Asia FX Update: Heavy in the mid-term

13 Mar 2020

Treasury Research & Strategy

Global Treasury

Terence Wu

(+65) 6530-4367

TerenceWU@ocbc.com

1

Asian FX Key Themes

• Asian asset markets face near term market panic (p. 11) and longer term growth concerns on one hand, and central

bank easing action on the other (p. 6). Central bank action may support the Asian govies (p. 9-10), but may have little

impact on FX (p. 12). Expect Asian FX to be more driven by portfolio outflows (p. 14) from the market panic, and growth

downgrades. It is not a stretch to expect the ongoing spread of COVID-19 (p. 6) to crimp global trade and raise

recession risks. Selected macro-economic indicators are already starting to exhibit weakness (p 3-5, 7). Thus, the

growth downgrade cycle is probably not ending yet.

• Summary of research view: Expect Asian FX to be under considerable pressure both in the short- and mid-term,

especially with the broad USD regaining its anti-cyclical properties. With the epicentre of the crisis no longer in China

and ample room for policy support, expect the RMB to outperform the rest of the Asian FX (p. 13). Near term, expect

the likes of IDR and INR to underperform on the back of excessive portfolio outflows (p. 14). Further out, currencies with

most exposure to the crisis, like the KRW, SGD (due to trade), and THB (due to tourism) may underperform peers. As

for the SGD NEER, we expect further downward pressure ahead, but we will not be panicking at current levels (p. 15).

2

Short term FX/bond market views and commentary

USD-Asia 10y govie (%) Commentary

China ↔/↑

↓ The COVID-19 situation now appears under control within China, with no signs of worsening after the

factories reopen. Attention shifting to other countries should support Chinese assets going forward. Expect

RMB complex to remain supported. The PBOC will keep the monetary taps loose, with further MLF and

LPR cuts still on the table. Negative economic outcomes for 1Q 2020 are already coming through, with

Feb official man./non-man. PMI coming in at an unprecedented 35.7 and 29.6 respectively. The Caixin

man./svcs PMIs also came in at an equally weak at 40.3 and 26.5 respectively. Year-to-date exports

slumped -17.2% yoy. Aggregate social financing and new yuan loans firmer than expected, although

monetary aggregates grew slower than expected. 4Q real GDP growth at 6.0% yoy, but nominal growth

reaccelerated to 9.63% yoy from 7.57% yoy. Feb CPI prints remain firm, but PPI moves into deflationary

territory.

S. Korea ↑ ↓ The USD-KRW fluctuates on either side of 1200.00, pending COVID-19 headlines. Nevertheless, expect

the KRW to underperform the RMB for now. The BOK surprised by remaining unchanged in February,

presumably to protect policy room. However, with the Fed rate cut, the BOK may be compelled to follow

suit. 4Q 2019 GDP came in at 2.3% yoy. Feb man. PMI dipped again to 48.7, from 49.8. Feb exports grew

4.5% yoy, against Jan’s 6.1% yoy decline. Imports also grew 1.4% yoy. Feb core and headline CPI came

in at 0.6% yoy and 1.1% yoy, softer than previous months on COVID-19 impact.

Taiwan ↔/↑

↓ TWD outperforming Asian peers amid better control over the country’s virus situation and firmer long term

prospects. However, ongoing equity outflows may weigh going forward. The CBC is static at 1.375% in

Dec, with minutes of the meeting showing optimism over growth. Despite the firmer macro footing in

Taiwan, some rumblings for CBC rate cut are also under way. 4Q GDP growth revised lower marginally to

3.31% yoy, from 3.38% yoy. Feb PMI dipped back into contractionary zone at 49.9, from 51.8 prior. Feb

exports shrank by -7.60% against an expected 1.00% yoy growth. Imports slumped -17.7% yoy, supporting

a larger-than-expected trade balance. Feb headline and core CPI contracted 0.21% and 0.38% yoy

respectively. 3

Short term FX/bond market views and commentary

USD-Asia 10y govie (%) Commentary

Singapore ↑ ↓ 4Q GDP revised higher to 1.00% yoy (from 0.80% yoy), and FY2019 growth at 0.7% yoy. Investors will

however focus more on the 2020 growth downgrade from 0.50-2.50% to -0.50%-1.5% yoy due to COVID-

19. With the attention of COVID-19 shifting out of Asia, expect the SGD NEER to firm from the depths

seen in the previous weeks, and probably settle south of the parity level. Not much impetus to push the

SGD NEER to the top half of the band when expectations of MAS easing in April swirls. Jan NODX

contracted by a less than expected -3.3% yoy (vs -3.7% consensus). Jan headline and core CPI printed

+0.8% yoy and +0.3% yoy respectively, both softer than expected. Big miss in the core print may highlight

weakness in the underlying economy. Jan IP grew 3.4% yoy, against estimates of -3.4% yoy.

