Asia FX Update - ocbc.com outlook... · 5/20/2007 · Asian FX Key Themes • The fundamental...
17
Asia FX Update: Sino-US tensions back to the fore 07 May 2020 Treasury Research & Strategy Global Treasury Terence Wu (+65) 6530-4367 [email protected] 1
Transcript of Asia FX Update - ocbc.com outlook... · 5/20/2007 · Asian FX Key Themes • The fundamental...
Asia FX Update: Sino-US tensions back to the fore
07 May 2020
Treasury Research & Strategy
Global Treasury
Terence Wu
(+65) 6530-4367
1
Asian FX Key Themes
• The fundamental picture on the macro front have improved (p. 3-5, 7-8). In fact, it has arguably turned further south,
with a number of Asian central banks suggesting further downside risks to their current, already-downgraded growth
forecast. Nevertheless, global risk sentiment remains buoyant in the short term (p. 10), with investors seemingly happy
to overlook worrying epidemiological developments in favour of the ongoing re-opening of economies (p. 6). Asian govie
yields, especially those of low-yielders, have compressed significantly (p. 9). Further declines from here may be a slow
grind. Meanwhile, portfolio outflow momentum has moderated significantly across Asia, with some countries nudging
into net inflow momentum. Nevertheless, much of this is due to a pause in outflows, rather than an explicit inflow from
foreigners (p. 14-15).
• Summary of research view: The environment may be turning harsher for the Asian currencies this week, with the USD
downtrend somewhat arrested and Sino-US headlines back in the front pages (p. 12). Thus, we suspect that most USD-
Asia pairs have seen its near term bottom, and may gradually ease higher from here. In that context, we are somewhat
skeptical of the ongoing outperformance of the TWD (p. 13). Structurally, the view has not shifted. We continue to
expect the downward macro spiral to favour the USD against the cyclicals and Asian currencies (p. 11). In Singapore,
the downside risks to the current growth forecast is non-negligible. If these risks continue to materialize, the SGD NEER
may have to adjust further to accommodate (p. 16).
2
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
China ↔/↑
↓ A war of words over the virus outbreak put Sino-US tensions back on the front page, and that may keep
the USD-CNY and USD-CNH buoyant for now. The scheduled resumption in the Chinese political calendar
further suggests a return to normalcy. Apr official and Caixin PMIs continued to show normalization,
supported by domestic demand. External factors still a negative, as highlighted by the weak export orders
component. Going forward, the hit from the lacklustre global demand will only get increasingly visible.
Expect further policy support both on the fiscal and monetary fronts. March data in China was mixed, with
industrial production above expectations (-1.1% yoy vs mkt: -6.2% yoy) but retail sales was weaker than
expected (-15.8% yoy vs. mkt: -10.0% yoy). Exports also saw a less than expected decline of -6.6% yoy.
1Q GDP at -6.8% yoy vs. expected -6.0% yoy. This series of measures reinforce the idea of increased
counter-cyclical easing by the PBOC. Year-to-date industrial profits out to Feb at -38.3% yoy. Mar CPI
prints softer than expected at 4.3% yoy, while the PPI prints move deeper into deflationary territory.
S. Korea ↔/↓
↔/↓ BOK held rates unchanged in its scheduled April meeting, saving bullets for potentially more stressed
needs later. Even as market stress has eased considerably, the Korean economy is definitely not out of
the woods. FY2020 growth may miss target, and a growth downgrade by the BOK is expected in May.
Man. PMI dipped for the fourth consecutive month in April to 41.6, from 44.2. Apr exports slumped -24.3%
yoy, while imports also contracted -15.9% yoy. Apr core and headline CPI came in at 0.1% yoy and 0.3%
yoy, both undershooting estimates. Expect the rising 55-day MA to provide support for the USD-KRW.
Taiwan ↔/↓
↔/↓ FY2020 growth forecast cut to 1.3-1.8% yoy this week, a second revision lower after the first revision in
February. Preliminary 1Q GDP growth at 1.54% yoy, softer than the estimated 1.70% yoy. Nevertheless,
the Taiwanese economy should be relatively less impacted compared to other Asian economies, leaving
the TWD to consistently outperform most Asian counterparts. Apr man. PMI slumped to 42.2, but still
relatively supported compared to other Asian economies. Mar exports printed -0.60% yoy, less than the
expected -2.2% yoy. Mar headline CPI flat, but the core measure grew 0.34% yoy.
3
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
Singapore ↔/↑ ↓ The extension of the CB restrictions is expected to put further negative pressure on the economy, with
MAS and relevant ministries highlighting the possibility of deeper contraction from current forecasts. If the
economic outlook proves to be more downbeat compared to the current official forecast, do not rule out the
possibility that the SGD NEER will need to see more adjustment lower. Advanced 1Q 2020 growth saw a -
2.2% contraction, do not rule out deeper pain in 2Q. Mar NODX surprised heavily on the upside, printing
17.6% yoy vs. mkt. expectation of -8.0% yoy. Mar headline and core CPI printed 0.0% yoy and -0.2% yoy
respectively, mixed to firmer than expected. Apr official PMI prints slipped further, but remains more
supported than estimates. Overall, it seems clear that the impact of the COVID-19 crisis have yet to be
reflected in the March data-prints. We do not expect similar data for April to be as sanguine.
Thailand ↔/↓
↔/↓ BOT expects the tourism slowdown and narrowing CA surplus to weigh on the THB, against the recent
trend in the USD-THB. Official growth forecast downgraded heavily to -5.3% yoy for FY2020. Apr man.
PMI slumped even further to 36.8 from 46.7 prior. Mar custom exports grew at 4.17% yoy, defying
estimates of a -5.80% decline, perhaps attributable to the weak THB. Imports also grew 7.25% yoy. Apr
headline CPI fell further into deflationary territory at -2.99% yoy, with core CPI at +0.41% yoy.
Malaysia ↔
↓ BNM cuts its policy rate by 50 bps, in line with expectation but not our house view. It appears that the BNM
is putting priority on growth at this stage. Nevertheless, the view seems to be that 1H will take most of the
economic damage. Going forward, the threshold for further cuts may be significantly higher. Further
softness in the crude oil complex adds pressure on the MYR and the fiscal situation, while extended MCO
regulations continue to weigh on the economy. Mar CPI stood at -0.2% yoy, against estimates of -0.1%
yoy. Apr man. PMI plunged to 31.3, from 48.4 prior, highlighting the depth of the economic challenge in the
near term. Mar exports declined by a less than expected -4.70% yoy.
4
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
India ↔ ↔/↓ The underlying threat to the economy may be the vast masses of unemployed in the informal and daily-
wage sectors. The RBI cut policy rates in Mar by 75 bps to 4.40% in an emergency meeting on 27 Mar,
and will remain on an accommodative stance. Bond market continued to rally on the back of RBI
purchases in the secondary market, and also suspected RBI participation in the primary market. Slump in
crude prices may benefit the INR, but likely overwhelmed by larger drivers at play. Expect the USD-INR to
search higher in line with USD-Asia. Apr man. PMI sunk to 27.4, from 51.8 prior. Mar exports contracted -
34.6% yoy, compared to 2.9% yoy.
Indonesia ↔/↓
↔ BI held rates unchanged at 4.50% on 14 April, but cut RRR to release liquidity. Threshold for further cuts
may now be higher, with the BI seemingly reluctant to risk USD-IDR upside. BI sees FY2020 growth to be
under the official forecast of 2.3% yoy. 1Q GDP at 2.97% yoy, with further softening expected in 2Q and
3Q. Fiscal rule to maintain a budget deficit at 3.0% of GDP dropped until 2023, with the deficit expected to
be north of 5.0% of GDP this year after increases in fiscal stimulus. Apr headline and core CPI at 2.67%
and 2.85% yoy respectively, both marginally softer than expected. Apr man. PMI sunk to 27.5, from 45.3
prior. Marginal decline in March exports, defying estimates of deeper declines.
