ASEAN Morning Bytes
Asian markets are expected to edge lower as Fed signals a long path to recovery
EM Space: Fed paints gloomy economic outlook for next couple of years
- General Asia: The Fed pledged to keep rates unchanged all the way through to the end of 2022 to help heal the battered jobs market, with economic activity expected to be downbeat for some time. Inflation data out from the US and China supports this view with price pressures fading quickly as demand remains subdued due to the pandemic. The gloomy economic outlook and lack of additional stimulus from the Fed may convince investors to pull back from the recent rally for the time being with the data calendar thinning out towards the end of the week.
- Malaysia: April industrial production (IP) data today will shed light on GDP growth coming into the second quarter. We are looking for a 25% YoY fall, following a 24% plunge in exports in the month. We recently cut our 2Q20 GDP growth forecast to -8.3% YoY from -6.6%, and the full-year 2020 forecast to -3.9% from -2.9%. The case for an additional 100bp of central bank (BNM) policy rate cuts in this easing cycle remains strong, which is likely by end-3Q20 and would take the rate to an all-time low of 1%.
- Thailand: The Cabinet approved a draft bill imposing a 7% value-added tax on foreign tech companies operating in Thailand. The bill awaits parliamentary approval for it to become a law. This may be an added source of revenue for the government, but given the fact that the digital tax will be eventually borne by consumers, it will be an added drag on already weak demand.
- Philippines: Bangko Sentral ng Pilipinas (BSP) governor Diokno will be working back some of his liquidity enhancement measures as the economy grinds back to life. With lockdown measures eased, businesses have been allowed to operate up to 50% capacity and BSP will be monitoring excess liquidity to decide when to restore its term deposit window in the near term. BSP flooded the financial system with liquidity equal to 5% of GDP to help prevent panic, but with sentiment improving, they will likely wind down liquidity support as well as their bond purchasing program.
- Indonesia: Bank Indonesia (BI) governor Warjiyo reiterated that the IDR was “undervalued” but at the same time pledged to ensure that IDR would be kept at levels that helped improve the competitiveness of its export sector. The conflicting remarks sent the IDR sliding on Wednesday after its recent surge to the 13,000 level and we expect IDR to remain steady as we head into the central bank decision next week. Should IDR remain stable in the coming week, we expect BI to finally pull the trigger on policy easing to bolster sagging growth momentum.
What to look out for: Covid-19 developments
- US PPI and initial jobless claims (11 June)
- Hong Kong industrial production (12 June)
- US consumer sentiment (12 June)
Download
Download article
11 June 2020
Good MornING Asia - 11 June 2020 This bundle contains 4 articles"THINK Outside" is a collection of specially commissioned content from third-party sources, such as economic think-tanks and academic institutions, that ING deems reliable and from non-research departments within ING. ING Bank N.V. ("ING") uses these sources to expand the range of opinions you can find on the THINK website. Some of these sources are not the property of or managed by ING, and therefore ING cannot always guarantee the correctness, completeness, actuality and quality of such sources, nor the availability at any given time of the data and information provided, and ING cannot accept any liability in this respect, insofar as this is permissible pursuant to the applicable laws and regulations.
This publication does not necessarily reflect the ING house view. This publication has been prepared solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved.
ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam).