Some of us can benefit from this, and some of us are still in crisis.
On the last Friday of May 2021, Asia's emerging markets looked westward and found reason for hope in America's mending labor market and the machinery of fiscal ambition, with Taiwan rising highest among them. Yet the same day that offered optimism to some delivered record suffering to others — Malaysia recording its third consecutive day of pandemic records, the human cost refusing to be abstracted into yield curves and index points. Markets, as they always do, were making distinctions: between nations where recovery was possible and nations where survival remained the immediate question. The inflation data arriving from Washington that afternoon would either deepen the divergence or briefly paper over it.
- Taiwan's stocks climbed 1.5% to two-week highs, carried by the dual tailwinds of Moderna vaccine doses arriving on home soil and stronger-than-expected U.S. jobless claims signaling genuine labor market healing.
- President Biden's $6 trillion budget proposal sent ripples across the Pacific, reminding traders in Singapore, Bangkok, and Jakarta that the world's largest economy was spending its way toward recovery — and pulling emerging markets along with it.
- Malaysia bled 0.8% as analysts warned a full national lockdown could no longer be ruled out, with 7,857 new infections and 59 deaths recorded in a single Thursday — the human weight too heavy for market optimism to lift.
- The Philippines surrendered its gains after a dazzling three-day, 8% rally, the momentum simply spent, the virus still circulating through a population that had not yet turned the corner.
- All regional eyes fixed on U.S. inflation data due at midday GMT — a single number capable of reshaping Federal Reserve expectations and either confirming or fracturing the recovery story Asia had been trading on all morning.
On a late-May Friday, Taiwan's stock market pulled ahead of its Asian neighbors, rising 1.5% to its highest level in more than two weeks. The fuel was American: unemployment claims had fallen more sharply than expected, President Biden was preparing a $6 trillion budget proposal, and the signals coming from Washington suggested the world's largest economy was genuinely healing. A strategist at IG observed that Asian markets had been lagging in returns and were now catching up. The Taiwan dollar and South Korean won both strengthened against the dollar. Singapore extended a six-session winning streak. Indonesia and Thailand added gains of their own, the latter buoyed by government pledges to protect employment amid a severe third wave.
Taiwan had its own private reason to celebrate: 150,000 Moderna vaccine doses were scheduled to arrive that same day, the opening installment of an order exceeding 5 million. The convergence of external recovery signals and domestic vaccine progress made the day feel, for a moment, like a turning point.
But the portrait fractured under closer examination. Malaysia fell as much as 0.8%, weighed down by a catastrophic surge — 7,857 new infections and 59 deaths in a single day, the third consecutive record. Analysts at ING warned a complete national lockdown could not be ruled out. The Philippines, after an extraordinary three-day rally that had added more than 8% to its benchmark index, gave back ground; the momentum had simply run out.
What the day ultimately revealed was divergence. Investors were no longer treating Asia as a single story following America's lead — they were parsing which economies had their outbreaks under control and which did not. The same forces lifting Taiwan were insufficient to overcome the pandemic's weight on Malaysia and the Philippines. U.S. inflation data was due to arrive within hours, a number that could either confirm the recovery narrative or complicate it. Either way, the distance between Asia's winners and its struggling was unlikely to close soon.
On a Friday in late May, Taiwan's stock market pulled ahead of its neighbors across Asia, riding a wave of optimism about the American economy. Investors were reading the signals coming from Washington and Wall Street—fresh data on jobless claims, a presidential budget announcement, the machinery of recovery grinding forward—and they liked what they saw. The Taiwan dollar and South Korean won both strengthened against the greenback. Taiwanese equities climbed 1.5%, reaching their highest point in more than two weeks. It was the kind of day when money moves in one direction, and Asia's emerging markets followed.
