SLR relaxation helps banks take on US Treasuries; high-energy-consuming industries in Japan, South Korea, and ASEAN face pressure; capital returned to US stocks in April but flowed out of China — 0506 Macro Desiccation

In mid-April, the Federal Reserve reduced the scale of its RMP short-term debt purchases from 40 billion to 25 billion, but this was a dynamic adjustment within expectations and reflected the recent improvement in liquidity. In addition, the SLR relaxation for US commercial banks was fully implemented starting in April, which will help enhance banks' willingness to absorb US Treasury bonds and address the issue of who will absorb US Treasuries as the Federal Reserve reduces its holdings.

Some regions in Japan, South Korea, and ASEAN are facing challenges from the adjustment of global supply patterns, especially in oil and gas-intensive industries such as chemicals and rubber, energy-consuming basic industries like steel and non-metal mineral products, and high-end export manufacturing such as machinery transportation equipment and semiconductors. However, products with high energy dependence also represent strong export sectors for East Asian economies.

In April, global risk appetite rebounded, with emerging markets overall performing better than developed markets. Among commodities, crude oil performed strongly, and both industrial metals and agricultural products saw widespread recovery. From a capital flow perspective, after the outbreak of the US-Iran conflict, global funds briefly left equities markets, then returned to US stocks in the mid-to-late period, but continued to flow out from the Chinese stock market.