China raised about $48 billion in its third instalment of a national semiconductor fund, aiming to increase its chip-making capabilities in the face of an escalating technology competition with the U.S. This latest financing round is the largest for the state-owned National Integrated Circuit Industry Investment Fund, created in 2014. Commonly known as the “Big Fund,” it directs state support to build up the country’s semiconductor-supply chain and has played an outsize role in its development. The third tranche of the fund, which was registered on Friday, counts China’s Ministry of Finance as its largest investor and has attracted funding from the country’s biggest state-owned banks and investment vehicles linked to local governments such as Shanghai, Beijing and Shenzhen. It hasn’t yet released any investment plans. Beijing’s national efforts to wean itself off foreign technology have been turbocharged over the past years, as U.S. authorities increasingly cut China’s access to American technology and know-how. Chinese leader Xi Jinping is seeking self-sufficiency in critical technology such as semiconductors and jet fighters to the production of grain and oilseeds. On Tuesday, among the individual stocks in Hong Kong, Semiconductor Manufacturing International gained 0.2 per cent and Hua Hong Semiconductor climbed 1.7 per cent. Certainly, Nvidia’s AI chips are crucial to technology from smartphones to chatbots. Their production is outsourced to just one company in Taiwan. With growing fears that China may stage an invasion of the island, the U.S. is racing to secure the supply chain. The U.S. earmarked more than $50 billion to expand chip manufacturing and research at home. South Korea, home to chip makers Samsung Electronics and SK Hynix, announced a $19 billion tax-incentive this month to bolster its semiconductor sector.

The Swiss stock market ended Monday's trading session with small gains. In the USA and the UK, markets were closed at the start of the week due to public holidays. The SMI gained 0.2 per cent to 11,961 points. Among the 20 SMI stocks, there were twelve price gainers and eight price losers. A total of 13.06 (previously: 17.9) million shares were traded. Within the SMI, UBS recorded a 1 per cent increase. The bank has ruled out an external successor for CEO Ermotti, as reported by the Financial Times. In the second tier, Julius Baer fell by 1.5 per cent following reports of a planned takeover of domestic competitor EFG International. From a financial point of view, the takeover could work on paper, according to analyst Anke Reingen from RBC. From a strategic point of view, however, the potential transaction raises questions. EFG's share price rose by 1 per cent.

Europe
European stocks edged higher on Monday in a muted session with U.K. and U.S. markets closed, while investors were looking ahead to eurozone inflation figures and U.S. PCE inflation data due later this week. Following Germany's Ifo business sentiment data, the inflation data will also provide key input ahead of the European Central Bank's rate decision on June 6, where a 25 basis point rate cut seems to be nearly a done deal. The Stoxx Europe 600 index gained 0.3% to 522.2 points on Monday. In Paris, the CAC 40 and SBF 120 added 0.5% each, while the DAX 40 increased by 0.4% in Frankfurt. The London and New York stock exchanges are closed on Monday due to a bank holiday in the United Kingdom and the United States. Alstom (+5.6%) has announced the launch of a capital increase of around €1 billion, the final part of the debt reduction plan presented by the rail equipment manufacturer on 8 May. Alstom plans to issue around 76.8 million new shares at a unit price of €13, representing a discount of around 29% to the share's closing price on Friday. Derichebourg climbed 1.7% to €4.79. TP Icap Midcap raised its target price for the metals recycling specialist from €6 to €7, while maintaining its recommendation at ‘buy’. TP Icap Midcap believes that this is an ‘ideal’ time to invest in the share in order to take advantage of the ‘cyclical upturn in the scrap metal market’ and to benefit from the recovery of Elior, the catering specialist (up 4%), which has been controlled by Derichebourg since last year.

United States
U.S. markets closed on Monday due to public holidays.

Asia
Asian stocks were mixed on Tuesday. Participants point to the lack of impetus from Wall Street, where there was no trading on Monday due to the public holiday. The stock market in Shanghai is treading water, while the Hang Seng Index in Hong Kong is up 0.6 per cent. Semiconductor and property stocks are in demand here. The government in Beijing will continue to support the semiconductor industry. Among the individual stocks in Hong Kong, Semiconductor Manufacturing International gained 0.2 per cent and Hua Hong Semiconductor climbed 1.7 per cent. Gains in the property sector were even more pronounced after the Shanghai government further eased restrictions on house purchases late on Monday. Shares in Longfor Group rose by 0.2 per cent and Shimao Group Holdings climbed 4.6 per cent. The Nikkei-225, on the other hand, was unable to maintain moderate gains from early trading and slipped slightly into negative territory. The index lost 0.2 per cent. New inflation data from Tokyo, which will be included in the Bank of Japan's (BoJ) interest rate forecast, will be on the agenda over the course of the week. The previous day, statements by BoJ Deputy Governor Shinichi Uchida supported the view that Japan is on the verge of completely overcoming decades of deflation. The comments are likely to reinforce the impression that the bank is on the way to a gradual tightening of monetary policy, according to analysts. In Seoul, the Kospi is trading slightly higher, while the S&P/ASX 200 in Sydney is down 0.3 per cent. Retail sales in Australia fell short of expectations. They rose by 0.1 per cent in April. However, economists had expected an increase of 0.3 per cent.

Bonds
Government bond markets are off to a slow start given U.K. and U.S. holidays on Monday. Prices of Swiss bonds fell at the start of the week as yields rose. Overall, however, business has been very quiet as the financial markets in the UK and the US are enjoying a long weekend due to public holidays. Meanwhile, primary market business remains lively at the start of the new week. Ferring Holding, for example, raised CHF 330 million with a dual tranche. And GW Emissionszentrale für gemeinnützige Wohnbauträger issued a bond for CHF 126 million. The 2-year Eidgenossen benchmark bond recently yielded 1.041%, the 10-year Eidgenossen benchmark bond 0.812%.

Analysis
Rating Galenica: Research Partners upgrades to Buy (Hold) - Target CHF 84 (81)
Target price Sonova: Kepler Cheuvreux increases to CHF 250 (202) - Reduce
Target price Ypsomed: Research Partners lifts to CHF 430 (400) - Buy

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