Asia week ahead: Holiday lull takes over
The markets may slacken slightly ahead of the Lunar New Year holiday, but central banks and statistical agencies will still be busy at work
A short week ahead
It’s a short week for markets as most Asian countries celebrate the arrival of the Lunar Year of the Ox.
China begins its new year-Golden Week holiday on 11 February as does Korea while Taiwan starts a day earlier on Wednesday. Most other countries will be out on Friday.
The holiday lull is expected to drain the liquidity from the markets, making it a relatively quiet week for market watchers.
The data
Even as regional markets slacken next week in the run-up to the holiday, statistical authorities in some countries will remain busy.
China’s Statistical Bureau will begin its monthly data dump for January and the front-loading of activity ahead of the New Year holiday should underscore firmer growth trend coming into 2021. Lined up next week are foreign exchange reserves and inflation figures, though we might get monetary and trade releases for January before the holiday starts.
Following on strong January export reading in Korea, Taiwan's exports data for January should further confirm the positive global semiconductor cycle. The cyclical upswing also received a further boost from a favourable base effect, which is what underlies the consensus of over 20% year-on-year surge in Taiwan's exports in the last month.
Malaysia will be in the limelight for its 4Q20 GDP report. No prizes for guessing that accelerated Covid-19 spread dented output further. We anticipate a steeper GDP contraction in the last quarter, by -5.2% YoY than the -2.7% seen in 3Q20. This should strengthen our call of a 25bp policy rate cut from the central bank this quarter.
Philippines central bank meeting
The Philippines’ central bank, which meets next Thursday paused its rate cut cycle at the last meeting in December after slashing the policy rate by total 175 basis points in the last year. The economy continues to take a beating from the pandemic as reflected by continued GDP contraction. However, CPI inflation also has started moving higher in recent months, which blunts the argument of more policy support for growth.
With the central bank's overnight borrowing rate of 2.0% and about 3.5% inflation rate, the real rate is already negative. We don't think the BSP wants to push it even lower and risk a weaker currency and potentially high inflation. In our view, the BSP easing cycle has run its course. The next move in the policy rates will be higher, though that’s not something for this year or even the next.
Asia Economic Calendar
Tags
Asia week aheadDownload
Download article
5 February 2021
Our view on next week’s key events 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).