Asia week ahead: China-US trade talks resume
In an otherwise light economic calendar, Malaysia's 2020 budget will be the highlight alongside US-China trade talks next week in Asia. Trade data from Taiwan and the Philippines will provide a state of play on the global electronics downturn and if it is nearing its trough
Trade talks – fingers crossed
After a breather of more than two months, Chinese and American trade representatives return to the negotiation table next week. While President Trump sees a 'good chance' of a trade deal 'sooner than you think', the news of Chinese companies starting to purchase US agricultural goods this week with a waiver from retaliatory import tariff bodes well for the upcoming talks.
Even so, caution is warranted given the breakdown of earlier negotiations. President Trump’s on-and-off rhetoric against China’s trade practices and the US now considering limiting financial flows to China too means the risk of yet another negotiation round ending in vain still exists.
Aside from the trade developments, there is little on the Chinese calendar to drive markets after a week of pause in trading for the National Day holiday this week.
Malaysia budget – growth comes first
Malaysia’s finance minister Lim Guan Eng presents the 2020 Federal Budget to parliament on 11 October. Malaysia’s export-driven economy is holding up well in the face of accelerating global economic slowdown due to the trade and tech war. With steady GDP growth, the finance minister is confident of achieving the target reduction in fiscal deficit to 3.4% of GDP this year from 3.7% in 2018, which seems fine for now.
However, the key question is whether these positive trends will be sustained into next year and beyond as the government aims to trim deficit under 3% in the near-term (2.8% by 2021). Indeed, it’s going to be difficult for the economy to continue to outperform as global headwinds are getting stronger and this demands greater policy support. Without losing sight on continued fiscal consolidation, the government will need to pursue an expansionary fiscal policy to support growth. It’s going to be a challenge.
We don’t see them backtracking on the fiscal goals, though the planned 3% of GDP deficit for 2020 sounds optimistic for now.
Trade figures – how’s electronics doing?
Is the global electronics downturn near its trough yet? For answers, look out for trade reports from Taiwan and the Philippines next week. Electronics and electronic parts dominate exports in both of these countries, accounting for about a third of Taiwan’s total exports, while that share is more than half in the Philippines.
The recent pick-up in the growth of electronics export from these countries stems from new smartphone launches. However, such seasonal boosts are quickly reversed, while weak economic prospects weighing on consumer confidence and deterring spending on more fancy gadgets is the added whammy this time around.
That said, the recent green shoots are hopeful signs of the electronics cycle close to it's low. The recovery could be prolonged, though.
Asia Economic Calendar
Download
Download article
4 October 2019
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).