Philippines ↔/↓ NA BSP reduced its policy rate by 50 bps to 2.75% in an unscheduled rate cut on 16 April. Cumulative cuts in
policy rate and RRR reach 125 bps and 200 bps respectively. 4Q GDP in-line with expectations at 6.4%
yoy. Apr CPI firmer than expected at 2.2% yoy, firmer than expected. Apr man. PMI sunk further to 31.6,
from 39.7 prior. Feb exports grew by a softer than expected 2.8% yoy. Jan remittances grew by a stronger
than expected 6.6% yoy.
5
COVID-19 watch: Next wave in ex-Asia EM countries?
• Total confirmed cases are north of
3.7m, with the latest wave of cases
coming in countries like Russia, Brazil
and Saudi Arabia. The growth rates in
Europe and North America are
gradually slowing.
• Investors continue to draw positivity
from headlines on re-opening and
vaccines. Epidemiological findings –
such as the mutations of the virus –
should attract more concern than they
currently have from the investors. Stay
vigilant on further spreads of the
virus, especially after the relaxation
of restrictions in the coming weeks.
• Charts drawn from the daily COVID-19
Monitor. Please refer to the publication
for further details.
6
Macro trajectory: Signs of impending US recession
• Macroeconomic indicators are
evolving in a fashion that is
consistent with an impending US
recession.
• The situation is as bad, if not worse
in Europe. April man. PMIs are in
their 30s, and the composite and
services PMIs are in the teens or
lower – levels not seen prior. Expect
further damage for the already week
European South.
7
0
10
20
30
40
50
60
70
80
90
100
-1000
0
1000
2000
3000
4000
5000
6000
Jan
-85
Jan
-87
Jan
-89
Jan
-91
Jan
-93
Jan
-95
Jan
-97
Jan
-99
Jan
-01
Jan
-03
Jan
-05
Jan
-07
Jan
-09
Jan
-11
Jan
-13
Jan
-15
Jan
-17
Jan
-19
Initial Jobless Claims
NBER defined recession US Initial Jobless Claims (6m change)
'000s
0
10
20
30
40
50
60
70
80
90
100
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Jan
-85
Jan
-87
Jan
-89
Jan
-91
Jan
-93
Jan
-95
Jan
-97
Jan
-99
Jan
-01
Jan
-03
Jan
-05
Jan
-07
Jan
-09
Jan
-11
Jan
-13
Jan
-15
Jan
-17
Jan
-19
US Treasury yield curve
NBER defined recession 10Y-3M UST yield 10Y-2Y UST yield
%
0
10
20
30
40
50
60
70
80
90
100
35
38
41
44
47
50
53
56
59
62
Jan
-85
Jan
-87
Jan
-89
Jan
-91
Jan
-93
Jan
-95
Jan
-97
Jan
-99
Jan
-01
Jan
-03
Jan
-05
Jan
-07
Jan
-09
Jan
-11
Jan
-13
Jan
-15
Jan
-17
Jan
-19
ISM Man. and non-Man Indices
NBER defined recession ISM Man. PMI ISM non-Man. PMI
3mma
0
10
20
30
40
50
60
70
80
90
100
-22-20-18-16-14-12-10
-8-6-4-202468
1012
Jan
-85
Jan
-87
Jan
-89
Jan
-91
Jan
-93
Jan
-95
Jan
-97
Jan
-99
Jan
-01
Jan
-03
Jan
-05
Jan
-07
Jan
-09
Jan
-11
Jan
-13
Jan
-15
Jan
-17
Jan
-19
US Leading Index
NBER defined recession US Leading Index
yoy%
Macro trajectory: Signs of sinking finally showing
• April manufacturing PMIs across Asia
are starting to show the slumps
reminiscent to the start of the GFC
crisis. especially in South Asia. South
Asia seems to be taking a larger hit,
with the PMIs coming in in the 30s
range. The North Asian prints have
held up better. The new orders sub-
gauge is generally softer than the
headline number, suggesting further
pain in the coming months.
