Mainland China and Hong Kong Market Overview
A-shares saw a rotation from technology into high-dividend sectors, including coal, agriculture, and brokerage stocks, as well as resource-related sectors, amid declining trading volume. This suggests a tactical rotation rather than a broader trend reversal.
Hong Kong equities fell in early trading before moving sideways. A meaningful breakout from the current range would likely require either Fed rate cuts or sustained southbound inflows.
US & Global Markets
The US Treasury increased its 10–30-year buyback operations to at least $4 billion, removing roughly $14 billion of long-end supply this quarter. However, Goldman Sachs notes that this micro-level optimization fails to address the primary drivers of rising long-end yields: a higher macro risk premium and weak demand for duration. International precedents, including the UK and Japan, show that supply adjustments cannot override macroeconomic forces, while aggressive yield suppression risks exacerbating volatility in both the yield curve and the US dollar.
As fiscal deficits widen and traditional policy tools become less effective, the US risks entering a "financial repression" regime. Under increasing political pressure, the government may resort to regulation, coercive measures, or capital controls to suppress yields and maintain fiscal sustainability. Such an outcome would mark a major shift in the global financial system, with equities and gold potentially emerging as the primary beneficiaries.
While the US dollar maintains its dominant position, structural reserve diversification continues. Recent increases in the dollar's share of global reserves appear to reflect valuation effects rather than a reversal of the longer-term trend. Rising US debt levels and the expanding use of financial sanctions have reduced the convenience yield associated with long-dated Treasuries. Rather than exiting the dollar-based system entirely, reserve managers are increasingly shifting toward higher-returning assets such as US equities and corporate bonds. Overall, de-dollarization remains a slow and uneven process.
