Vishnu Varathan
Senior Economist
vishnu.varathan@mizuho-cb.com
Chang Wei Liang
FX Strategist
weiliang.chang@mizuho-cb.com
Asia FX Strategy
― Aug ‘15: ‘C’-erious Volatility! ―
‘C’-erious Volatility!: Volatility triggered by three big ‘C’s, namely China, Commodities
and Central Banks, have hammered risk sentiments and EM Asia asset markets.
Accordingly, AXJ (Asia ex-Japan currencies) have slumped further.
China uncertainties and risks of financial market shocks continue to overhang and markets
watch for signs of stabilization; commodity exporters and trade partners are hit!
Commodity market tumbling further exacerbates demand shortfall fears rather than
providing cost relief even for net importers. Energy exporters are hardest hit now.
Central banks in the region are trying to stabilize markets but mindful not to squander too
much FX reserves too soon. The Fed is still a big swing factor as hike is watched.
18 Aug 2015
Mizuho Bank, Ltd.
Singapore Treasury Division
Executive Summary
•
Renewed focus on the possibility of a Fed rate hike comes September should
keep USD elevated even as EM FX looks to be roiled by capital outflows.
•
AXJ: Heightened China risks and devaluation compounding pressures from
commodity sell-off and impending Fed hikes; but sell-off is uneven.
•
CNY: The abrupt devaluation resulting in some 3-4% depreciation in CNY in
a matter of days may have further to run; but overall stability not undermined.
•
INR: Even with lower oil and inflation, political impasse and broader AXJ
risks weigh; but INR is well-placed to relatively out-perform.
•
SGD: $NEER easing is not justified on CNY devaluation; requires fresh
negative shocks. Nonetheless, soggy MYR and CNY drag via NEER effects.
•
MYR: Investor confidence continues to languish amidst heightened political
uncertainty and limited clarity on contingent liabilities.
•
IDR: Weighed by capital outflows, with reforms gingerly awaited post
Jokowi’s cabinet reshuffle.
•
THB: Headwinds from poor external demand and tepid domestic consumption
look to persist, keeping THB under pressure.
•
PHP: Contraction in manufacturing exports on Chinese demand slippage
offset positivity from better US demand.
•
VND: Band-widening buys time on instinct and pressures to devalue further.
•
AUD: RBA toning down jawboning provides little relief with fresh China risks
and sustained ore pressures; but soft bounce later in 2016 likely.
•
KRW: Broad-based export slowdown undermines given increased price
competition from Japanese corporates and slower Asian growth.
•
Near-term MYR, IDR and AUD remain under pressure with INR and PHP
offering some resilience; meanwhile KRW and TWD catch-down watched.
USD/JPY
EUR/USD
USD/CNY
USD/INR
USD/KRW
USD/SGD
USD/IDR
USD/MYR
USD/PHP
USD/THB
USD/VND
AUD/USD
18 Aug 15
124
1.11
6.39
65.3
1183
1.41
13835
4.11
46.3
35.5
22085
0.74
Sep 15
125
1.09
6.43
65.5
1180
1.41
14000
4.10
46.5
36.0
22100
0.72
Dec 15
126
1.09
6.48
66.5
1200
1.42
14100
4.18
46.8
36.3
22100
0.70
-1-
Mar 16
124
1.12
6.42
64.5
1170
1.37
13950
3.98
46.3
35.5
22500
0.73
Jun 16
123
1.14
6.36
63.5
1150
1.35
13600
3.88
45.5
34.5
22500
0.76
Sep 16
123
1.14
6.30
62.5
1120
1.33
13400
3.75
44.6
34.3
22750
0.76
Global FX: Fed rate hike beckons
Cumulative gain in wages suggest Fed rate hike due
Market rate pricing still look too dovish further out
US - Fed Funds Rate vs ECI Wages
3.0
Market-Implied Fed Funds Rate (%)
1.5
1.75
2.0
1.0
1.0
0.5
0.0
0.0
-1.0
-0.5
-2.0
-1.0
-3.0
-1.5
1.50
1.25
1.00
0.75
0.50
0.25
-4.0
-2.0
0.00
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
17 Sep 28 Oct 16 Dec 27 Jan 16 Mar 27 Apr 15 Jun 27 Jul 14 Sep 26 Oct 14 Dec
% Change in ECI Wages & Salaries (rhs, from year ago)
Market-Implied Fed Funds Rate (%)
% Change in Fed Funds Target from year ago (lhs, 1 year lead)
Softening growth momentum in Japan is a concern
Interim EUR stabilisation on EZ activity recovery
EZ PMI vs EUR/USD
56
Japan - GDP (q/q saar)
1.50
3.0
1.45
54
2.0
1.40
1.0
52
1.35
50
1.30
0.0
1.25
-1.0
48
1.20
-2.0
46
1.15
-3.0
1.10
-4.0
44
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun
12 12 12 13 13 13 13 14 14 14 14 15 15
1.05
42
1.00
Jul 12
Jan 13
Jul 13
EZ PMI
Jan 14
Jul 14
Jan 15
Jul 15
EU/USD(rhs)
Sources: Reuters, Mizuho Bank Singapore Treasury
FOMC Median FFR Projection
*As of 5 Aug 15
Sources: Reuters, Mizuho Bank Singapore Treasury
Sources: Fed Reserve, Reuters, Mizuho Bank Singapore Treasury
Consumption
Govt
Investment
Change in Stocks
Net Exports
GDP q/q saar
Sources: CEIC, Mizuho Bank Singapore Treasury
•
The FOMC statement suggests that the Fed will raise rates when there is some further
improvement in the labor market – which is not a particular high bar for the first hike.
•
Fed’s Lockhart, a centrist voter in the FOMC, has also stated that he favors a hike in
Sep as long as there is no data deterioration, downplaying the weaker Q2 employment
cost index gain in context of the cumulative progress in the labor market recovery.
•
With global growth still placid in contrast to the relatively solid US recovery, we think
the USD will continue to be the near-term beneficiary of oncoming Fed normalization.
•
USD strength might be particularly acute with markets still positioned dovishly
relative to Fed rate guidance, and thus positioning is at risk of a disruptive catch-up.
•
In Europe, sentiment has improved as Greece looks set to strike a third bailout deal
while the Greek banking system is also set to return to normalcy on accelerated
recapitalization before the results of ECB’s stress tests are out.
•
The EUR was surprisingly lifted in the wake of CNY depreciation as short EUR/CNY
carry trades unwind, but we think growth remains too patchy for sustained EUR strength.
•
Going forward, we think Europe will continue to recover at a modest pace, but not
strong enough to warrant a roll-back of ECB QE just yet, keeping EUR on the backfoot.
•
In Japan, BoJ minutes for July highlighted a degree of comfort that long-term inflation
expectations are improving, while the economy is also recovering moderately.
•
However, Q2 GDP growth contracted on weaker exports and consumption spending,
raising the possibility of BoJ easing should weakness entrenches further.