• Trade prints up to March remains
supported in most countries, but if the
South Korean April 20-days gauge is
any guide, the hit will be coming in
April and May.
• Threat of further growth down-
grades beyond the original cuts
are material at this stage.
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Asian PMIs (monthly)
EM PMI CN SK TW SG
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Asian PMIs (monthly)
IN TH MY PH ID
8
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Z-score(3mma)
Asian aggregate (Exports)
CN Asia (ex-CN, JP)
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Z-score(3mma)
Asian aggregate (Imports)
CN Asia (ex-CN, JP)
Asian 10y yields: Further moves lower will be a grind
• Aside from Indonesia, where the BI is keeping a lid on rising yields, Asian 10y yields should broadly remain on a
downtrend. However, with the low-yielders already depressed levels, the room for further decline may be limited. Expect
a slow grind lower from current levels.
2.40
2.60
2.80
3.00
3.20
3.40
3.60
3.80
4.00
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
% CN
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%SK
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
Jan
-18
Ma
r-1
8
May-…
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
May-…
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
% TW
2.60
2.90
3.20
3.50
3.80
4.10
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%MY
6.00
6.50
7.00
7.50
8.00
8.50
9.00
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%ID
0.60
1.10
1.60
2.10
2.60
3.10
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%TH
5.80
6.30
6.80
7.30
7.80
8.30
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%IN
0.801.001.201.401.601.802.002.202.402.60
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%SG
9
Investor risk appetite improvement stopping at nothing
• The FX Sentiment Index (FXSI)
has continued to march lower,
denoting an improvement in overall
risk sentiment. The index is now
almost at the threshold of the Risk-
Neutral zone.
• A number of stress points are
plain to see – weak macro data,
warnings from central bankers,
Sino-US tensions – but investors
appear more than willing to
overlook them in favour of
positivity on virus-related headlines.
• We had long been skeptical of this
improvement in risk appetite. The
fundamentals have yet to change,
and we continue to expect a second
round worsening in risk sentiment
ahead. -3.5
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
4.5
5.5
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Emerging Market Bond Index Plus
RISK OFF
RISK ON
Z-score
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
MSCI AP ex. JP
RISK OFF
RISK ON
Z-score
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
FX Sentiment Index
RISK OFF
RISK ON
10
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
VIX
RISK OFF
RISK ON
Defensive in the structural horizon – USD safest haven
• The broad USD is typically countercyclical – it tends to strengthen when the global economy is weak. Our macro view
is still for further downside in the global economy. High level indicators, such as CLIs and PMIs, should continue to turn
depressed in the coming months.
• This impending global recession remains the main reason why we prefer to back in the USD in a multi-week
time horizon. This also suggests a negative outlook in the Asian and cyclical currencies.
11
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0-40
-30
-20
-10
0
10
20
30
40
50
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
Jan-1
2
Jan-1
3
Jan-1
4
Jan-1
5
Jan-1
6
Jan-1
7
Jan-1
8
Jan-1
9
Jan-2
0
6mma % yoy(inverse scale)
% yoy
Global Man PMI USD Trade Weighted Index (RHS)
-15
-10
-5
0
5
10
15
20-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
Ja
n-1
7
Ja
n-1
8
Ja
n-1
9
Ja
n-2
0
6mma %yoy(inverse scale)
%yoy
OECD Leading Indicator USD Trade Weighted Index (RHS)
Source: Bloomberg, OECD, OCBC
Asia currencies still remarkably resilient…
• … but the longer term fundamentals have not changed. We continue to see the macro trajectory to be heavy. Central
banks like the BI and MAS have highlighted further downside risks from the original round of growth downgrades.