Thailand ↔/↑

↔/↓ The THB is settling down into a range with 31.50 as a locus after underperformance at the start of the

year. However, the THB may still be on a negative bias on the tourism hit, which may take longer to

recover than the COVID-19 spread itself. 4Q GDP at 1.60% yoy, softer than expected, but FY2019 growth

in line with expectations at 2.40% yoy. Growth may be hit hard by COVID-19 this year due to its reliance

on the tourism sector, leading to the BOT to cut its policy rate to an unprecedented 1.00%. Developments

in the COVID-19 front to dictate near-term BOT decisions. Feb man. PMI dipped further to 49.5, compared

to 49.9 prior. Jan custom exports grew 3.35%, against an expectation of -2.90% yoy. Custom imports fell

by a less than expected -7.86% yoy, rather than the expected -16.45% yoy. Feb headline/core CPI at

0.74% yoy and 0.58% yoy respectively.

Malaysia ↑ ↑ Political intrigue will once again dominate investors’ minds, weighing on the MYR and MGS bonds in the

near term. 4Q GDP missed heavily at 3.60% yoy, against an expected 4.10% yoy. FY2019 also missed

expectations at 4.30% yoy. BNM cut rates by 25 bps as expected in its Mar meeting. The door remains

wide open for further cuts, perhaps as early as the next meeting in May. Jan CPI stood at 1.6% yoy,

marginally softer than expectations. Jan man. PMI faded back into contraction zone at 48.8, from 50.0

prior. Jan exports contracted at -1.5% yoy (mkt: -1.6% yoy), while imports also shrunk -2.4% yoy.

4

Short term FX/bond market views and commentary

USD-Asia 10y govie (%) Commentary

India ↑ ↓ Relatively unscathed by the COVID-19 episode, but equity outflows have caught up with India on global

risk-off tone and domestic issues (Yes Bank failure). Nevertheless, excessive upside in the USD-INR is

curtailed by the weak USD and the slumping crude complex. The RBI held policy rates unchanged in

February, but easing is still achieved by depressing back-end govie yields through OMOs. Expect the INR

to be sideways for now. Price pressures continue to increase, with Jan headline CPI coming in at 7.59%

yoy, but the latest GDP growth slowed to 4.5% yoy in 3Q2019 – a classic case of stagflation. Dec

industrial production contracted a marginal -0.30% yoy. Jan man. PMI continued to push higher to 55.3,

from 52.7 prior. Dec trade deficit in line with expectations.

Indonesia ↔/↑

↔/↑ BI cut policy rate by 25 bps to 4.75% in its February meeting, and sounded confident of a weak V-shaped

recovery in the Indonesian economy. This confidence is probably all but shattered in the 2 weeks since.

Expect the BI to continue being in the easing mode. IDR currently weighed on by bond outflows amid risk

off sentiment, and is playing catch up to the declines seen by Asian counterparts. 4Q’19 GDP surprised on

the downside at 4.97% yoy, with exports and investment being the main drags. Jan exports contracted by -

3.71% yoy, weaker than expected. Jan trade deficit widened again, after an improvement in Dec. Feb

headline CPI at 2.98% yoy, marginally better than expected, but the core gauge continues to

underperform. Feb man. PMI firmed to 51.9 from 49.3 prior.

Philippines ↔/↑

NA The BSP reduced its policy rate to 3.75% in its February meeting as expected, with the BSP said to be

readying the next round of cuts in relation to the surprise Fed rate cut. 4Q GDP in-line with expectations at

6.4% yoy. Feb CPI softer than expected at 2.6% yoy. Dec exports grew 21.4% yoy, significantly

outperforming expectations, while imports contract 7.6% yoy. Feb man. PMI bucked trend in Asia to

improve to 52.1, from 51.7 prior. Nov remittances grew 2.0% yoy, weaker than expected.