•
As such, we think USD/JPY might be supported on the upside, although increasing
strains seen in Emerging Asia might cap against overt buoyancy.
-2-
AXJ: ‘C’-erious Volatility
MYR, IDR & AUD (China/Commodities) are worst Performers with EUR & JPY slde
on Central Bank Stimulus ; USD dominance not over!
25
20
20.0
(% Chg vs USD)
7.2
15
2015 Worst : MYR (-12.8%); IDR (-10.0%); AUD (-7.9%)
10
2015 Best : TWD (-1.74%); CNY (-3.01%); INR (-3.1%)
5
0
-10.4
-9.7
-14.6
-8.4
(20)
(25)
-18.0
-20.4
-21.0
2014
-12.1
-3.7
-2.4
-5.7
-7.8
(10)
(15)
-3.5
-7.4
(5)
-10.4
-11.6
-15.8
-8.2
-8.0
-3.2
-2.9
-5.5
-5.3
-4.5
-3.5
-4.2
*USD index change measures USD change vs. EUR, JPY,
GBP, CAD, SEK & CHF.
2015 YTD (till 18th Aug)
2014 through 18-Aug 2015
Sources: Bloomberg, Mizuho Bank SingaporeTreasury Div.
MYR By Far the Worst Performer! IDR, KRW, TWD & SGD
Highly Correlated to CNY move (% Chg vs. USD since Start-2015)
4
4
150
FX Reserves Shifts since mid-2013 "taper tantrums" to
May-2015 show materially stronger India but sharp
deterioration in Malaysia
30
29.2
0
100
0
13.6
50
(4)
74.6
20
Absolute Change (US$ bn,
LHS)
44.4
-13.0
-9.7
-35.2
0
(8)
(50)
(12)
(16)
Jan-15
INR
MYR
THB
IDR
PHP
AUD
VND
EUR
KRW
SGD
TWD
Feb-15 Mar-15
Apr-15 May-15
Sources: Bloomberg, Mizuho Bank - Singapore Treasury Div.
Jun-15
(16)
Jul-15
Aug-15
9.5
-0.8
0
-1.0
-3.7
(8)
(12)
10
9.6
(4)
(10)
-8.0
(100)
(20)
(150)
Korea
Sep-15
India
Singapore
Thailand
-26.7
Malaysia
(30)
Indonesia Philippines
Sources: Bloomberg. Mizuho Bank Singapore Treasury Div.
•
AXJ 1 sell-off and volatility was “C-eriously” amplified by China’s devaluation,
commodity sell-off and central bank triggers (predating and reacting to China).
•
Invariably negative AXJ reflected negative EM/China reflex. Even commodity importers
reacted to implied demand shrinkage rather than cost-relief from softer commodities.
•
To be fair, China is not starting a currency war, and certainly Asian central banks are
justifiably more concerned about stability than competitive devaluation.
•
But with the US Fed set to stay the course on at least one rate hike this year, in contrast to
further PBoC easing, AXJ downside risks piggy-back on China and commodities.
•
Given accentuated exposure to China and commodities, MYR, IDR and AUD look
particularly vulnerable; but AUD is tipped to come out more buoyant on two counts.
•
First, prolonged slump in energy prices being less elastic to China stimulus as
opposed to iron and copper ore prices (once supply glut is worked off). Second, MYR
(more so!) and IDR are vulnerable to near-term capital outflows from political risks.
•
KRW, TWD and SGD are exposed to CNY slippage via trade and NEER passthrough; perhaps most acutely for KRW given near-term stimulus bias.
•
Softer oil prices could provide relatively more buffer, but not complete insulation, for
INR and PHP. Upshot: Near-term AXJ downside is only a matter of degree.
•
Finally, cash (FX reserves) discriminates. MYR fares worst on “cash burn” and reserve
replenishment constrain intervention; whereas INR is buffered by pre-emptive build-up.
1
AXJ: Asia ex-Japan Currencies
-3-
CNY: Qualified Devaluation
"One-off" CNY Devaluation triggered follow-through
sell-off as market-based fix kicked in
6.60
6.60
11-Aug: 1.9% reference devaluation followed by a
few sessions of self-reinforcing sell-off as fixing
shifted to market-based mechanism. CNY sell-off
quelled by PBoc intervention/clarification
6.50
6.40
CNY NEER appreciation was stretched near-4% per annum
(since 2005); thus the adjustment last week released some
pressures alongside market-based fixing. (Index 2005=100)
150
6.50 145
145
One-off devaluation ==> measured
"catch-down" for trade-weighted
CNY. Consistent with broader
stability at reasonable valuation.
6.40 140
15 Mar 2014:USD/CNY
bands doubled to +/-2%.
6.30
6.30
6.20
6.20
6.10
6.10
140
135
135
130
130
125
USD/CNY
Trading Bands
6.00
5.90
Jan-13
May-13
Sep-13
4% appreciation p.a.
3% appreciation p.a.
120
120
3.5% appreciation p.a.
Sources: Bloomberg, Mizuho Bank - Singapore Treasury Div.
115
Jan-12
Sources: Reuters, Mizuho Bank Singapore Treasury Div.
Jan-14
May-14
Jul-12
Jan-13
Jul-13
Jan-14
115
Jul-14
Jan-15
Jul-15
5.90
Sep-14
Jan-15
May-15
Sep-15
Weak Exports justify Softer CNY; but CNY adjustment is
not a panacea; and PBoC intent is far from Mercantilist
(30)
125
CNY NEER
6.00
Stronger CNY
USD CNY Fix
USD/CNH
150
Capital Outflows (% of Prev Qtr FX Reserves) persist even with
valuation effects removed; CNY stability preferred
2.0
(20)
10
10
8
8
1.5
(10)
1.0
6
6
0.5
4
4
0.0
2
2
0
0
0
10
20
(0.5)
30
(2)
(2)
(1.0)
40
(4)
Exports (YoY 3mma, LHS, Inverted)
CNY NEER (6M avg MoM Chg; 4M advanced; RHS)
50
05
06
07
08
09
10
11
12
13
14
C/A
Valuation Effect
Chg in FX Reserves
(1.5)
15
16
(6)
Sources: CEIC, Mizuho Bank Singapore Treasury Div.
09
10
11
Investments
Deviation (Implied Hot flows)
(4)
(6)
12
13
14
15
Sources: Bloomberg, Mizuho Bank - Singapore Treasury Div.
•
An unprecedented 1.9% devaluation of CNY fix to 6.2298 on 11th Aug sparked spot
CNY and CNH sell-off; over 3-4% to 6.40 (CNH) and 6.45 within the week. But de facto
devaluation was qualified as “one-off”.
•
Moreover, the PBoC stressed on CNY stability at reasonable, equilibrium level,
alluding to improved (CNY fix) pricing mechanism and increased CNY flexibility.
•
Over-valued effective exchange rate cited as devaluation trigger means that reasonable,
equilibrium CNY rate is a function of; i) CNY NEER, and; ii) exports.
