Macro
Briefing
A monthly review of the economy
and markets – April 2014
Stock Markets Performance
A lacklustre performance by US equities
came on the back of disappointing results
from heavyweight technology names such
Google and IBM and discretionary stocks
such as Amazon. Still, nearly 75% of US
companies who have reported 1Q
earnings
have
beaten
earnings
expectations.
April 2014
Europe
Asia ex Japan
US
Japan
Returns (%) -4
-2
0
2
4
European equities topped other regions
in April (refer to the chart). On a year to
date basis, the region is the top performer
on brighter economic data and improved
prospects. Deflationary fears were allayed
a little as April’s preliminary consumer
price index rose to 0.7%, up from 0.5% in
March.
3 Months
Europe
US
Asia ex Japan
Japan
Returns (%) -6
-4
-2
0
2
4
6
8
10
Europe
US
Asia ex Japan
Japan
-6
-4
-2
Manufacturing sector PMI data in the
eurozone rose to 53.4 in April from 53 in
March. For the first time since 2007,
every nation recorded an increase in
activity.
Japanese equities continued to post
losses for the fourth consecutive month.
Investors were disappointed that the Bank
of Japan did not unleash another round of
quantitative easing. Concerns over the
effects of the consumption tax too dented
sentiment.
Year-To-Date
Returns (%) -8
Economic data were mixed as consumer
confidence and retail sales data
strengthened but GDP and housing data
were weak.
0
2
4
6
Southeast Asian markets led gains in
Asia ex Japan, buoyed by foreign fund
inflows. Investor interest shifted to these
markets amid worries that China’s
economic slowdown may be deeper than
expected.
Source: MSCI Total Return Index from Thomson Reuters DataStream as of 30 April 2014 (US dollar currency).
1
South East Asian markets led the gains
in April; Thailand and Philippines posted
strong gains and also are top performers
on a year to date basis.
April 2014
Thailand
Philippines
Singapore
Hong Kong
Australia
Korea
Indonesia
Malaysia
Taiwan
India
China
Vietnam
Returns (%) -6
-4
-2
0
2
4
6
In the Philippines, investors were
encouraged by stronger 1Q14 growth
estimates of 7%, up from 6.5% in 4Q13 on
the back of a recovery in exports and
increased infrastructure spending.
3 Months
Indonesia
Philippines
Thailand
Australia
India
Singapore
Malaysia
Taiwan
Korea
Hong Kong
Vietnam
China
India’s stock market paused after two
consecutive months of gains as focus as
disappointing domestic macro indicators
on growth and inflation dampened preelection euphoria.
Returns (%) -5
0
5
10
15
20
Year-To-Date
Indonesia
Philippines
Thailand
Vietnam
Australia
India
Singapore
Taiwan
Malaysia
Korea
Hong Kong
China
Returns (%)
In Thailand, the market advanced on the
back of a lull in terms of political news as
well as stabilization in domestic activities,
helped by the Songkran holiday season.
There was also an influx of foreign buying
in big caps especially in the telecom,
banks and energy sectors.
China’s equity market fell in April on
worries about a deeper slowdown as well
as mixed economic data from the US.
China recorded a 7.4% year-on-year
gross domestic product growth in the
1Q14, following a 7.7% rise in 4Q13. It
was the slowest quarterly increase since
the global financial crisis.
Vietnam shares fell sharply amid growing
tension with China in the East Sea. But on
a year to date basis it has done well.
-10
-5
0
5
10
15
20
25
Source: MSCI Total Return Index from Thomson Reuters DataStream as of 30 April 2014 (US currency).
2
Major Currencies Against USD (% change)
The Korean Won was a beneficiary of
Some emerging market currencies came
good economic data; it hit a six-year high
under pressure on worries over reduced
after South Korea posted its 34th
global liquidity.
consecutive monthly current account
surplus on the back of rising exports.
The Indian rupee was hit especially
hard as a result of broader concerns
Better
than economy.
expected 1Q14 growth
about India’s
figures propelled the Taiwan Dollar
higher. Heavy institutional buying also
supported the currency.
April 2014
KRW
TWD
JPY
PHP
SGD
THB
MYR
AUD
VND
INR
CNY
IDR
(%)
-2
-1
0
1
2
3
4
3 Months
AUD
IDR
KRW
INR
MYR
THB
SGD
PHP
TWD
VND
JPY
CNY
(%) -4
In April, the Indonesian Rupiah
weakened the most against the US dollar
on renewed concerns about the current
account deficit and uncertainty around
the elections. But in the year to date it
has risen the most against the US dollar.
-2
0
2
4
6
8
The Indian Rupee which on a year to
date basis has been an outperformer
declined in April due to widening trade
deficit in March and good dollar demand
from oil importers.
Year-To-Date
IDR
AUD
JPY
INR
KRW
THB
SGD
MYR
VND
PHP
TWD
CNY
(%)
-4
The Japanese Yen rose in April after
declining the previous month. The Yen’s
safe haven currency status came into
play on the back of US’ plans to ramp up
sanctions against Russia over Ukraine.
The Chinese Renminbi continued to
post declines for the fourth consecutive
month. While this was triggered by policy
adjustments that reduced the currency’s
daily trading band midpoint, the latest
decline could have been exacerbated by
concerns over slowing economic growth.
-2
0
2
Source: Thomson Reuters DataStream as of 30 April 2014.
4
6
3
Policy Rate versus Inflation Rate
India’s central bank left policy rates on
hold as inflation risks remain. The RBI's
target is to ease retail inflation, as
measured by the consumer price index,
to 8% by January 2015 and 6% by
January 2016. If inflation continues
along the glide path, the RBI sees no
"further policy tightening in the near
term“.
