Asia week ahead: Export slump continues in final quarter

Next week in Asia kicks off with the release of Singapore’s trade figures, in which the focus typically is on non-oil domestic exports. We will also get trade data from Japan, Taiwan and Thailand over the course of the week. All of these being October figures, they will be probed for signs of an export-led recovery in the reporting countries.

Against frequent negative and positive swings in rhetoric, the US-China Phase One trade deal remains far from becoming a reality. So too is the recovery in Asian exports, which is being held back by weak electronics demand globally. This is why we aren’t expecting any positive news in the forthcoming trade data aside from some signs of bottoming.

Also making headlines on Monday morning will be Thailand’s GDP report for 3Q. We think recent events – the Bank of Thailand policy rate cut last week followed by signals this week from a top central bank official about a further downgrade of the growth outlook and further room for easing – could be a prelude to a bad GDP report. So markets may be in for a disappointment if they go by the current consensus view of 2.8% 3Q GDP growth, up from 2.3% in 2Q. We, on the other hand, are looking for a slowdown to 2%. Even so, we don't think the BoT will cut rates again in December.

A slew of price data – producer prices from Korea and consumer prices from Japan, Malaysia and Singapore – will be read in light of central bank policies in the region. Inflation hasn’t been an issue in the majority of Asian countries. And unless we see a severe food price shock (for example, much worse spread of swine fever, or disruptive weather conditions, etc.) or a fuel price shock (geopolitical risk in the Gulf region), we don't see inflation becoming a problem through 2020 and perhaps beyond.

But with the central bank policy rates in most regional countries close to their record lows, the room for additional easing is limited. Bank Indonesia, which meets next week, still enjoys some policy space and may be inclined to ease after a surprising dip in inflation in October while growth has been stuck at the 5% level for the last several years. However, BI may follow its Philippines counterpart (BSP) by leaving policy on hold and preserving that leftover policy space for the future.