5

COVID-19 watch: Attention shifts to the global spread

• Within China, the situation is now

largely contained, with President Xi

feeling comfortable enough to visit

Wuhan. Makeshift hospitals are also

being progressively closed.

• However, the total confirmed cases

outside China has exceeded 45,000,

with a 3.2% fatality rate (6.6% in Italy).

Italy is basically on lockdown mode.

• COVID-19 now is no longer an Asian-

specific negative, but the

subsequent deterioration in global

risk sentiment may not do Asian

currencies any favours.

• For further insights, please refer to the

daily COVID-19 Monitor, now covering

the global spread.

6

Selected economic indicators starting to show the hit

• The sticker shock is the official and

Caixin PMIs in China. On both the

manufacturing and services

gauges, the outcome has slumped

to rarely seen levels. PMIs in the

rest of Asia remain largely resilient,

but we expect the hit to come in

their March numbers.

• Majority of data-prints are still not

fully showing the impact of COVID-

19. Over the coming 4-6 weeks,

expect indicators to start

reflecting the weakness, leading

to some structural negatives for

the Asian currencies.

44.0

46.0

48.0

50.0

52.0

54.0

56.0

Aug

-11

Fe

b-1

2

Aug

-12

Fe

b-1

3

Aug

-13

Fe

b-1

4

Aug

-14

Fe

b-1

5

Aug

-15

Fe

b-1

6

Aug

-16

Fe

b-1

7

Aug

-17

Fe

b-1

8

Aug

-18

Fe

b-1

9

Aug

-19

Fe

b-2

0

6mmaAsian PMIs

EM PMI CN SK TW SG

46.0

48.0

50.0

52.0

54.0

56.0

58.0

Aug

-11

Fe

b-1

2

Aug

-12

Fe

b-1

3

Aug

-13

Fe

b-1

4

Aug

-14

Fe

b-1

5

Aug

-15

Fe

b-1

6

Aug

-16

Fe

b-1

7

Aug

-17

Fe

b-1

8

Aug

-18

Fe

b-1

9

Aug

-19

Fe

b-2

0

6mmaAsian PMIs

IN TH MY PH ID

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

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

% yoyInflation: Asia vs. OECD

ASIA (ex-JPN, CN) Asia (ex JP, CN) Core OECD

-3.0

-1.5

0.0

1.5

3.0

4.5

6.0

7.5

9.0

Jan

-01

No

v-0

1

Sep

-02

Jul-

03

Ma

y-0

4

Ma

r-05

Jan

-06

No

v-0

6

Sep

-07

Jul-

08

Ma

y-0

9

Ma

r-10

Jan

-11

No

v-1

1

Sep

-12

Jul-

13

Ma

y-1

4

Ma

r-15

Jan

-16

No

v-1

6

Sep

-17

Jul-

18

Ma

y-1

9

China inflation

Headline CPI Core CPI 7

Macro outcomes take a back seat for now…

• …with the focus now on market panic and the slew of central bank and

government support actions. The Fed, BOE, BOC and RBA have all cut

policy rates, and injected liquidity into the stressed system. The BOJ and

ECB are the hold-outs in terms of rate cuts. Fiscal stimulus packages

have also be announced across the way. A question worth keeping in

mind for now, is whether these actions will be sufficient to arrest the risk-

off sentiment, and if not, what else will.

