Articles
28 July 2021

ASEAN Morning Bytes

Asian markets will likely be muted ahead of the Fed decision.

EM Space: FOMC in focus

  • General Asia: Asian markets are likely to move sideways with a weakening bias as investors react to the China corporate crackdown while awaiting the outcome of the ongoing Fed policy meeting. Anxiety over China’s reach over corporates has moved over to the US with Wall Street weighed down by this development while US economic data was generally robust overnight, with rising house prices a key data point to follow. Meanwhile, market participants eagerly await any comments from Fed officials after the two-day policy meeting for hints to the timing and pace of the taper.
  • Malaysia: Today's June trade data should show a sharp slowdown of export growth to 15% YoY from 47% YoY in May. Underlying this are less favourable base effects and nationwide Covid-19 restrictions curbing economic activity. The same goes for import growth (ING forecast 20% YoY vs. 50% in May). This results in a wider June trade surplus of about MYR 21 billion (up from MYR 14 billion in May). A higher trade surplus and firmer global oil prices may have helped the MYR to outperform its Asian peers during the last month. But things have turned upside down this month with the worsening local pandemic (total infections crossed the 1 million mark this week) and increased political uncertainty. Our end-2021 USD/MYR view of 4.22 remains under review for upside revision as the market has traded through it to 4.23 currently.
  • Thailand: The Thai cabinet has passed THB 61 billion of additional support measures to help individuals and businesses tide over tighter Covid-19 restrictions. We don’t think a marginal increase in the stimulus will do much good to the economy given that the domestic spread of the virus is showing no signs of easing; daily new cases hit a record of over 15,000 this week, taking total infections so far to over half a million. A senior Bank of Thailand official last week warned about the current Covid-19 wave trimming 0.8 to 2.0 percentage points from GDP growth this year. We are looking to downgrade our 2021 GDP growth forecast of 2.1% and end-year USD/THB forecast 33.00 (spot 32.96).

What to look out for: Fed meeting and Covid-19 developments

  • Malaysia trade balance (28 July)
  • US trade balance, wholesale inventories and mortgage applications (28 July)
  • US FOMC decision (29 July)
  • US GDP, pending home sales, initial jobless claims (29 July)
  • Singapore unemployment and money supply (30 July)
  • Thailand trade balance (30 July)
  • Hong Kong GDP (30 July)
  • US personal spending, University of Michigan consumer sentiment (30 July)
  • China PMI manufacturing and non-manufacturing (31 July)
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