•
On the former, even after “one-off” CNY depreciation, trade-weighted CNY is
consistent with annualized appreciation of 3.5% since 2012; at the very least!
•
Admittedly, reining in pace of CNY (NEER) appreciation will help with exports
recovery; but anticipated exports boost 3-6months down is likely to be modest.
•
Broader point: Beijing is not succumbing to mercantilist reflex, but complementing
monetary and fiscal stimulus with appropriate and measured FX adjustment.
•
Nonetheless, a more market-based fixing mechanism, USD/CNY upside could persist;
6.35-6.58 range watched into 2015, with a more gradual pullback to 6.30-6.45 in 2016.
•
One risk to note is band-widening as this could exaggerate CNY downside; even if
only fleetingly. But band-widening is neither imminent nor automatic given
overarching CNY stability priority – consistent with internationalization/SDR inclusion.
-4-
INR: Relative, Not Absolute, Resilience
Weakening Foreign Equity flows In Synch with
Wider Asian Equities Trend weighs on INR
2,000
1,500
3
2
1,000
Softer Oil Prices and Gold import compression to help
rein in Trade & C/A Deficit (3mma US$bn)
50
50
40
40
30
30
20
20
10
10
0
0
1
500
0
0
(500)
(1)
(1,000)
(2) (10)
Smoothed (4wkma, USDmn, LHS) Equity flows
(1,500)
(10)
INR % Chg (Wk/Wk, 4wkma, RHS)
(2,000)
Trade Bal
Imports
Gold Imports
(3) (20)
Sources: Bloomberg, Mizuho Bank Singapore Treasury Div.
07
Inflation "de-pressurized" by global oil price slump
& fairly contained food inflation pick-up (WPI % y/y)
30
08
09
10
11
20
4
10
0
12
(30)
13
14
15
RBI has built up FX reserves; much stronger
position than during "taper tantrum" (USD bn)
400
16
FX Reserves (LHS)
Gold (LHS)
Others (LHS)
Imports cover (RHS, ratio)
350
8
(20)
Sources: CEIC; Mizuho Bank Singapore Treasury Div.
(30)
12
Exports
Oil Imports
Non-oil Imports
14
300
12
250
10
200
8
150
6
100
4
50
2
0
Headline WPI (LHS)
CPI (LHS)
(4)
(10)
Fuel (RHS)
Food (RHS)
(8)
(20)
06
07
08
09
10
11
Sources: CEIC, Mizuho Bank Singapore Treasury Div
12
13
14
15
0
0
06
07
08
09
10
11
Sources: CEIC, Mizuho Bank Singapore Treasury Div.
12
13
14
15
•
We remain die-hard INR bulls; but more broadly in the medium-long term and
relative basis for now as near-term risks INR tendencies (vs. USD) are bearish.
•
To be sure, it is not as if INR fundamentals are all turning unequivocally negative.
For one, oil prices sliding all over again ought to be INR positive from C/A dynamics.
•
What’s more, softer than expected inflation and consequent policy flexibility (as well
as implied real returns) from surging real interest rates should bolster INR too.
•
But, countervailing forces eclipse INR positives. First, stalled reforms at “lame duck”
parliamentary session reflect wider reservations about reform pace; as did MAT2.
•
Second, China’s CNY devaluation, despite limited direct impact on INR, revealed
policymakers’ concerns about erosion of REER competitiveness.
•
As an extension, RBI is expected to opportunistically accumulate FX reserves if INR
strength against a broad spectrum of Asian currencies is sustained. In other words,
INR strength in the absence of wider AXJ gains may be on a relatively short leash.
•
Finally, brewing Fed rate hikes are likely to trigger EM Asia outflows and consequent
AXJ, including INR, weakness; but measured INR/AXJ outperformance not precluded.
•
Upshot: USD/INR could test 68 by end-2015 before heading towards 60 by end-2016.
2
MAT (minimum alternative tax) is essentially recourse that tax authorities have to ensure that companies that pay less than 18.5% tax on
book profits make-up shortfall of 20% of book profits. This may have negative impact for foreign funds that flown under the MAT radar.
-5-
SGD: Softer Even Without Easing
108
107
S$NEER has slipped back since Mid-July as softer CPI/commodities, downside
was exacerbated by CNY devaluation
107
Stronger SGD on a
trade-weighted basis
Post-MAS
jump in
S$NEER
106
105
105
104
103
30-day moving
average of
S$NEER
+/- 2% from
S$NEER mid-pt
103
NEER
Mid-Point
102
Sources: MAS, Bloomberg, CEIC , Mizuho Bank, Singapore Treasury Div.
101
Jan-14
101
Mar-14
May-14
Jul-14
Sep-14
Nov-14
1.2
SOR surge accentuated by further SGD depreciation
expectations triggered by CNY devaluation (%)
1.2
1.0
SOR (swap offer rate) is a synthetic SGD rate, which is
a function of USD interest rates (USD LIBOR) and
expected SGD (vs. USD) appreciation as implied by FX
forward market. As per covered interest rate parity,
SOR is direct function of USD LIBOR, but an
inverse function of SGD appreciation. In other
words, rising USD LIBOR and/or SGD depreciation
will push SOR higher.
1.0
0.8
0.6
0.8
0.6
0.4
0.2
0.2
0.0
0.0
3-mth annualised SGD depreciation
3-mth USD SIBOR
3-mth SOR
(0.4) Sources: Bloomberg, CEIC, Mizuho Bank Singapore Treasury Division.
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14
May-15
Jul-15
SGD slide accentuated by CNY Devaluation & weaker
growth/CPI (USD/SGD, inverted; +/-2% bands)
1.20
1.22
1.20
1.22
1.24
1.24
Stronger
SGD
1.26
1.28
1.28
1.30
1.30
1.32
1.32
1.34
1.34
SGD (Actual)
1.36
1.36
SGD (Mid Pt)
1.38
1.38
(0.2)
1.40
(0.4) 1.42
Jan-15
Mar-15
1.26
0.4
(0.2)
Jan-15
Jul-15
1.40
Sources: Bloomberg, CEIC, Mizuho Bank, Singapore Treasury Div
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
1.42
Jan-15
Jul-15
•
Bets on step depreciation3 at the October policy meeting are beginning to surface,
perhaps even mount; but we think that this is premature, if not misguided.
•
In particular, arguments that S$NEER slippage to the softer side of the band are
indicative of pipeline easing suggest the tail wags the dog; a flawed notion.
•
To be sure, we are sympathetic to the idea of further policy easing insofar as it is
grounded in forward-looking downside risks to the economy and dis-inflation.
•
But our reservations about pre-supposing re-centring S$NEER lower derives from
three factors. First, we are not convinced about persistent dis-inflation.
•
Admittedly, fading oil dis-inflation has re-emerged as global crude prices slip. But a
tight job market and muted scope for utility tariff cut underpin “core” price pressures.
