Recently, both bond and stock markets saw increased volatility. This shift came as inflation and retail sales in the US outpaced expectations repeatedly. Meanwhile, the Fed again announced their decision to wait for more data before lowering interest rates. As a result, investors aggressively readjusted their interest rate forecasts, which directly impacted equity markets. We believe the concerns are warranted as commodity prices have soared as of late, which could cause higher inflation in the coming months. At this point in time, our assessment suggests that the equity price movements may be a short-term reaction to bond yields and we will monitor these trends attentively.
China’s program to support “whitelist” property projects has raised RMB 469 billion as at end-March. This is a notable increase over the RMB 200 billion previously reported and we hope to see substantially more funds disbursed given the size of China’s residential property sector. There are also expectations that the People’s Bank of China will be enriching its monetary toolbox by gradually increasing the trading of government bonds in its open market operations. To us, this is a form of monetary policy easing, another positive step instituted. We also hold a positive outlook on China's recent Q1 GDP growth and the expansion in PMI numbers. However, we acknowledge an initial slowdown in growth for key economic indicators, such as retail sales and industrial production, indicating persistent sluggishness in the domestic economy. We will continue tracking these developments in the coming months to confirm the trend.
Additionally, we are monitoring the escalating geopolitical tensions between Iran and Israel, particularly as Israel contemplates its response to Iran's recent drone strikes on Israeli territory. This situation has the potential to significantly impact crude oil prices, adding risk to higher inflation in the near-term. The US-China tension continues to be a long-term issue. It was reported that the US lawmakers have introduced a bill to bar US mutual funds from investing in indices that track Chinese stocks. We note that global portfolio allocation to the Chinese market has already been reduced since last year. We believe this has already resulted in the US market valuation premium to the Chinese market at an extremely high level versus historical trends. We believe that once the Chinese economy is on a firmer and sustainable growth footing, the valuation premium should contract.
Over the near-term, inflationary risks in the US and uncertainty in China may cause headwinds to equity markets. As stated above, our analysis on prevailing data suggests that this is a temporary correction given heightened valuations in developed equity markets. As such, we will look for attractive opportunities going forward.