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

70

Aug

-12

Fe

b-1

3

Aug

-13

Fe

b-1

4

Aug

-14

Fe

b-1

5

Aug

-15

Fe

b-1

6

Aug

-16

Fe

b-1

7

Aug

-17

Fe

b-1

8

Aug

-18

Fe

b-1

9

Aug

-19

Fe

b-2

0

OCBC Asia Macro Surprise Diffusion Index

3M MSI

+ve data surprises

-ve data surprises

-60

-40

-20

0

20

40

60

Aug

-12

Fe

b-1

3

Aug

-13

Fe

b-1

4

Aug

-14

Fe

b-1

5

Aug

-15

Fe

b-1

6

Aug

-16

Fe

b-1

7

Aug

-17

Fe

b-1

8

Aug

-18

Fe

b-1

9

Aug

-19

Fe

b-2

0

OCBC US Macro Surprise Diffusion Index

3M MSI

+ve data surprises

-ve data surprises

-80

-60

-40

-20

0

20

40

60

80

Aug

-12

Fe

b-1

3

Aug

-13

Fe

b-1

4

Aug

-14

Fe

b-1

5

Aug

-15

Fe

b-1

6

Aug

-16

Fe

b-1

7

Aug

-17

Fe

b-1

8

Aug

-18

Fe

b-1

9

Aug

-19

Fe

b-2

0

OCBC EZ Macro Surprise Diffusion Index

3M MSI

+ve data surprises

-ve data surprises

8

Asian 10y yields: Focus on central bank action

• Near-term panic aside, Asian yields should focus on central bank action. The Fed is likely on the path to zero lower

bound again. Even for Asian central banks with less policy room (BOK, BOT), expect them to at least track the Fed to

the zero bound. Meanwhile, the central banks with more policy room may be expected to outdo the Fed.

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

6.00

6.50

7.00

7.50

8.00

8.50

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

0.901.101.301.501.701.902.102.302.502.70

Jan

-18

Ap

r-1

8

Jul-

18

Oct

-18

Jan

-19

Ap

r-1

9

Jul-

19

Oct

-19

Jan

-20

%SG

9

Asian 10y yields: Still more downside room

• Despite Asian govie yields being already low, the coordinated monetary easing across global central banks should

continue to pressure Asian 10y yields southwards. If history is any guide, the period prior to the Fed going to the zero

bound is characterized by the decline in back-end Asian yields. It will not come as a surprise if the low-yielders see the

most decline, on the back of the rush-to-quality dynamic. Furthermore, the capitulating real UST yields also points to

further downside for Asian yields.

10

Risk-Off sentiment off the charts

• Despite the containment of the

COVID-19 within China, the

global spread of the COVID-

19, coupled with an earlier

than expected Fed rate cut

set off the fear in global asset

markets, with UST yields and

equity markets leading the rout.

• The FX Sentiment Index (FXSI)

is now effectively off the charts.

However, this bout of risk-off

has translated to USD

weakness amid de-risking

and capitulating rate

differential advantage, instead

of the more typical USD

strength. This has given the

Asian currencies a get-out-of-

jail free card.

-3.5

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

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

Emerging Market Bond Index Plus

RISK OFF

RISK ON

Z-score

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

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

EM FX 1M implied volsZ-score

RISK OFF

RISK ON

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

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 Asia Pacific ex JP Index

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

11

No more “get out of jail free” free card

• Asian FX enjoyed a breather when the broad USD was held back

within the G-10 space by the EUR and JPY. However, the dynamic

has been flipped over the past 72 hours, when the broad USD has

re-engaged its anti-cyclical properties. USD-Asia has promptly

reacted higher. Market panic should keep USD-Asia buoyant for

now. Meanwhile, further cyclical growth downgrades caused by the

COVID-19 episode will keep Asian currencies on the tenterhooks in

the medium term.

• In terms of the North-South divide, South Asian currencies are most

exposed due to portfolio outflows. In these economies, the portfolio

outflow momentum are at historically stretched levels, or fast

approaching that level (see p. 14 for details). The USD-North,

however, should be relatively anchored by the RMB complex. With

the COVID-19 situation under control in China, and the

PBOC/government having ample firepower to stimulate, we expect

the RMB complex to outperform the likes of KRW and SGD going

forward.