•
Second, front-loaded easing (slope reduction) in Jan warrants fresh shocks surpass
those in early-2015 for more easing. In any case, easing tends to raise interest rates.
•
Finally, contrary to (flawed) allegations tit-for-tat SGD response, CNY devaluation in
fact diminishes the case for MAS easing. Point being, loosened CNY “peg” aligns
trade-weighted SGD (lower) given heavy CNY in the S$NEER basket.
•
Nonetheless, even if mid-point, crawl and band-width specifications remain unchanged,
SGD will sympathetically slide if CNY and MYR tumble further. We see upside
risks to 1.44 if 1.42 cracks decisively; retracement to 1.35 and below late-2016.
3
Entails shifting (re-centring) S$NEER/policy band mid-point lower, resulting in abrupt, one-off (trade-weighted) SGD depreciation.
-6-
MYR: Confidence weighed by uncertainty
But likely to be dragged by renewed oil price slippage
Malaysia - Trade Developments
Oil vs USD/MYR
40
30
20
10
0
-10
-20
-30
-40
-50
-60
40
30
20
10
0
-10
-20
-30
-40
-50
-60
2.80
140
3.00
120
USD bn
% 3m/3m saar
Exports have rebounded alongside MYR weakness…
Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
Trade Bal (rhs, USDbn, 3m saar)
3.20
100
3.40
80
60
3.60
40
3.80
20
Aug 10
Exports 3m/3m saar
Aug 11
Aug 13
Tapis Oil Price (lhs, USD)
Imports 3m/3m saar
4.00
Aug 15
Aug 14
USD/MYR (rhs, inverted)
Sources: CEIC, Mizuho Bank Singapore Treasury
Sources: CEIC, Mizuho Bank Singapore Treasury
Foreign holdings of MYR govt debt back to 2012 lows
Malaysian reserves below the psychological $100bn mark
Malaysia - Foreign bond holdings (USD bn)
Malaysia - Official Reserve Assets (USD bn)
45%
160
240
220
140
40%
120
200
35%
100
180
160
USD bn
USD bn
Aug 12
30%
80
60
140
25%
40
120
100
20
20%
Jul 12
Jan 13
Jul 13
% of Total Outstanding (rhs)
Jan 14
Jul 14
Jan 15
Jul 15
0
Jul 08
Non-resident holdings of BNM+Govt Bonds/Bills
Sources: CEIC, Mizuho Bank Singapore Treasury
Jul 09
Jul 10
Jul 11
Jul 12
Jul 13
Jul 14
Jul 15
Sources: CEIC, Mizuho Bank Singapore Treasury
•
USD/MYR bulldozed through the psychological 4-figure as CNY devaluation fired
up MYR bears. Moreover, BNM’s dilemma between reserve re-building and
intervention is stark and tempts MYR cynics.
•
We believe BNM faces three reservations against holding the 3.80 mark: 1/ Brent crude
prices slipping below $50 on fears of increasing Iranian supply, 2/Regional currencies’
tumble against the USD and 3/Diminished FX reserves below the USD100bn mark.
•
While the weakened Ringgit has already led to an improved trade profile in July, we
believe that investor confidence is still unlikely to return for now.
•
Political tensions remain heightened given the 1MDB-related controversies and there
will be doubts whether the government is able to push through much needed
reforms to restore foreign investor climate in such a difficult political climate.
•
For one, fiscal consolidation remains a priority to ensure a stable currency as low oil
prices offset the expected fiscal gains from introduction of the GST in April.
•
Secondly, greater visibility with regards to the contingent liabilities of the government
will be needed for investors to re-rate Malaysian debt, especially as financing conditions
are expected to turn more negative in the wake of 1MDB developments.
•
With continued political paralysis amidst prospective Fed tightening, USD/MYR might
test 4.20 mark amid foreign outflows before partial capitulation later in 2016.
-7-
IDR: Watching reforms with Cabinet reshuffle
Equity outflows have put IDR on the back foot
Expanding non-energy trade surplus a positive
Indonesia - JKSE vs IDR
Indonesia - Trade Balance
60
5600
30
12000
5400
40
20
20
10
0
0
12500
5200
5000
13000
4800
13500
-20
4600
-10
14000
4400
-40
Jakarta Stock Exchange Composite
-20
Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
4200
14500
Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15
Oil & Gas Trade balance (rhs, USDbn 3m saar)
Non-Oil & Gas Trade balance (rhs, USDbn 3m saar)
Exports (3m/3m saar)
Imports (3m/3m saar)
USD/IDR (rhs, inverted)
Sources: CEIC, Mizuho Bank Singapore Treasury
Sources: CEIC, Mizuho Bank Singapore Treasury
FDI has seen multi-year slippage with no uplift
Private external debt load looks high vs reserves
Indonesia - FDI (12m/12m)
50
Indonesia - External Assets and Liabilities
(USD bn)
200
40
30
150
20
100
10
0
50
-10
0
Jan 08
-20
Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
Primary
Secondary
Tertiary
Sources: Reuters, Mizuho Bank Singapore Treasury
Jan 09
Jan 10
Private External Debt
Official Reserves
FDI 12m/12m
Jan 11
Jan 12
Jan 13
Jan 14
Jan 15
Short-term Private External Debt
Sources: CEIC, Mizuho Bank Singapore Treasury
•
Capital outflows from Indonesia have accelerated with the Fed appearing poised to
hike rates by Sep, while a commodity price slumber has also hit the IDR given
Indonesia’s dependence on commodity exports.
•
Indonesian equities have slipped over 16% since late April on foreign outflows, and we
think investor sentiment continues to be quite bearish due to the slow pace of reforms.
•
Jokowi announced a Cabinet reshuffle in a bid to bolster investor confidence, making
changes at key economic posts (Trade, Economic, Planning Agency and Maritime).
•
The appointment of former BI Governor (and Taxation chief) Nasution as Coordinating
Economic Minister also signals greater emphasis on IDR stability and fiscal reforms.
•
Reforms are urgently needed now with the environment turning more challenging,
with commodity prices continuing to test new lows while CNY devaluation also pose
headwinds to IDR, dimming Chinese import demand for Indonesian goods.
•
While non-energy trade balance has improved on import compression, sustainable
support requires continued foreign investment inflows, which remain discouraged
given the administration’s bias towards economic nationalism.
•
As such, we continue to hold a negative view on IDR, unless the new Cabinet pushes
for a more distinct shift towards economic-friendly policies.