Thus, the structural outlook for a higher USD-Asia is effectively unchanged.
• The Asian currencies have reacted well to near term improvement in risk sentiment in the near term, and have stayed
supported against the USD. Nevertheless, the environment may be shifting against the Asian currencies – with
Sino-US tensions back on the forefront, and the USD recovering against the G-10 currencies – most USD-Asia
pairs should have limited downside from current levels. We expect USD-Asia to ease higher from here.
Asian FX Short-term Heat Map
USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR
USD 1 9 1 1 1 1 1 1 1 1
JPY 1 1 1 1 9 9 1 2 1 1
CNH 9 1 2 2 1 1 1 1 1 1
SGD 1 1 2 1 2 2 1 2 1 1
MYR 1 1 2 1 2 2 9 2 1 1
KRW 1 9 1 2 2 1 2 1 2 1
TWD 1 9 1 2 2 1 1 2 1 1
THB 1 1 1 1 9 2 1 2 1 1
PHP 1 2 1 2 2 1 2 2 1 1
INR 1 1 1 1 1 2 1 1 1 1
IDR 1 1 1 1 1 1 1 1 1 1
Asian FX Short-term Heat Map
USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR
USD 1 9 1 1 1 1 1 1 1 1
JPY 1 1 1 1 9 9 1 2 1 1
CNH 9 1 2 2 1 1 1 1 1 1
SGD 1 1 2 1 2 2 1 2 1 1
MYR 1 1 2 1 2 2 9 2 1 1
KRW 1 9 1 2 2 1 2 1 2 1
TWD 1 9 1 2 2 1 1 2 1 1
THB 1 1 1 1 9 2 1 2 1 1
PHP 1 2 1 2 2 1 2 2 1 1
INR 1 1 1 1 1 2 1 1 1 1
12
106
108
110
112
114
116
118
120
122
124
Ma
y-15
Sep
-15
Jan-1
6
Ma
y-16
Sep
-16
Jan-1
7
Ma
y-17
Sep
-17
Jan-1
8
Ma
y-18
Sep
-18
Jan-1
9
Ma
y-19
Sep
-19
Jan-2
0
Ma
y-20
Asian Currency Index (ACI) implied valuation
Actual Predicted
WeakerAsian FX
StrongerAsian FX
NEERs: Concern over TWD on NEER basis?
• Although Taiwan’s management of the virus situation is first in class and its economic hit may be the lightest, the
ongoing outperformance in the TWD should warrant some concern. On the NEER basis, the TWD also looks elevated
against historical norms. We should not rule out some retracement in the TWD in the near term.
1000
1050
1100
1150
1200
1250
130071.00
73.00
75.00
77.00
79.00
81.00
83.00
85.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
South Korea
KRW NEER 5y Average USD-KRW (RHS)
Index: Jan 94 = 100 29.00
29.50
30.00
30.50
31.00
31.50
32.00
32.50
33.00
33.50
34.0079.00
81.00
83.00
85.00
87.00
89.00
91.00
93.00
95.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Taiwan
TWD NEER 5y Average USD-TWD (RHS)
Index: Jan 94 = 100
9000
10000
11000
12000
13000
14000
15000
16000
1700014.00
15.00
16.00
17.00
18.00
19.00
20.00
21.00
22.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Indonesia
IDR NEER 5y Average USD-IDR (RHS)
Index: Jan 94 = 100
28.00
29.00
30.00
31.00
32.00
33.00
34.00
35.00
36.00
37.0078.00
80.00
82.00
84.00
86.00
88.00
90.00
92.00
94.00
96.00
98.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Thailand
THB NEER 5y Average USD-THB (RHS)
Index: Jan 94 = 100
53.00
56.00
59.00
62.00
65.00
68.00
71.00
74.00
77.00
80.0043.00
45.00
47.00
49.00
51.00
53.00
