Asia Week Ahead: China activity data could give markets some direction next week

Asian markets had been struggling to find a clear direction lately, although next week’s economic calendar featuring China’s activity data could provide some cues.

The week opens with India’s inflation report. India is expected to post the fastest inflation in the region for August. In August, the appreciation of the Indian rupee and the fall of global oil prices might have kept imported inflation at bay. However, higher domestic food, utilities, and transport costs likely drove inflation back towards 6% (ING forecast 5.9%).

Prakash Sakpal sees inflation staying near the 6% policy limit well into 2022. This may convince the central bank to hike rates earlier than most Asian peers. We have pencilled in a 25bp rate hike in early 2022 and one more later in the year.

China’s data dump on 15 September features industrial production, retail sales and fixed asset investment.

Iris Pang expects slower growth in retail sales as government policies, such as the closure of education centres and limiting online gaming hitting the jobs market. Meanwhile, industrial production is expected to slow only marginally due to isolated Covid-related closures. Lastly, the growth of fixed asset investments is predicted to pick up, bolstered by outlays in transport and infrastructure.

This acceleration will be driven directly by the government’s infrastructure programs as authorities attempt to fill the gaps in economic activity.

Meanwhile, Australia reports labour figures during the week.

Rob Carnell thinks “with about 50% of the population under some form of lockdown during much of August; it would be a surprise if there were not some reflection of this in the August labour figures. We think this will show up most clearly in the part-time segment of the report, where attachment to the labour force may be less firm. Though this will still affect the headline employment figure; and we anticipate that this will fall. That said, the assumption going into this lockdown was probably that these lockdowns would not last long, and so the impact on employment and the unemployment rate may be much lower than in previous episodes.”

Indonesia’s trade numbers should show more of the same trends noted in 2021. Exports and imports will likely post double-digit growth in August as economic activity picked up relative to levels seen in 2020. The overall trade balance will likely stay in surplus as exports get a lift from higher commodity prices. The trade surplus should help limit the current account deficit this year.

Lastly, Singapore will report August non-oil domestic exports data on 17 September. The pickup of semiconductor exports from Korea and Taiwan bodes well for NODX growth. That said, stagnant chip production in July suggests the sector is hitting a capacity wall amidst ongoing global supply shortages. This, in turn, means the best of the semiconductor exports surge is probably behind us and underlies our forecast of only moderate NODX growth in August at 9.2% YoY, down from 12.7% in July.