After easing in March, the Philippines’
inflation rate picked up in April due to
higher food and utility prices. The repo
rate was held constant at 3.5%.
April’s inflation rose to a 13-month high
in Thailand due to food and fuel prices.
A gradual increase in inflation is
forecast for the rest of the year
predominantly due to food shortage
arising from drought.
The Bank of Korea held its interest
rate on hold at 2.5% given the slow but
steady growth pace. Inflation too
remains under control.
Source: Data from Thomson Reuters DataStream as of 30 April 2014 .
4
Real GDP Growth Consensus Forecast, %
The US’ 2014 growth was downgraded
as the 1Q14 growth was affected by
severe weather conditions.
2014 GDP Forecast, %
3.5
3.0
Australia
US
2.5
2.0
Japan
1.5
The Eurozone recovery continues to
gain
traction
led
by
Germany.
Nonetheless some others such as Italy
are still grappling with labour market
issues.
Eurozone
1.0
0.5
Apr-13
Jun-13
8.5
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
2014 GDP Forecast, %
8.0
7.5
China
7.0
6.5
Philippines
Asia ex
Japan
6.0
Vietnam
Indonesia
India
5.5
5.0
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
2014 GDP Forecast, %
Japan’s downward revision comes on
the back of uncertainty surrounding the
effects of April’s consumption tax. The
latest release of 4Q13 growth of 0.2%
was a tad lower than the first estimate of
0.3%. Slower growth
in capital
expenditure and personal consumption
were key reasons.
Some countries in Asia ex Japan faced
downgrades in the growth expectations.
China’s weak industrial production and
retail
sales
data
prompted
the
downgrade. To shore sentiment, the
Chinese government announced a ministimulus package, targeting spending on
railway and housing.
5.5
5.0
Malaysia
Thailand continues to be affected by
political unrest and the prolonged
deadlock is weakening growth.
Singapore
Impact of a tighter monetary bias aimed
at preventing excessive credit growth is
behind the downward revision in
Philippines’ 2014 growth forecasts.
4.5
4.0
S Korea
Hong Kong
Taiwan
3.5
3.0
Thailand
2.5
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Source: Data from Consensus Economics, 14 April 2014.
Feb-14
Apr-14
5
APPENDIX
Valuations - 12-months Forward P/E (x)
18
25
Australia
17
16
14.568
15
22
China
23
21
19
14
18
17
13
Hong Kong
20
16
15
12
14
13
11
10
11
9
9
8
7
7
10
5
04
05
06
07
08
25
09
10
11
12
13
14
04
05
06
07
08
09
10
11
12
13
14
8
04
05
06
07
08
34
18
India
14.739
8.603 12
10
11
12
13
14
Japan
Indonesia
23
09
29
16
21
14.342
14
19
17
24
14.87212
19
15
13
10
11
8
12.835
14
9
9
6
7
5
4
4
04
05
06
07
08
14
09
10
11
12
13
14
04
05
06
07
17
12
16
11
10
9.186
09
10
11
12
13
14
04
05
06
07
22
18
Korea
13
08
09
10
11
12
13
14
Philippines
Malaysia
15.454
08
20
15
18
14
16
17.833
13
9
14
12
8
11
7
10
6
9
5
12
10
8
8
04
05
06
07
19
08
09
10
11
12
13
14
04
05
06
07
37
Singapore
08
09
10
11
12
13
04
14
05
06
07
14
Taiwan
08
09
10
11
12
13
14
Thailand
13
17
32
15
27
13
22
12
11
12.098
10
13.834
11
9
17
14.347
8
7
9
12
7
7
04
05
06
07
08
09
10
11
12
13
14
6
5
04
05
06
07
08
09
10
11
12
13
14
04
05
06
07
08
09
10
11
12
13
14
Source: IBES MSCI from Thomson Reuters DataStream as of 30 April 2014. Note: The forward price earnings multiple shown above is calculated on an 12month rolling basis. The horizontal lines represent the average (the middle line) and one standard deviation either side of this average for the period
shown.
6
APPENDIX
Earnings Forecast Revision (Month-on-Month Change %)
2
Australia
3
2
1
0.06
China
1
0
0
1
-1
-1
0
-2
-2
-1
-3
-3
-2
-4
-4
-3
-5
-5
-4
-6
-6
08
09
10
11
12
13
14
Hong Kong
2
0.065
-0.087
-5
08
09
10
11
12
13
14
08
09
10
10
2
India
1
0
-1
-0.232
-2
-3
-4
08
09
10
10
11
12
13
4
3
2
1
0
-1
-2
-3
-4
-5
-6
14
Korea
6
Japan
-0.142
-10
-20
-30
08
09
10
11
12
13
14
-40
08
09
10
2
11
12
0
-1
-1
-0.073
-8
-2
-2
-0.106-3
-3
-10
-4
08
09
10
2
11
12
13
Singapore
1
0
-1
-2
-3
-4
-5
-6
08
09
10
11
12
13
14
14
1
-2
-6
13
Philippines
Malaysia
0
-4
14
0
4
0
13
0.147
1
2
12
Indonesia
2
8
11
-0.136
-4
08
8
6
4
2
0
-2
-4
-0.099 -6
-8
-10
-12
-14
-16
-18
-20
14
08
09
10
11
12
13
14
Taiwan
0.746
08
2
09
10
11
12
13
14
Thailand
1
0
-1
-2
-0.194
-3
-4
-5
-6
-7
09
10
11
12
13
14
08
09
10
11
12
13
Source: IBES MSCI from Thomson Reuters DataStream as of 30 April 2014. Note: Weighted 1-month % change in the 12 month forward earnings EPS
forecasts.
7
14
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