Asia week ahead: Central bank policy dominates
Three Asian central banks hold their policy meetings. And, there is a flood of activity data from around the region. All this will make it an exciting week for markets
Central bank policy-making
Central banks in Japan, Taiwan and Indonesia meet next week. All are expected to leave policies on hold. Yet, there will be some interest here. Especially so in the Bank of Japan’s meeting, which is the first since Prime Minister Shinzo Abe’s resignation in late August, the event that might have fuelled speculation about even easier BoJ policy to soften the Covid-19 blow to the economy. ING’s Japan watcher, Rob Carnell, however, cautions against it (here is why). The markets will also be watching Japan’s August CPI inflation and trade figures next week, none of which is going to make much sense from the BoJ policy perspective.
For the central bank with the longest history of unorthodox policies, doing yet more of the same seems a particularly pointless exercise. – Rob Carnell on BoJ policy
The interest in Bank Indonesia’s policy stems from the steady downward grind in CPI inflation, which at 1.3% year-on-year in August was the lowest in the last two decades (since April 2000). Will this move BI for the fifth rate cut this year? ING’s Indonesia expert, Nicholas Mapa, doesn’t think so amidst intensifying currency depreciation due to debt monetisation worries (here is more). Coming ahead of the BI meeting, August trade data should continue to reflect downside pressure on growth.
What about Taiwan’s Central Bank of the Republic of China (CBC) policy? CBI’s has been one of the steadiest monetary policy in Asia. It didn’t change from mid-2016 until the Covid-19 outbreak at the start of this year. And, with just one 25bp rate cut in March this year, the easing cycle is done, in our view. Our Greater China Economist, Iris Pang, doesn’t expect another move, in either direction, over our forecasting horizon until end-2022.
And, busy data schedule
China’s remaining activity data for August, including industrial production, retail sales, fixed asset investment, and home sales will be in focus. Iris Pang doesn’t see growth for these differing much from the July pace.
August CPI inflation will be the highlight of India’s data calendar. The Covid-19 supply shock to food prices and administrative hikes in fuel prices drove inflation above the central bank’s (Reserve Bank of India) 6% policy limit in April, which is where it has been since, including the 6.9% recorded in July. We expect no let-up in price pressure in August. Our forecast for August is 7.1%. Also, look out for India’s August trade figures for what these say about growth.
Singapore’s non-oil domestic exports for August is an interesting release too. Pharmaceutical exports, the key support to NODX earlier this year, has lost its vigour in recent months, but a pick-up in electronics exports kept the headline NODX growth in positive territory. We expect pretty much the same in August, though with a more moderate NODX growth than July’s 6.0% YoY.
Down under, Australia’s jobs report for August and New Zealand’s 2Q20 GDP will be the ones to watch. The worsened Covid-19 outbreak in the state of Victoria underpins our house forecast of a sharp slowdown in Australia's employment growth, which is also the consensus view. Our forecast for New Zealand GDP is a 7% quarter-on-quarter fall.
Asia Economic Calendar
Download
Download article14 September 2020
Good MornING Asia - 14 September 2020 This bundle contains 3 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).