Asia week ahead: Central banks in wait-and-watch mode
Another big central bank week in Asia is likely to pass without much action. The record monetary easing unleashed earlier in the year means most central banks remain in a wait-and-see mode for the recovery to gain traction
Central banks wait and watch ...
Central banks in China, Japan, Taiwan, Indonesia and the Philippines meet next week, and all of them are expected to leave rates unchanged.
As an informal monthly rite, the People’s Bank of China will review the level of one-year medium-term lending facility rate. The last move was a 20 basis point rate cut to 2.95% in April this year and we see it staying there next week. The Bank of Japan will also stay put, following this week's announcement of a $700 billion economic stimulus package. And, with strong exports helping the overall economy, Taiwan's central bank has no reason to temper with policy either.
Bank Indonesia’s 25 bp policy rate cut on November has reduced the odds of any policy change this month, while the main driver behind the last rate cut - strong currency appreciation, has lost steam this month. In the Philippines, the latest CPI inflation spiked to a 20-month high of 3.3% YoY in November from 2.5% in October has pushed the central bank policy bears out of the game.
... as the recovery takes twists and turns
China’s remaining activity data for November – industrial production, retail sales, fixed-asset investment and home prices will help formulate expectations for growth in the fourth quarter of the year, and we forecast 5.5% YoY. A 21% YoY surge in Chinese exports last month imparts upside risk to our 6% YoY industrial production growth view. Likewise, the 28% YoY jump in industrial profits in October heralds further pick up in investment spending, while record Singles-Day demand boosted retail sales growth.
Elsewhere in Asia, November trade figures dominate the calendar. Export growth accelerated in all three economies that have reported the November data so far including China, Korea and Taiwan, and we imagine the same for the rest of the region. Singapore’s non-oil domestic exports may capture more focus following two consecutive months of declines.
The unemployment rate should continue to grind higher in Hong Kong (SAR) and Korea in November as these economies grappled with renewed Covid-19 restrictions.
In India, inflation numbers will be closely monitored as it chokes central bank easing. We might see some slowdown in the key drivers – food and transport prices, though not enough to bring the headline inflation back below the central bank's 6% policy limit. Our forecast for November is 7.1%, down from 7.6% in the previous month.
Finally, it'll be Australia’s jobs report for November and New Zealand’s 3Q20 GDP data. Some retracement in Aussie jobs growth seems to be in order after an unexpectedly strong 178,000 bounce in October, and, New Zealand GDP should see a significant clawback of a large dip suffered in 2Q.
Asia Economic Calendar
Tags
Asia week aheadDownload
Download article11 December 2020
Our view on next week’s key events This bundle contains {bundle_entries}{/bundle_entries} 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).