-8-
THB: Domestic & external headwinds
Headline inflation remains below 2015 target
Persistent export contraction on demand weakness
Thailand - CPI
5.0
Thailand - Exports (y/y, quarterly)
4.0
4.0
3.0
3.0
2.0
2.0
1.0
0.0
1.0
-1.0
-2.0
0.0
-3.0
-4.0
-1.0
-5.0
-2.0
Jul 13
Oct 13
CPI y/y
Jan 14
Apr 14
Jul 14
Oct 14 Jan 15 Apr 15
Core CPI y/y
Core Inflation Target
-6.0
Jul 15
Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
Volume
Headline Inflation Target
Price
Exports y/y
Sources: CEIC, Mizuho Bank Singapore Treasury
Sources: CEIC, Mizuho Bank Singapore Treasury
Q2 growth disappoints on tepid domestic demand too
Slump in manufacturing triggers THB exodus
Thailand - Manufacturing Production vs THB
Thailand - GDP y/y
10
10
8
6
4
2
0
-2
-4
-6
-8
31.0
31.5
32.0
32.5
33.0
33.5
34.0
34.5
35.0
35.5
36.0
5
0
-5
-10
-15
-20
Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
Consumption
Govt
Investment
Change in stocks
Net exports
GDP y/y
Sources: CEIC, Mizuho Bank Singapore Treasury
-25
Aug 13 Nov 13 Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15
Mfg Pdn Index sa (3m/3m saar)
USD/THB (rhs, month avg)
Sources: CEIC, Mizuho Bank Singapore Treasury
•
Thailand is seeing headwinds for both domestic and external demand, with exports
shrinking on a volume basis for two consecutive quarters while domestic consumption
and investment have slowed in Q2.
•
With Thailand facing the worst drought in decades this quarter, we think
consumption should continue to languish as rural incomes take a hit.
•
Together with poor external demand conditions, this had led to particularly sharp
slippage in Thai manufacturing production, which weighed on the baht.
•
While BoT has refrained from cutting its policy rate after enacting two rate cuts this year,
limited growth traction also suggests that monetary policy might stay
accommodative for a prolonged period, especially given soft headline inflation.
•
In the wake of a bomb blast in Bangkok, investors are also likely to focus on the
potential hit to tourism and domestic sentiment, and we think risks of an acceleration
of foreign outflows cannot be discounted at this juncture.
•
Thus far, equity outflows from Thailand have not been overly sharp relative to
previous episodes, but the sharp rally in USD/THB this time might potentially unnerve.
•
Caught between the lack of a pick-up in external demand given softer Chinese growth
and the nearing of tighter US monetary policy, we think USD/THB might see further
upside pressures on outflows.
•
We have raised our USD/THB forecast to 36.3 for end 2015, but are hopeful of a
more robust return of external demand to support the baht into 2016.
-9-
PHP: Pressures build on export slippage
Manufacturing exports facing downside pressures
Offshore positioning continues to shift towards PHP shorts
USD/PHP vs PHP 1Y NDF Implied Rate
Philippines - Exports (2q/2q saar)
47
4.00
46
3.50
3.00
45
44
2.50
43
2.00
1.50
42
41
1.00
40
0.50
0.00
39
38
-0.50
37
-1.00
Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15
40
30
20
10
0
-10
-20
-30
Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15
Agro
Mineral
Special
Exports 2q/2q saar
Manufactures
USD/PHP
Sources: CEIC, Mizuho Bank Singapore Treasury
Rebound in remittances growth provides a buffer
Production contraction worst since 2011 in volume terms
Philippines - Industrial Production
Philippines - Remittances Growth
30
25
20
15
10
5
0
-5
-10
-15
-20
Jun 11
16
14
12
10
8
6
4
2
0
May 10
May 11
May 12
May 13
May 14
May 15
BoP - Secondary Income (y/y, 3mma)
Jun 12
IP value 6m/6m saar
Overseas Remittances (y/y, 3mma)
Sources: CEIC, Mizuho Bank Singapore Treasury
PHP 1Y NDF-implied rate (rhs)
Sources: Reuters, Mizuho Bank Singapore Treasury
Jun 13
Jun 14
Jun 15
IP volume 6m/6m saar
Sources: CEIC, Mizuho Bank Singapore Treasury
•
The Philippines has not been able to avoid the broad-based export slowdown in Asia
despite being the best positioned to benefit from the US recovery given supply chain links.
•
Export slippage was particularly acute in manufacturing, with exports to China down
by 30.2% YoY in June, offsetting gains to Japan and the US.
•
Electronics exports performed relatively better compared to non-electronics, but
softening shipments still led the Philippines’ electronics industry group SEIPI to lower its
exports growth target to 3-5%, from 5-7% earlier.
•
If Chinese growth continues to soften and impact exports, we expect PHP to face
further downside pressures, with industrial production already contracting at the sharpest
pace since 2011 on dismal export performance.
•
A silver lining is that remittances growth has rebounded in recent months, suggesting
some degree of pent-up demand for PHP which can help buffer from overt weakness.
•
BSP cut its 2015 inflation forecast to 1.8% from 2.1% previously, raising risks that
monetary policy might still remain soft even as the Fed begins to hike interest rates.
•
As such, we think a further upward re-pricing of USD/PHP is likely, with offshore
NDF positioning in long PHP positons already reduced sharply.
•
We see USD/PHP extending gains towards 46.80 by end 2015 on further accentuated
USD demand alongside a rate-liftoff by the Fed.
- 10 -
VND: Wider; but Lower?
Deterioration in Net Exports reveal Pressures on the
C/A and consequent pressures on the VND ($bn; Qtrly)
6
6
4
4
2
2
0
0
(2)
(2)
(4)
(4)
C/A (LHS)
(6)
Higher real interest rate rise from inflation plunge creates a
window of opportunity to ease; especially Oil sliding again
15
10
10
5
5
0
0
(5)
(5)
Refinancing Rate
(6)
(10)
Net Exports (3m Rolling RHS)
(8)
15
(10)
Real (Re-financing) Rate
(8)
Average Real rates (2009-2013)
(10)
(15)
Sources: CEIC, Mizuho Bank - Singapore Treasury Div.
06
07
08
09
10
11
(10)
12
13
14
(15)
Sources: SBV, CEIC, Mizuho Bank Singapore Treasury Div.
07
08
09
10
11
12
13
14
15
15
•
On hindsight, wider USD/VND trading bands (from +/-1% to +/-2%) are not surprising;
and the timing (12th Aug) left little doubt that PBoC devaluation was a convenient trigger.
•
The move is as tactical as it is opportunistic. Wider bands in the context of persistent
depreciation pressures at limits translated into immediate (de facto) 1% devaluation4.
•
To be sure, persistent trade deficit with resultant C/A pressures and thinned FX reserves
have long been telling of underlying pressures for some adjustment on the FX end.
•
What’s more, benign inflation and fresh pullback in oil prices stretch out dis-inflation
fade, hence lowering policy cost of a softer VND. So why not an outright devaluation?
•
Simply because of the trade-off it entails with regards to VND stability and policy
credibility – two particularly important objectives. Specifically, the SBV promising no
more than 2% devaluation a year may be a sticking point.
•
But this is not a deal breaker given that the VND has only depreciated 3% this year even
after the back-door devaluation from band-widening; far less than other Asian currencies.
•
So if CNY slump intensifies sympathetic devaluation cannot be ruled out, but otherwise a
2-3% catch-down move (devaluation) next year looks more likely.