55.00
57.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
India
INR NEER 5y Average USD-INR (RHS)
Index: Jan 94 = 100 2.80
3.00
3.20
3.40
3.60
3.80
4.00
4.20
4.40
4.6070.00
75.00
80.00
85.00
90.00
95.00
100.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Malaysia
MYR NEER 5y Average USD-MYR (RHS)
Index:: Jan 94 = 100
0
10
20
30
40
50
60
70
80
90
100
80828486889092949698
100102104106108110112114116118
De
c-16
Ma
r-17
Jun
-17
Sep
-17
De
c-17
Ma
r-18
Jun
-18
Sep
-18
De
c-18
Ma
r-19
Jun
-19
Sep
-19
De
c-19
Ma
r-20
Asian NEERs
THB PHP IDR MYR SGD
TWD KRW CNY INR
Index:30 Dec 2016 = 100 2019 2020
-5.53
-4.24-3.67
-3.31
-1.81-1.30
1.83
2.54 2.69
-6.00
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
THB IDR INR KRW MYR SGD PHP TWD CNY
Asian year-to-date NEER performance
06/05/2020
%
13
1045
1095
1145
1195
1245
1295
1345-9000
-7000
-5000
-3000
-1000
1000
3000
5000
7000
9000
11000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Mar
-20
South Korea
NFB: Bond & Eq 20D RS USD-KRW
Improving flow environment, but not outright positive (1)
29.0
29.5
30.0
30.5
31.0
31.5
-16000
-11000
-6000
-1000
4000
Dec
-17
Mar
-18
Jun
-18
Sep
-18
Dec
-18
Mar
-19
Jun
-19
Sep
-19
Dec
-19
Mar
-20
Taiwan
NFB: 20d RS USD-TWD
62.00
64.00
66.00
68.00
70.00
72.00
74.00
76.00
78.00-20000
-15000
-10000
-5000
0
5000
10000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Mar
-20
India
NFB: Bond & Eq RS 20D USD-INR
13000
13500
14000
14500
15000
15500
16000
16500
17000-25000
-20000
-15000
-10000
-5000
0
5000
10000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Mar
-20
Indonesia
Bond & Equity: 20D RS USD-IDR
30.0
30.5
31.0
31.5
32.0
32.5
33.0
33.5-3000
-2000
-1000
0
1000
2000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Mar
-20
Thailand
Net bond & equity WTD RS20 USD-THB
3.85
3.95
4.05
4.15
4.25
4.35
4.45-1800
-1500
-1200
-900
-600
-300
0
300
600
900
Jan-
18
Ap
r-18
Jul-1
8
Oct
-18
Jan-
19
Ap
r-19
Jul-1
9
Oct
-19
Jan-
20
Ap
r-20
Malaysia
Equity 20D RS USD-MYR
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
De
c-16
Feb
-17
Ap
r-1
7
Jun
-17
Au
g-1
7
Oct
-17
De
c-17
Feb
-18
Ap
r-1
8
Jun
-18
Au
g-1
8
Oct
-18
De
c-18
Feb
-19
Ap
r-1
9
Jun
-19
Au
g-1
9
Oct
-19
De
c-19
Feb
-20
Ap
r-2
0
Total Portfolio Flows (20D RS) ACI (RHS)
z-score4wk MA
1m%
Stronger Asia FX
Weaker Asia FX
-40000
-35000
-30000
-25000
-20000
-15000
-10000
-5000
0
5000
10000
15000
20000
De
c-16
Ma
r-17
Jun
-17
Sep
-17
De
c-17
Ma
r-18
Jun
-18
Sep
-18
De
c-18
Ma
r-19
Jun
-19
Sep
-19
De
c-19
Ma
r-20
Asian aggregate portfolio flows (20D Rollsum)
Equity Bond
• The Asian portfolio flows environment continue to see improvement, with the likes of South Korea, Taiwan and Indonesia
now nudging into a net inflow situation on a rolling 20-day basis. Moderation in outflows from India is still also ongoing.
