Weekly Market Review

US

US equities closed higher as markets cheered a US Supreme Court ruling that struck down much of President Donald Trump’s reciprocal tariffs, which had been imposed using the International Emergency Economic Powers Act (IEEPA). The relief rally saw the S&P 500 rise 1.10% as investors welcomed a partial easing of trade-related uncertainty.

However, within hours, Trump announced a new 10% global tariff, later raising it to 15%, this time invoking Section 122 of the 1974 Trade Act. Under this provision, the president can impose temporary tariffs for up to 150 days, after which any extension would require Congress approval.

Extending it beyond the 150-day window would push the issue close to the US mid-term elections, making congressional approval politically challenging. Against this backdrop, the administration is also pursuing alternative legal routes such as Section 232 and Section 301 tariffs, which target specific countries or sectors but require formal investigations that can take several months to conclude.

Net-net, the practical impact of the Supreme Court ruling is relatively modest. China is arguably the marginal beneficiary, as tariffs imposed under the IEEEPA framework were around 20%, while the new global tariff now sits at 15%, implying a temporary 5% reduction. Even then, this relief is likely short-lived, as any future investigations could once again single China out for higher tariffs.

For other countries, the benefit is also less clear. For example, some countries such as Malaysia and Indonesia, have already negotiated bilateral tariff arrangements with the US at around 19%.

Despite the global rate now being lower at 15%, some of these countries may be reluctant to reopen negotiations or renege on existing deals, given the risk of retaliation. As a result, many countries that already have negotiated on tariff may simply choose to maintain the status quo to avoid further complications.

On the macro front, key releases including labour and inflation data. After showing signs of softening in the second half of 2025, the US labour market appears to have steadied, with the unemployment rate edging down from 4.4% to 4.3%. That said, other high-frequency indicators continue to suggest that labour conditions are likely to weaken gradually over the course of this year.

Non-farm payrolls surprised on the upside, with job creation coming in at around 130,000 versus consensus expectations of roughly 65,000. While the headline number looks encouraging, the data for the month of January tends to be seasonally distorted. The next few months will be important in assessing whether this strength is sustainable.

Elsewhere, the data was more mixed. Retail sales disappointed, coming in flat m-o-m compared with expectations of a 0.4% increase, pointing to some moderation in consumer momentum. Inflation continued to stabilise with headline CPI easing to 2.4% from 2.7%, reinforcing the view that price pressures are gradually trending lower.

Taken together, these developments suggest that as long as inflation continues to drift toward the Fed’s 2% target and unemployment rate grinds higher, the Fed should still have scope to deliver at least 2 rate cuts this year — albeit in a data-dependent approach.

This cautious stance was echoed in the January FOMC minutes, which leaned slightly hawkish and highlighted ongoing divisions among policymakers. On one side, FOMC members concerned about sticky inflation, while on the other are dissenters who continue to argue for further easing.

In terms of market reaction, the softer CPI print helped nudge US Treasury yields lower, with the 10-year yield now hovering around 4.1%. Looking ahead, we expect the 10-year Treasury to remain range-bound in the near term, broadly trading between 4.0% and 4.2%.

Asia

It was a shortened trading week across Asia, with several key markets closed. The MSCI Asia ex-Japan index rose 0.9%, led decisively by Korea, where the KOSPI surged 5.5%. The rally was squarely driven by technology heavyweights, with SK Hynix and Samsung Electronics gaining roughly 6% and 4% respectively, as investors continued to position for sustained strength in the AI supply chain.

While concerns have lingered around whether US hyperscalers can sustain such aggressive capex spending, the market appears willing to look past these worries for now. The reality is that hyperscalers are still intent on going all-in on AI investment, even as key input costs, particularly semiconductors, have risen sharply. For now, balance sheet constraints look like the only real limiting factor, and that is likely a later-stage issue given that most of these companies remain in net cash positions.

This has reinforced the narrative of a significant wealth transfer from US hyperscalers to Asian semiconductor companies. A new investment shorthand gaining traction is “MAMA”, referring to Microsoft, Amazon, Meta and Alphabet. Collectively, their AI-driven capex is expected to bring positive spillover effects in Asia, benefitting different companies across the supply chain particularly in Korea and Taiwan.

