Asia week ahead: Packed with data

Central banks in China, Korea and New Zealand are set to review their monetary policy. All are expected to leave interest rates on hold.

The People’s Bank of China hasn’t touched the 1-year and 5-year Base Lending Rates since April last year. There is no reason for it to disturb policy now given that the recovery is coming along nicely. The renewed threat to the economy from the pandemic may instil some interest in the other two central bank meetings; the Bank of Korea and the Reserve Bank of New Zealand.

An alarming spike in Korea’s jobless rate from 4.5% in December to 5.4% in January, the highest since the Asian crisis in 1999, adds weight to the argument for the Bank of Korea to ease. The last move in the BoK policy rate was a 25bp cut in May 2020, putting it at an all-time low of 0.5%. With very little leeway to take rates lower, it will continue to place the onus on the government to boost growth. As for the RBNZ, we think it will look through the latest brief lockdown in Auckland, while above-expected 4Q20 CPI inflation of 1.4% in 4Q20 supports stable policy for now.

January inflation, trade and manufacturing releases dominate the data calendar.

CPI inflation in Hong Kong, Malaysia and Singapore likely remained in negative territory. Of note here would be data from Malaysia where tighter Covid-19 movement restrictions possibly intensified the downward price trend, supporting our call of a 25bp Bank Negara Malaysia policy rate cut in March.

Regional exports are off to a strong start in 2021 with double-digit growth in the majority of countries that have reported January figures so far. The releases from Hong Kong, Malaysia and Thailand next week should show similar results. And Taiwan’s export orders should inform where this trend is heading. Following on the heels of surging exports, manufacturing output continues to firm up this year. So does GDP growth.

India will be in the spotlight as it reports 4Q20 GDP. There has been no end to the negative growth trend just yet, though we estimate a moderate contraction of -4.7% year-on-year compared to -7.5% in 3Q20. This stems from firmer manufacturing growth complementing the seasonal agriculture strength in 4Q, though domestic demand remained under pressure from the virus.