's political alliance. On June 5, the argument between Musk and Trump over the Big and Beautiful Act became a market focus, with Trump threatening to terminate Tesla's government contracts. Tesla's key man risk remains high, as Musk's actions and statements significantly influence Tesla's stock price. Political disputes not only affect market sentiment but also impact Tesla's fundamentals. Tesla currently enjoys 41 billion dollars in government tax exemptions, and Musk holds 6 billion dollars in military satellite launch contracts. Moreover, Tesla's highly anticipated autonomous driving technology and Robotaxi are at a critical stage of deployment in North America, and the ease of government approval processes will directly affect the company's implementation progress.
(US Congressional Budget Office CBO forecast: 3.8 trillion dollars; Yale budget lab / Responsible Federal Budget forecast: 3.4 trillion dollars)
The overall progress of Sino-US tariffs is positive and stable. Since the trade friction, the two heads of state have had their first phone call and agreed on the possibility of mutual visits. However, global tariff trade uncertainty remains high, with the US policy of increasing import tariffs on steel and aluminum from 25% to 50%.
On June 5, US President Trump and Chinese President had a phone call to discuss the trade tensions that have lasted for several weeks and the disputes surrounding key minerals, leaving key issues to be further negotiated. The two leaders also extended invitations for mutual visits.
On May 30, Trump announced that he would increase the tariff on imported steel from 25% to 50%, effective from June 4. The EU expressed regret and prepared to retaliate. If no mutually acceptable solution is reached, the EU's existing measures and additional measures will automatically take effect on July 14, or earlier if necessary.
After the outbreak of the tariff war, Asian currencies generally appreciated, and "de-dollarization" has become a trend in Asian markets.
The currencies of eight Asian countries appreciated by 10.6% to 0.7% after the US unilaterally imposed tariffs. Reuters cited investment analysts describing the situation as an "inverse Asian financial crisis," which is the opposite of the Asian financial crisis in 1997, where countries in the region are buying non-US dollars to preserve value. To maintain exchange rate stability, the Hong Kong Monetary Authority intervened on May 2. By selling Hong Kong dollars and buying US dollars to release liquidity, the authority injected a total of 129.402 billion Hong Kong dollars from May 2 to May 5, with 60.5 billion Hong Kong dollars injected on May 5 alone, setting a historical record for the highest single-day intervention. The sudden increase in Hong Kong dollar liquidity led to a sharp drop in the Hong Kong Interbank Offered Rate (Hibor).
Additionally, the proportion of US dollar assets in Hong Kong's foreign exchange fund has dropped significantly from over 90% in the past to 79%, the lowest since the financial crisis. Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, pointed out that the foreign exchange fund has reduced its investment in US assets in recent years. The total support and investment portfolios now have a US dollar asset ratio of about 79%, down from over 90% a few years ago. In contrast, the proportion of renminbi, euro, and yen assets has increased, with some investments flowing into private equity funds and real estate to enhance long-term returns. The fund also plans to shorten the duration of US Treasury bonds.
The Korean presidential election has concluded, and investors are optimistic that the new president will introduce stimulus policies and market reforms to boost the economy, pushing the KOSPI into a technical bull market. On June 4, 2025, Lee Jae-myung was elected as the 21st President of South Korea, marking the end of the political turmoil since former President Yoon Suk-yeol implemented martial law in December last year. The new president has announced a series of policy improvement measures:
Fiscal Policy: The new president has promised to implement a supplementary budget of over 20 trillion won to promote domestic consumption, the construction industry, and the artificial intelligence supply chain. Notably, the government will offer a 10% infrastructure tax incentive for domestically produced and sold semiconductors.
Artificial Intelligence Innovation: The new president aims to: 1) Invest 100 trillion won in artificial intelligence and strategic high-tech fields through public and private funding; 2) Establish a large national artificial intelligence data center with high GPU capacity; 3) Promote the application of artificial intelligence software in both private and public enterprises.
Capital Market: The new president has also pledged to address the "Korean Discount" issue. He plans to boost the domestic stock market and reshape valuations by improving corporate governance, also known as the Value Up plan. His goal is to usher in the "KOSPI 5000" era, which is expected to reignite bullish sentiment in the Korean stock market, increase investors' risk appetite, and direct funds towards large-cap stocks like Samsung.
Asset Views
Bonds $10-YR T-NOTE - main 2509(ZNmain)$
US Treasury Bonds: Previously, expectations of interest rate cuts and recession concerns made US Treasury bonds attractive. However, the surge in fiscal spending has exacerbated concerns over the worsening fiscal deficit, which may weigh on the performance of US bonds. Future trends will depend on the progress of the US OBBBA bill and tariff negotiations.