The mood was buoyed by concrete news from the United States. Unemployment claims had fallen more sharply than expected in the previous week, a sign that American employers were hiring again and the labor market was genuinely mending. President Biden was preparing to unveil a $6 trillion budget proposal for 2022. These were the kinds of announcements that ripple outward from the world's largest economy, reaching traders in Singapore, Bangkok, Jakarta, and Taipei. A strategist at IG noted that Asian markets had been lagging in returns and were now catching up on the strength of this recovery narrative. The region's currencies held their gains as the day progressed, though all eyes remained fixed on inflation data due to arrive from the United States at midday GMT—a number that could shift expectations about whether the Federal Reserve would tighten policy sooner rather than later.
Taiwan had additional reasons to celebrate. The first shipment of 150,000 COVID-19 vaccine doses from Moderna was scheduled to arrive that same day, part of a larger order exceeding 5 million doses. Thailand's stock market also rose for a third consecutive session, up 0.5%, as the government announced plans to shore up employment and consumer spending amid a severe third wave of infections. Singapore extended its winning streak to six sessions. Indonesia pushed forward for a third day of gains. The momentum felt broad, felt real.
But the picture fractured when you looked closer. Malaysia's stock market fell as much as 0.8%, heading toward its worst day in a week. The country was drowning in a surge of infections. On Thursday alone, Malaysia had recorded 7,857 new coronavirus cases—the third straight day of record numbers—along with 59 deaths. Analysts at ING warned that a complete nationwide lockdown could not be ruled out, with some state officials pushing the federal government to take that drastic step. The Philippines, after a brilliant three-day run that had added more than 8% to its benchmark index, gave back ground on Friday. The market had exhausted its momentum.
What emerged from the day's trading was a portrait of divergence. The same forces that lifted Taiwan and Thailand—American economic strength, the promise of vaccines, the hope of recovery—were insufficient to overcome the weight of the pandemic's third wave bearing down on Malaysia and the Philippines. Investors were making distinctions now, parsing which countries had their outbreaks under control and which did not. The regional currencies had gained, but not equally. Indonesian 10-year yields had risen 3 basis points to 6.475%, while Malaysia's 3-year yield had dipped slightly. The story was no longer simply about Asia following America's lead. It was about which Asian economies could actually capitalize on that lead, and which would be held back by the virus still circulating through their populations. The inflation data from Washington would arrive in hours, and it would either confirm the recovery narrative or complicate it. Either way, the divergence within Asia itself—between the winners and the struggling—would likely only deepen.
Notable Quotes
Asia markets follow optimism around U.S. economic data boosting the recovery theme and may potentially spur some catch-up growth in Asia, as they have been lagging in terms of returns performance.— Yeap Jun Rong, market strategist at IG
A complete nationwide lockdown cannot be ruled out, with some state rulers urging the Federal government to do this.— Prakash Sakpal and Nicholas Mapa, analysts at ING, on Malaysia's COVID situation
The Hearth Conversation Another angle on the story
Why did Taiwan's market jump so much higher than the others if they're all in the same region?
Taiwan had two things working for it at once. The U.S. labor market was healing, which made investors feel good about growth everywhere. But Taiwan also got its first big vaccine shipment that day. That's concrete. That's local. The others didn't have that same tailwind.
So it's not just about following America's lead?
It's not. Malaysia and the Philippines were getting crushed by COVID surges at the exact same moment. You can't ride optimism about recovery when your hospitals are overwhelmed. The market was making a calculation: some of us can benefit from this, and some of us are still in crisis.
What about the currencies? They all seemed to strengthen.
They did, but unevenly. The Taiwan dollar and Korean won led the way. That's because investors were rotating money into those economies. If you think a country's recovery is real, you want its currency. The others gained too, but it was more muted, more tentative.
And the U.S. inflation number coming later—why did everyone care so much?
Because if inflation was hot, the Federal Reserve might raise interest rates sooner. That changes everything for emerging markets. Higher U.S. rates make American bonds more attractive, so money flows out of Asia. Everyone was holding their breath.
So this day was really about Asia trying to figure out if it could trust the American recovery story?
Exactly. And whether it could trust itself to actually benefit from it.