•
This more “controlled” depreciation following CNY and other AXJ could also help
facilitate (foreign) funding for VAMC 5 to improve banking sector clean-up given
inherent capital inadequacy issues.
4
Please see our recent publication “Mizuho Chart Speak – VND: Of (Modest) Backdoors & Flexibility”, dated 12 Aug 2015.
Vietnam Asset Management Company (VAMC), set up in Jul 2013, has bought some VND96trln (US$4.4bln) of NPLs in 2014 with plans
for VND104trln (US$4.8bn) in 2015. Whereas, <VND4trln (US$180mn) has been divested stressing the VND500bn (US$23bn) capital.
5
- 11 -
AUD: Substitution, Not Game-Changer
Commodities Devastated by confluence of Strong Dollar,
China Woes & Weak Demand (Cum.% Chg from end-2012)
20
Soft Iron ore Pressures AUD
200
20
1.1
180
160
10
10
0
0
(10)
1.0
140
120
0.9
100
(10)
80
0.8
Iron Ore
60
AUD
Sources: Bloomberg, Mizuho Bank Singapore Treasury Div.
(20)
(20)
(30)
(30)
(40)
(40)
40
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
0.7
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
As China risks pile on, Copper "catch-down" adds to AUD pressures
10000
1.1
9000
1.0
8000
(50)
0.9
(50)
7000
(60)
(60)
Iron Ore
Copper
Brent
Gold
Sources: Bloomberg, Mizuho Bank Singapore Treasury Div.
(70)
Jan-13
May-13
Sep-13
Jan-14
May-14
(70)
Sep-14
Jan-15
May-15
Real interest rates lifted by (transient) oil dis-inflation; but
scope for fresh easing is diminished given ultra low real rates
8
8
Real rates (Trimmed Mean)
Real rates (Headline)
Policy Rate
6
0.8
6000
Copper
AUD
Sources: Bloomberg, Mizuho Bank Singapore Treasury Div.
5000
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
0.7
Jul-12
Jan-13
2
2
0
0
07
60
08
09
10
11
Jan-15
Jul-15
12,000
11,000
10,000
"Official" Mfg PMI
55
Sources: CEIC, Mizuho Bank Singapore Treasury Div.
Jul-14
HSBC-Markit Mfg PMI
4
06
Jan-14
"Unofficial"-Official Mfg PMI Gap is secondary whereas
China momentum is the main concern. Copper slippage
requires reversal trigger from China
60
6
4
(2)
Jul-13
Copper Prices (RHS US$/Metric Ton)
9,000
8,000
(2)
12
13
14
15
50
7,000
60
Recent improvement in employment diminishes Case or
Urgency for Policy Easing at the margin
6,000
40
40
20
20
0
45
Copper Prices, while relatively more resilient than
Iron ore (for supply-side reasons too) have slipped
more acutely.
5,000
The bigger picture copper price support is
predicated on China demand stabilization!
3,000
4,000
0
(20)
(20)
Full-time Emp. Chg ('000s, 3mma)
Emp. Chg. (000's; 3mma; LHS)
(40)
08
09
10
11
Part-time Emp Chg ('000s, 3mma)
Sources: CEIC, Mizuho Bank Singapore Treasury Div.
12
13
14
40
(40)
08
09
10
Sources: Bloomberg, Mizuho Bank Singapore Treasury Div.
11
12
13
14
2,000
15
15
•
The RBA watering down reference to an overvalued AUD is not a game-changer for
bearish AUD bias as China risks substituted jawboning.
•
To be precise, RBA view of AUD “adjusting to significant declines in key commodity
prices” from “likely and necessary” further drop constitutes bearish to neutral shift.
•
But AUD relief (bounce) is invariably shallow and short-lived AUD bounce as slippery
commodity prices and most emphatically CNY risks dominate.
•
Dent on real Chinese demand for Australian ores was exacerbated by forced liquidation
of metal collateral when China stocks wobbled and CNY devaluation is another dampener.
•
Thus, for now soggy iron/copper ore prices weigh on AUD via ToT and renewed oil
price drop translate mean that pipeline price pressures are subdued, if not dis-inflationary.
•
So while the RBA signalled diminished rate cut odds from record low 2.00%, confluence
of benign inflation, weak ToT and negative China shocks leave easing option intact.
•
Upshot: AUD bears have the upper hand in the next 3-6 months as Fed rate hikes
approaches and China struggles to establish convincing traction; 0.68 test beckons.
•
But AUD is not condemned to a one-way slide either. As China’s suite of stimulus
with a heavy infrastructure skew – hence, a more direct impact on hard commodities –
kick in, commodity prices should bottom more distinctly
•
And AUD is expected to hitch a short and gradual ride up to the firmer side of the
0.70-0.80 range later in 2016 as global recovery broadens a little more.
- 12 -
KRW: Impacted by Chinese slowdown
Broad-based export weakness in all destinations
Export weakness concentrated in manufactures in Q2
Korea - Exports by Destinations
10
15
Korea - Exports by Products (q/q saar)
10
5
5
0
0
-5
-5
-10
-15
-10
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun
12 12 12 13 13 13 13 14 14 14 14 15 15
Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15
US
EU
China
Japan
Asia ex-JP/CN
Others
Primary and Crude Materials
Electrical
Other Manufactured Goods
Exports y/y 3mma
Sources: CEIC, Mizuho Bank Singapore Treasury
Sources: CEIC, Mizuho Bank Singapore Treasury
Won-Dollar yield compression driving USD/KRW up
2.90
KRW-USD 2y yield differential vs USD/KRW
1040
1060
1.90
1080
1100
1.40
0.90
Price compression largely explains export slippage
Korea- Exports growth (Price vs Volume)
1000
1020
2.40
8
6
4
2
0
1120
-2
1140
-4
1160
-6
1180
-8
0.40
1200
Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
-10
KRW-USD 2Y yield differential
Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
Volume
USD/KRW (rhs, inverted)
Sources: CEIC, Mizuho Bank Singapore Treasury
Mineral Fuels and Chemicals
Autos
Exports SA q/q saar
Price
Exports y/y 3mma
Sources: CEIC, Mizuho Bank Singapore Treasury
•
Even as the threat of MERS recedes, KRW continues to be blighted by a weak external
demand, which has contributed to a significant drag on exports.
•
Korea’s exports contracted at its fastest pace since the Global Financial Crisis in 1H
2015, with exports showing broad-based slippage across all destinations, particularly in
Asia ex-Japan/China.
•
While Q1 export slippage is driven by lower oil-related commodity prices, the
continuation of export weakness in Q2 was more concerning, being concentrated in
manufacturing and accompanied by slower volume growth.
•
This reflects larger than expected demand slippage in Asian export markets, and tie
in with anecdotes of increased competition from Japanese manufacturers, who have
been slashing prices to capture a greater export market share.
•
Korea’s Q2 growth was therefore negatively impacted dragged by net exports, as
well as slower consumption due to disruptions from MERS.
