Global markets have spent the past month navigating a challenging combination of rising bond yields, inflation concerns and geopolitical uncertainty. Persistent worries that inflation could reaccelerate led investors to sell US Treasuries, pushing the 30-year Treasury yield to its highest level in nearly 19 years and the 10-year yield to its highest since January 2025.Expectations for US Federal Reserve policy have shifted, with markets now assigning a 42% probability of an interest rate hike in December compared with almost none a month earlier. Higher yields have weighed on equity valuations and tightened financial conditions globally.
Despite these concerns, the backdrop has become more supportive. Negotiations on the Iran war have shown encouraging progress, raising hopes for a potential peace agreement. We believe the US is more likely to pursue diplomatic pressure than renewed military escalation.
In Southeast Asia, markets were divergent in May, reflecting varying levels of exposure to global themes and differences in domestic fundamentals. Thailand was the region's standout performer, with the SET index rising 5.2% for the month and 24.7% year-to-date.
The rally in Thailand was driven primarily by electronics exporters, particularly DELTA, as investors continue to position for the global artificial intelligence and semiconductor investment cycle. Singapore's Straits Times Index gained 2.4% for the month and 8.2% year-to-date, supported by financials, industrials and resilient domestic demand.