Geopolitically, attention has turned to rising tensions around Iran, where increased US military build-up is aimed at pressuring Tehran on issues ranging from its nuclear programme to missile capabilities and regional proxy support. Iran is unlikely to concede on these fronts, and while negotiations are ongoing, they are currently limited to nuclear discussions.

The risk scenario — albeit not the base case — would be a military escalation, which could have severe implications given Iran’s ability to disrupt the Strait of Hormuz, a critical chokepoint through which roughly 20% of global oil trade flows.

These risks have already nudged energy markets higher, with Brent crude rising around 6% last week. For now, markets appear to be taking developments in stride, but we are monitoring this development closely.

On portfolio positioning, we remain invested with no significant trades. Cash levels range up to 3% for our Asian funds.

Regional Fixed Income

Asian credit markets were relatively quiet during the shortened week, partly due to the absence of China which is a key regional buyer. Asia Investment Grade (IG) spreads tightened by 1bp to around 59 bps, while Asia High Yield (HY) spreads rallied by approximately 6 bps to 344 bps. Similarly, United States and European IG and HY markets saw spreads narrow across the board by roughly 2 to 10 bps.

Primary market activity in Asia was subdued. However, in the Australian dollar market, Tier 2 issuance was seen from banks including Macquarie Group and ANZ Bank. The United States primary market remained active, largely driven by the tech sector. Alphabet Inc. priced a USD 32 billion equivalent multi-currency deal including USD, GBP and CHF tranches. The deal was well received despite its large order book with a bid-to-cover (BTC) of 5 times. Notably, one tranche included a 100-year GBP bond priced at a tight credit spread of 120 bps.

In Asia, rating-related developments were more prominent. Indika Energy Tbk (INDY) was downgraded by Moody’s Ratings to B1 from Ba3. S&P Global Ratings placed Hanwha TotalEnergies Petrochemical Co. Ltd.’s BBB- rating on Negative, and similarly for Thailand’s PTT Global Chemical.

Meituan received a negative outlook from Moody’s on its Baa1 rating amid uncertainty surrounding its food delivery business. The company subsequently issued a profit warning, guiding for a potentially largest annual loss since 2021. Meituan’s bond curve widened by approximately 3 to 5 bps before partially recovering as buying interest emerged at lower levels.

SoftBank Group also experienced some volatility. Senior bonds widened by around 0.75 to 1 bp, while subordinated papers widened by approximately 2 to 3 bps despite strong 3Q’2025 results. Sentiment has recovered towards the end of the week, with credit default swaps tightening by around 5 bps.

In India, the Reserve Bank of India eased overseas borrowing rules by removing the all-in cost cap for issuers and increasing the per borrower limit from US$750 million to US$1 billion. This change could support higher offshore issuance from Indian corporates, particularly as issuance over the past 2 years has been limited due to relatively attractive onshore borrowing costs.

From a portfolio perspective, activity remained light. We took profit from our exposures in Indonesia, with proceeds redeployed into selected new issuances, including Australian Tier 2 bonds and Euro-denominated corporate hybrid papers. Cash levels are currently maintained at approximately 2% to 4%.

Domestic Fixed Income

In the local bond market, the Malaysian Government Securities (MGS) yields closed marginally lower last week amid subdued trading activity during the festive period. The 3-year, 10-year and 30-year MGS yields ended the week at 3.03%, 3.52% and 4.01% respectively, easing by 1 to 2 bps from the previous week.

In the primary market, we saw a RM5 billion 20-year Government Investment Issue (GII) auction, of which RM2 billion was privately placed. The auction was well received, drawing demand of 2.9 times coverage and closing at an average yield of 3.99%. Investors’ interest was supported by perceived relative value, particularly given the flatness of the 20-year segment against the 30-year.

February saw several primary corporate bond issuances. In the triple-A (AAA) credit space, Cagamas Berhad issued a 1-year bond amounting to RM760 million at 3.32%. Similarly, Danum Capital Berhad (Khazanah) priced a 3-year tranche of RM400 million at 3.42% and issued another 10-year bond of RM1 billion at 3.82%.

In the double-A (AA) credit space, UEM Sunrise Berhad priced a 12-year issuance of RM500 million at 4.10%, and 7-Eleven Malaysia Holdings Berhad issued a 5-year bond of RM250 million at 4.56%.

We stayed defensive and did not participate in these issuances, in anticipation of increased supply, particularly within the AAA segment. Cash levels were maintained between 5% to 6%.