•
BoK maintained that the economy is slated to recover on the back of expansionary policy
and the end of MERS, but added that uncertainty about growth has become elevated.
•
With Korean growth slowing relative to the US, we see risks that the KRW-USD yield
differential will continue to narrow, adding to pressures on the won.
•
We think uncertainty related to external demand and capital outflow pressures in
anticipation of a Fed rate hike should keep USD/KRW supported towards the 1200
mark.
- 13 -
FX Positioning & Flows
Figure 1. Non-commercial longs in EUR
Figure 2. Non-commercial longs in JPY
20
1.70
10
1.60
0
90
95
-5
100
1.50
0
105
-10
1.40
-10
110
1.30
-20
-15
115
1.20
-30
125
-40
1.00
Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
Non-commercial longs (USD bn)
120
-20
1.10
-25
130
Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
EUR/USD (rhs)
Non-commercial longs (USD bn)
USD/JPY (rhs, inverted)
Sources: CFTC, Bloomberg, Mizuho Bank Singapore Treasury
Sources: CFTC, Bloomberg, Mizuho Bank Singapore Treasury
Figure 3. Non-commercial longs in AUD
Figure 4. Non-commercial longs in USD
9
60
105
1.05
50
100
1.00
40
0.95
30
0.90
20
0.85
10
0.80
0
0.75
-10
1.10
6
3
0
-3
-6
-9
0.70
-12
Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
Non-commercial longs (USD bn)
90
85
80
75
-20
70
Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
AUD/USD (rhs)
Sources: CFTC, Bloomberg, Mizuho Bank Singapore Treasury
95
Non-commercial longs (USD bn)
DXY (rhs)
Sources: CFTC, Bloomberg, Mizuho Bank Singapore Treasury
Figure 5. India - Foreign equity inflows
Figure 6. Indonesia - Foreign equity inflows
56
30
9000
58
20
10000
30
60
10
20
62
0
0
64
-10
-10
66
-20
60
50
40
11000
10
12000
13000
-20
68
-30
-40
Sep 13 Dec 13 Mar 14 Jun 14
Sep 14 Dec 14 Mar 15 Jun 15
Foreign equity inflows (20dma, ann.)
70
Sep 15
USD/INR (rhs, inverted)
Sources: SEBI, Bloomberg, Mizuho Bank Singapore Treasury
5
-40
15000
Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
Foreign equity inflows (20dma, ann.)
USD/IDR (rhs, inverted)
Sources: JSE, Bloomberg, Mizuho Bank Singapore Treasury
Figure 7. Thailand - Foreign equity inflows
10
Figure 8. Korea - Foreign equity inflows
30.0
120
31.0
-15
60
32.0
33.0
34.0
35.0
-30
36.0
Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
Foreign equity inflows (20dma, ann.)
USD/THB (rhs, inverted)
Sources: SET, Bloomberg, Mizuho Bank Singapore Treasury
1000
1050
0
-30
-60
-20
-25
30
USD bn
-5
950
90
0
-10
14000
-30
1100
1150
-90
-120
1200
Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
Foreign equity inflows (20dma, ann.)
USD/KRW (rhs, inverted)
Sources: Korea Exchange, Bloomberg, Mizuho Bank Singapore Treasury
- 14 -
Currency Forecast Ranges
USD Crosses
USD/JPY
EUR/USD
USD/CNY
USD/INR
USD/KRW
USD/SGD
USD/IDR
USD/MYR
USD/PHP
USD/THB
USD/VND
AUD/USD
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
121 - 127
122 - 130
122 - 130
121 - 130
119 - 128
(124)
(125)
(126)
(124)
(123)
1.05 - 1.15
1.04 - 1.14
1.04 - 1.14
1.05 - 1.15
1.07 - 1.17
(1.10)
(1.09)
(1.09)
(1.12)
(1.14)
6.20 - 6.47
6.43 - 6.52
6.38 - 6.48
6.32 - 6.42
6.26 - 6.36
(6.43)
(6.48)
(6.42)
(6.36)
(6.30)
63.3 - 67.5
64.4 - 68.6
62.5 - 66.5
61.5 - 65.5
60.6 - 64.4
(65.5)
(66.5)
(64.5)
(63.5)
(62.5)
1120 - 1210 1170 - 1230 1140 - 1200 1120 - 1180 1090 - 1150
(1,180)
(1,200)
(1,170)
(1,150)
(1,120)
1.35 - 1.43
1.39 - 1.44
1.35 - 1.42
1.32 - 1.37
1.31 - 1.35
(1.41)
(1.42)
(1.37)
(1.35)
(1.33)
13300 - 14400 13700 - 14500 13500 - 14400 13200 - 14000 13000 - 13800
(14,000)
(14,100)
(13,950)
(13,600)
(13,400)
3.74 - 4.20
4.08 - 4.28
3.88 - 4.18
3.78 - 3.98
3.66 - 3.88
(4.10)
(4.18)
(3.98)
(3.88)
(3.75)
45.1 - 47.2
46.1 - 47.5
45.6 - 47.0
44.8 - 46.3
43.9 - 45.5
(46.5)
(46.8)
(46.3)
(45.5)
(44.6)
33.8 - 36.7
35.6 - 37.0
34.9 - 36.3
33.9 - 35.5
33.7 - 34.9
(36.0)
(36.3)
(35.5)
(34.5)
(34.3)
21800 - 22200 22000 - 22200 22100 - 22600 22400 - 22600 22500 - 22900
(22,100)
(22,100)
(22,500)
(22,500)
(22,750)
0.70 - 0.74
0.68 - 0.72
0.70 - 0.75
0.73 - 0.79
0.73 - 0.79
(0.72)
(0.70)
(0.73)
(0.76)
(0.76)
JPY Crosses
USD/JPY
EUR/JPY
JPY/CNY
JPY/INR
JPY/KRW
JPY/SGD
JPY/IDR
JPY/MYR
JPY/PHP
JPY/THB
JPY/VND
AUD/JPY
Sep 15
121 - 127
(124)
133 - 141
(136)
4.97 - 5.38
(5.18)
0.50 - 0.55
(0.53)
9.12 - 9.87
(9.49)
1.10 - 1.17
(1.13)
107 - 118
(113)
3.04 - 3.43
(3.23)
0.36 - 0.39
(0.38)
0.27 - 0.30
(0.29)
172 - 185