However, the moderation in outflows from Thailand and Malaysia has effectively stalled over the past week.
Nevertheless, this tells only half the picture…
14
Improving flow environment, but not outright positive (2)
• … because much of this improvement is due to a slowing down of outflows, rather an actual inflows (save for Korea and
Indonesia). Anecdotally, government bond auctions in Indonesia have also not seen very good response – requiring the
BI to take up green shoe option to absorb government bonds.
15
-10,000.00
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Korea - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-25,000.00
-20,000.00
-15,000.00
-10,000.00
-5,000.00
0.00
5,000.00
10,000.00
15,000.00
20,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Taiwan - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-30,000.00
-20,000.00
-10,000.00
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
India - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-25,000.00
-20,000.00
-15,000.00
-10,000.00
-5,000.00
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Indonesia - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-15,000.00
-10,000.00
-5,000.00
0.00
5,000.00
10,000.00
15,000.00
20,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Thailand - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-6,000.00
-4,000.00
-2,000.00
0.00
2,000.00
4,000.00
6,000.00
8,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Malaysia - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
SGD NEER: Southbound to a new lower range?
• Recent rhetoric from the MAS and other official sources seem to suggest that there is non-negligible downside risks to
the current -4.0% to -1.0% GDP growth forecast. Indeed, the extension of the CB measures may have resulted in a
greater than expected economic hit. If that is the case, the Jan to late-March decline in the SGD NEER – which was
thought to be congruent to the growth outlook in late March – may no longer be sufficient amid a worsened outlook.
• At this juncture, while we still do not see a dip towards the bottom end of the policy range as the base case, the
SGD NEER may need to spend more time around the parity to -0.50% below parity area to account for
increased uncertainty. This should imply some implicit buoyancy for the USD-SGD in the coming weeks.
-0.0800
-0.0600
-0.0400
-0.0200
0.0000
0.0200
0.0400
0.0600
Contribution of SGD NEER component currencies (since 30 Apr to 6 May)
INR
AUD
IDR
KRW
GBP
CNY
THB
TWD
JPY
MYR
EUR
USD
SGD strengthens agst currency x
SGD weakens agst currency x
116
117
118
119
120
121
122
123
124
125
126
127
128
129
Oct-
13
Jan-1
4
Apr-
14
Jul-1
4
Oct-
14
Jan-1
5
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7
Apr-
17
Jul-1
7
Oct-
17
Jan-1
8
Apr-
18
Jul-1
8
Oct-
18
Jan-1
9
Apr-
19
Jul-1
9
Oct-
19
Jan-2
0
Apr-
20
Jul-2
0
Oct-
20
2.0%pa+/-2.0% band
flatten slope
neutral slope
1.0%pa+/-2.0% band
flatten slope
0.5%pa+/-2.0%
band
0.0%pa+/-2.0% band
0.5%pa+/-2.0%
band
steepen slope
1.0%pa+/-2.0% band
steepen slope
0.5%pa+/-2.0%
band
flatten slope
neutral slope, re-centre lower
0.0%pa+/-2.0%
band
16
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Co.Reg.no.:193200032W
Treasury Research & Strategy
Macro Research Selena Ling
Head of Research & Strategy
Tommy Xie Dongming
Head of Greater China Research
Wellian Wiranto
Malaysia & Indonesia
Terence Wu
FX Strategist
Howie Lee
Thailand, Korea & Commodities
Carie Li
Hong Kong & Macau
Dick Yu
Hong Kong & Macau
Credit Research
Andrew Wong
Credit Research Analyst
Ezien Hoo
Credit Research Analyst
Wong Hong Wei
Credit Research Analyst
Seow Zhi Qi
Credit Research Analyst
17
