Asia week ahead: Gleaning the trade impact
The plummeting Chinese PMIs don't bode for well for hard activity indicators out next week. Trade figures from several Asian countries should provide a glimpse of the pain Covid-19 is inflicting. Things are likely to get worse before they get better
China
A sharp plunge in China’s manufacturing and non-manufacturing purchasing manager indexes in February means hard activity data is set to reveal the impact of Covid-19 on the economy starting with trade figures over the weekend, followed by inflation and monetary indicators over the course of next week.
We agree with the consensus of a double-digit trade contraction in the first two months of the year in comparison to the same period last year, and inflation above 5%. Meanwhile, market expectations of a sharp slowdown in new yuan loans and aggregate financing in February stems from virtually stalled economic activity, though we're not ruling out the risk of these indicators surprising on the upside as a result of the recent monetary stimulus.
The rate of new infections is abating and factories are gradually re-opening, which is good news for the economy. However, markets are unlikely to relax just yet, as the data might show recent exceptional weakness in economic activity persists for months before it gets better.
Taiwan, Korea, Malaysia and India
Trade reports also are due in Taiwan and the Philippines, while Korea releases its jobs report and Malaysia its manufacturing data – all will be under scrutiny for the Covid-19 impact. However, data may not provide a good sense of the impact as the epidemic rapidly began to spread beyond China only in the second half of February.
Lastly, India’s elevated consumer price inflation above 7% will continue to be the main headwind for central bank easing amid the rising threat of the virus to GDP growth. Making matters worse is the latest acceleration currency depreciation, which saw the Indian rupee weakening above 74 against the US dollar this week.
It’s going to be a challenge for Governor Shaktikanta Das as he struck a dovish chord after the Fed's surprise rate cut.
Asia Economic Calendar
Tags
Asia week aheadDownload
Download article
9 March 2020
Good MornING Asia - 9 March 2020 This bundle contains 7 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).