Asia week ahead: Manufacturing to nosedive

Japan, Korea, Taiwan, Singapore and Thailand's April manufacturing production data is due next week – all informing where GDP growth is headed in these countries this quarter. Likewise, China’s industrial production data is due, with persistently large profits decline potentially weighing down investment and GDP growth.

Undoubtedly, the Covid-19 movement restrictions have dampened activity across the spectrum, let alone manufacturing. Singapore may emerge as a bright spot given continued strong gains in non-oil domestic exports in April. Taiwan's exports weren’t that bad with relatively firmer exports.

Factories in Korea are gradually returning to operation as the Covid-19 spread subsides. However, a 24% year on year fall in exports in April wasn’t very promising for manufacturing and GDP growth, making a strong case for another 25 basis point rate cut from Bank of Korea next week (28 May).

Weak exports also weigh on manufacturing in Japan and Thailand, both expected to report steep production declines in April.

Finally, markets are eagerly waiting for India's 1Q20 GDP report card, now Asia’s epicentre of Covid-19 pandemic. Our 1.1% YoY growth forecast is in line with the consensus. The risk is clearly on the downside judging from the sharp fall in activity in March as reflected by the 35% YoY plunge in exports and 17% manufacturing fall. A much weaker than expected GDP result should put the central bank on course to more policy easing at the next meeting on 5 June.