Chinese Government Bonds: Neutral on Chinese government bonds. Challenges to economic growth still exist, and monetary easing is being intensified, which will strengthen their safe-haven attributes.
Equities
Hong Kong Stock Market $HSI(HSI)$ : Undoubtedly, the Hong Kong stock market has been the brightest star globally this year, with a vibrant new IPO market, net inflows from the south far exceeding historical averages, and Hong Kong's technology giants driven by endogenous revenue, highlighting the investment value of the Hong Kong market. The A/H premium is also continuously narrowing. Recent progress in Sino-US trade negotiations can further serve as a catalyst. Pay attention to the $CSOP HS TECH(03033)$
A-Shares: In the short term, A-shares benefit from state-backed market support and expectations of policy stimulus. In the long term, they benefit from the accelerated process of self-reliance and control driven by tariffs. Pay attention to the $CSOP CSI300(03133)$ and the $CSOP STAR 50(03109)$.
US Stocks $S&P 500(.SPX)$ : Considering the capricious nature of Trump's policies, the "TACO (Trump Always Chickens Out)" trade has been prevalent. US stocks rebounded historically in May, and the latest macroeconomic data shows that the US economy remains resilient, especially with cash-rich technology stocks being attractive. Pay attention to the CSOP US Seven Giants ETF ( $CSOP MAG7(03454)$ ).
Japanese Stocks: The trade situation seems to be stabilizing, and the market is looking forward to progress in US-Japan trade negotiations as a new factor for risk appetite. Nomura and other research analyses believe that before the G7 Summit (June 15-17), there is a higher motivation for both the US and Japan to reach an agreement, and related news may emerge. If an agreement is reached and includes a reduction in automobile-related tariffs, the Japanese stock market may have an opportunity to catch up with other countries' stock markets, thereby correcting its undervalued situation.
Asia-Pacific Stock Markets: After the outbreak of the tariff war, most Asian currencies have appreciated, and the Asia-Pacific stock markets have shown resilience. Under the global trend of seeking diversification, multiple Asia-Pacific markets, including the Korean stock market, Japanese stock market, and Hong Kong stock market, have attracted global capital inflows.
Saudi Stock Market: The Saudi market offers structural growth opportunities, considering its significant growth potential with the progress of the 2030 Vision. However, the recent economic recession risk and the heavy blow to oil prices have caused a short-term impact on the Saudi stock market.
Alternatives
$Gold - main 2508(GCmain)$ : Gold has become a core asset amid rising tariff risks, supported by the weak dollar trend and increasing central bank demand. The People's Bank of China increased its gold reserves for the seventh consecutive month in May, continuing to strive for asset diversification despite price fluctuations. According to Metals Focus, central banks worldwide are expected to purchase 1,000 tons of gold in 2025, marking the fourth year of large-scale central bank gold purchases to diversify reserves away from dollar-denominated assets towards gold.
REITs: We hold a neutral to optimistic view on REITs. This year, investment in commercial real estate in the Asia-Pacific region has significantly warmed up, especially in the REITs markets of Australia and Japan. Hong Kong REITs have been relatively weak, but the declining Hibor is expected to bring an increase in DPU. S-REITs have performed poorly, but in the context of rising tariff uncertainty, S-REITs with defensive investments in data centers and suburban retail areas are expected to remain resilient.
Virtual Asset Futures:
$Bitcoin(BTC.USD.CC)$ and $Ethereum(ETH.USD.CC)$ : With the mainstream trend and the push of the "de-dollarization" wave, virtual assets have shown continuous strong performance. Despite the decline from its historical high of 110,000 US dollars, Bitcoin has held its position above 100,000, with analysts predicting a target of 120,000 US dollars. A research report from Standard Chartered Bank shows that government entities, including those in France, Saudi Arabia, and US state pension funds, have significantly increased their holdings of MicroStrategy (MSTR) shares in the first quarter, reflecting the growing interest of sovereign capital in indirectly configuring Bitcoin. Ethereum, on the other hand, surged by over 40% in May due to record inflows of funds.
Disclaimer and Important Notice
The products described in this document are authorized by the Securities and Futures Commission of Hong Kong (“SFC”). Such authorization does not imply official recommendation by the SFC.
This document is for general reference only and does not constitute investment or any advice in any aspect, nor should it be regarded as an offer or solicitation to invest in any investment product.
For SG users only, A tool to boost your purchasing power and trading ideas with CashBoost!
Open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with upcoming 0-commission, unlimited trading on SG, HK, and US stocks, as well as ETFs. Find out more here.
Other helpful links:
Comments