(178)
86 - 93
(89)
Dec 15
122 - 130
(125)
134 - 142
(136)
4.99 - 5.38
(5.18)
0.51 - 0.56
(0.53)
9.24 - 9.96
(9.60)
1.10 - 1.17
(1.13)
108 - 118
(113)
3.22 - 3.47
(3.34)
0.36 - 0.39
(0.37)
0.28 - 0.30
(0.29)
170 - 183
(177)
84 - 91
(88)
Mar 16
122 - 130
(126)
135 - 144
(137)
4.90 - 5.29
(5.10)
0.49 - 0.54
(0.51)
8.94 - 9.63
(9.29)
1.05 - 1.13
(1.09)
106 - 116
(111)
3.04 - 3.34
(3.19)
0.35 - 0.38
(0.37)
0.27 - 0.29
(0.28)
172 - 185
(179)
88 - 96
(92)
Sources： Reuters, Mizuho Bank Singapore Treasury Division forecasts
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Jun 16
121 - 130
(124)
136 - 146
(139)
4.93 - 5.33
(5.13)
0.49 - 0.54
(0.51)
8.93 - 9.62
(9.27)
1.05 - 1.12
(1.08)
105 - 115
(110)
3.01 - 3.24
(3.13)
0.35 - 0.38
(0.37)
0.27 - 0.29
(0.28)
175 - 188
(181)
91 - 98
(94)
Sep 16
119 - 128
(123)
137 - 147
(140)
4.93 - 5.32
(5.12)
0.48 - 0.53
(0.51)
8.77 - 9.44
(9.11)
1.05 - 1.12
(1.08)
104 - 114
(109)
2.94 - 3.16
(3.05)
0.35 - 0.38
(0.36)
0.27 - 0.29
(0.28)
178 - 192
(185)
90 - 97
(93)
Growth & Inflation Tables
Key Economic Forecasts
Country
United States
Eurozone
Japan
ASIA (ex-Japan)
ASEAN-6
China
India
Korea
Singapore
Malaysia
Indonesia
Thailand
Philippines
Vietnam
Australia
GDP YoY
2.2
-0.4
1.6
6.1
5.1
7.7
4.7
3.0
3.9
4.7
5.8
2.9
7.2
5.4
2.1
2013
CPI
1.5
1.3
0.4
4.2
4.3
2.6
10.1
1.3
2.4
2.0
6.4
2.2
2.9
6.6
2.5
CA (% GDP)
-2.4
2.2
0.7
1.7
2.1
1.9
-2.8
6.7
18.4
3.8
-3.3
-0.6
3.5
5.6
-3.3
GDP YoY
2.4
0.8
-0.1
6.0
4.5
7.4
5.3
3.3
2.9
6.0
5.0
0.7
6.1
6.0
2.7
2014
CPI
1.6
0.4
2.7
4.2
4.4
2.0
10.4
1.3
1.0
3.2
6.4
1.9
4.2
4.1
2.5
CA (% GDP)
-2.4
2.3
0.5
1.7
2.2
2.1
-1.6
6.3
19.0
4.6
-3.0
3.5
4.4
4.2
-2.8
GDP YoY
2.2
1.4
1.2
6.2
5.2
7.1
5.5
2.6
2.6
4.7
4.8
2.9
6.3
6.4
2.8
2015
CPI
0.8
0.1
0.9
2.9
3.4
1.5
5.4
0.8
0.0
2.2
6.5
0.1
2.1
1.2
1.9
C/A (% GDP)
-2.1
2.5
1.5
2.0
1.9
2.6
-1.3
6.8
19.0
3.2
-2.9
4.0
4.2
3.5
-2.8
2016
CPI
1.9
1.2
1.3
3.5
4.4
2.0
5.9
2.1
1.7
2.6
5.0
2.8
3.1
4.5
2.1
GDP YoY
2.7
1.7
1.5
7.0
6.1
7.2
6.6
3.5
2.9
5.2
5.1
4.1
6.4
6.6
2.9
C/A (% GDP)
-2.2
2.4
1.5
1.8
1.9
2.2
-1.9
6.5
19.0
4.0
-2.8
3.0
3.7
3.2
-2.0
Note: Asia (ex Japan) includes China, India, South Korea, Singapore, Hong Kong, Taiwan, Malaysia, Indonesia, Thailand, Philippines, Vietnam
Central Bank Policy Outlook
Country
China
India
Korea
Central Bank
PBoC
RBI
BoK
Singapore
Malaysia
Indonesia
Thailand
Philippines
Vietnam
Australia
MAS^*
BNM
BI
BoT
BSP
SBV
RBA
2014
Q4
5.60
8.00
2.00
2015
Policy Rate
1-Yr Lending Rate
Repo Rate
Base rate
Q1
5.35
7.50
1.75
Q2
4.85
7.25
1.50
2016
Q3
4.85
7.25
1.50
Q4
4.85
7.25
1.50
Q1
4.85
7.00
1.50
Q2
4.85
7.00
1.75
Q3
4.85
6.75
2.00
Q4
4.85
6.75
2.00
Slope
Reduction* Status Quo
Status Quo
S$ NEER
3.25
O/N Policy Rate
3.25
3.25
7.75
Benchmark Rate
7.50
7.50
2.00
1-Day repurchase rate
1.75
1.50
4.00
Reverse repurchase rate
4.00
4.00
6.50
Refinancing Rate
6.50
6.00
2.50
O/N Cash Rate
2.25
2.00
Status Quo
3.25
3.25
7.50
7.50
1.50
1.50
4.00
4.00
5.50
5.50
2.00
2.00
Status Quo
3.25
3.50
7.50
7.50
1.50
1.75
4.00
4.00
5.50
5.50
2.25
2.50
Status Quo
3.50
3.50
7.00
7.00
2.00
2.25
4.25
4.25
5.50
6.00
2.50
2.50
^ Unlike other regional central banks, the MAS conducts monetary policy via FX. Specifically it adopts a trade-weighted appreciation of the SGD at a "modest and
gradual" (estimated to be 2% per annum) pace as the default policy.
* In an off-cycle meeting on 28th Jan, the MAS slightly reduced the gradient of the slope and has kept policy at the April meeting.
FX Deposit and Forward-Implied Rates
As of
18 Aug 15
USD
JPY
EUR
AUD
CNH
INR
KRW
SGD
IDR
MYR
PHP
THB
Spot
124
1.11
0.74
6.44
65.3
1180
1.41
13800
4.11
46.3
35.5
Deposit
0.28
-0.09
-0.13
2.18
4.10
7.63
1.58
0.68
6.90
3.34
2.60
1.49
1M
Fwd-Implied
-0.10
-0.28
2.34
4.74
7.56
4.64
1.11
10.73
3.09
2.41
9.08
Deposit
0.45
-0.01
-0.08
2.33
4.20
7.83
1.65
0.81
7.23
3.64
2.14
1.57
3M
Fwd-Implied
-0.11
-0.14
2.38
4.24
7.40
2.50
1.51
9.39
2.99
2.50
5.96
Deposit
0.95
0.15
0.13
2.48
3.36
8.23
1.58
0.99
7.95
3.79
2.92
1.93
*Deposit rate is mid of bid/offer rates **Fwd-implied rates derived from FX forwards and USD deposit rates
Sources：CEIC, Bloomberg, Reuters, International Monetary Fund (IMF), Mizuho Bank Singapore Treasury Division forecasts
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1Y
Fwd-Implied
0.05
0.09
2.63
3.78
7.78
1.60
1.69
9.53
2.89
2.91
1.70
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