12 February 2019
ASEAN Morning Bytes

General market tone: Wait and watch.

Investors will likely stay defensive on Tuesday, awaiting fresh developments on the US-China trade front.

EM Space: Trump indicates he’d still like to meet China’s leader before March

  • General Asia: Traders will still likely tread water as trade talks moved over to Beijing on Monday. Given the lack of clarity, investors will likely look for local data and Fed speakers for direction although any announcement of trade talks going either ways could give some impetus to trade again.  
  • Malaysia: December industrial production surprised on the upside with 3.4% growth. Manufacturing sales and employment growth eased, yet wage growth accelerated which together with low inflation suggests that private consumption remained the main driver of GDP growth in the last quarter. We believe that the central bank (BNM) considers the economic risks to be fairly balanced between growth and inflation and that it will keep monetary policy on hold this year.
  • Thailand: The THB recovered some of the sell-off last Friday even as the political muddle continues to dampen market sentiments. The Election Commission formally disqualified Princess Ubolratana’s candidacy for election to be the next prime minister. The Commission announced the list of 69 prime ministerial candidates contesting in the elections on 24 March. We expect politics to overshadow the economy and markets in the coming months.
  • Indonesia: Bank Indonesia’s (BI) Deputy Governor Dody Waluyo doused cold water on hopes for a policy rate cut as the central bank remains “cautious” and champions economic stability over the headline growth numbers. These comments come on the heels of data showing a wider current account deficit for 4Q 2018.  
  • Philippines:  The Philippines reports trade numbers for the month of December with the country liked to have posted yet another wide trade gap given still robust imports and anaemic export sector. The widening trade gap continues to be the main reason for the country’s current account woes as imports of raw materials and capital good have been piling up as the economy gears for more investment-led growth. Meanwhile, foreign direct investment for November 2018 contracted by 45.9%, dragging the year to date numbers to post 3.2% contraction on the year. Most of the weakness could be traced to fewer placements in debt instruments and equity although companies still saw slight growth in the reinvestment of earnings.   
Malaysia: Manufacturing boosts GDP growth

We believe that the central bank (BNM) considers the economic risks to be fairly balanced between growth and inflation and that it will keep monetary policy on hold this year

Firmer exports, firmer manufacturing

Released today, Malaysia’s industrial production grew more than expected by 3.4% year-on-year in December, up from 2.6% growth in November (revised from 2.5%). The outcome was slightly short of our 3.5% growth forecast but way better than 2.7% consensus estimate. Our above-consensus estimate relied on firmer exports, especially electronics exports which have held up well in the face of a slowdown elsewhere in the region (Korea, Taiwan, Singapore).

Among the other activity indicators released alongside the production data, manufacturing sales growth eased slightly (7.5% in December vs. 7.7% in November) and employment growth slowed too (1.7% vs. 2.0%), yet salaries improved (10.1% vs. 9.0%).

Reading time around about 3 minutes

Good MornING Asia - 12 February 2019

Chinese markets reopened to the worst post-Lunar New Year start in more than a decade amid reports of two local borrowers defaulting on their debt obligations and the yuan playing catch-up with the emerging market currency selloff over the holiday. The sentiments may not get any better ahead of the upcoming US-China trade negotiations 

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