105

107

109

111

113

115

117

119

Ma

r-1

5

Jul-1

5

Nov-1

5

Ma

r-1

6

Jul-1

6

Nov-1

6

Ma

r-1

7

Jul-1

7

Nov-1

7

Ma

r-1

8

Jul-1

8

Nov-1

8

Ma

r-1

9

Jul-1

9

Nov-1

9

Ma

r-2

0

Asian Currency Index (ACI) implied valuation

Actual Predicted

WeakerAsian FX

StrongerAsian FX

Asian FX Short-term Heat Map

USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR

USD 1 1 1 2 9 1 1 1 2 2

JPY 1 1 2 2 1 1 2 2 2 2

CNH 1 1 9 1 2 2 2 2 2 2

SGD 1 2 9 2 2 2 2 2 2 2

MYR 2 2 1 2 1 1 1 1 2 2

KRW 9 1 2 2 1 9 9 1 1 2

TWD 1 1 2 2 1 9 9 9 2 2

THB 1 2 2 2 1 9 9 2 2 2

PHP 1 2 2 2 1 1 9 2 2 2

INR 2 2 2 2 2 1 2 2 2 2

IDR 2 2 2 2 2 2 2 2 2 2

Asian FX Short-term Heat Map

USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR

USD 2 2 2 2 2 2 2 9 2 2

JPY 2 9 2 2 2 9 2 1 1 2

CNH 2 9 1 1 2 9 2 1 1 9

SGD 2 2 1 9 9 1 1 1 1 1

MYR 2 2 1 9 1 1 1 1 1 1

KRW 2 2 2 9 1 2 2 2 2 1

TWD 2 9 9 1 1 2 2 1 1 2

THB 2 2 2 1 1 2 2 1 1 9

PHP 9 1 1 1 1 2 1 1 2 2

INR 2 1 1 1 1 2 1 1 2 2

12

NEERs: Despite all that has happened, RMB still leads

• The relative stability in the RMB complex against the USD has allowed the RMB to outperform the rest of the Asian

currencies year-to-date. The THB has continued to normalize on NEER terms, but the KRW is starting to look

undervalued. TWD extending higher on NEER terms, looking overvalued.

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

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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

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

1600014.00

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

74.0043.00

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

8486889092949698

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

Asian NEERs

THB PHP IDR MYR SGD

TWD KRW CNY INR

Index:30 Dec 2016 = 100 2019 2020

-4.56

-3.00

-2.55

-1.77-1.36

-0.66

-0.11

0.31

1.46

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

THB INR KRW IDR SGD MYR PHP TWD CNY

Asian year-to-date NEER performance

09/03/2020

%

13

1045

1095

1145

1195

1245-6000

-4000

-2000

0

2000

4000

6000

8000

10000

Dec

-17

Mar

-18

Jun-

18

Sep

-18

Dec

-18

Mar

-19

Jun-

19

Sep

-19

Dec

-19

South Korea

NFB: Bond & Eq 20D RS USD-KRW

Deluge of portfolio outflows from Asia now actualizing

29.0

29.5

30.0

30.5

31.0

31.5

-10000

-8000

-6000

-4000

-2000

0

2000

4000

6000

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

Taiwan

NFB: 20d RS USD-TWD

62.00

64.00

66.00

68.00

70.00

72.00

74.00

76.00-6000

-4000

-2000

0

2000

4000

6000

8000

10000

Dec

-17

Mar

-18

Jun-

18

Sep

-18

Dec

-18

Mar

-19

Jun-

19

Sep

-19

Dec

-19

India

NFB: Bond & Eq RS 20D USD-INR

13000

13300

13600

13900

14200

14500

14800

15100

-10000

-8000

-6000

-4000

-2000

0

2000

4000

6000

Dec

-17

Mar

-18

Jun-

18

Sep

-18

Dec

-18

Mar

-19

Jun-

19

Sep

-19

Dec

-19

Indonesia

Bond & Equity: 20D RS USD-IDR

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5-2000

-1500

-1000

-500

0

500

1000

1500

2000

2500

Dec

-17

Mar

-18

Jun-

18

Sep

-18

Dec

-18

Mar

-19

Jun-

19

Sep

-19

Dec

-19

Thailand

Net bond & equity WTD RS20 USD-THB

3.85

3.90

3.95

4.00

4.05

4.10

4.15

4.20

4.25

4.30-1800

-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

Malaysia

Equity 20D RS USD-MYR

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

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

Total Portfolio Flows (20D RS) ACI (RHS)

z-score4wk MA

1m%

Stronger Asia FX

Weaker Asia FX

-25000

-21000

-17000

-13000

-9000

-5000

-1000

3000

7000

11000

15000

19000

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

Asian aggregate portfolio flows (20D Rollsum)

Equity Bond

• In the 19 Feb edition of this report, we thought it baffling that the portfolio flows environment in Asia was as benign as it

was. The expected deluge of the outflows has been actualizing in the weeks since. Both bond and equity flows are

capitulating, and no economies are being spared. Watch this space, with the risk-off tone deepening, expect the flow

environment to worsen further – a negative weight on the Asian currencies.

14

SGD NEER: Stay calm for now

• The SGD NEER has reacted lower again. This is perhaps not surprising as MAS policy easing in April may increasingly

be priced as the base case scenario. Our scenario analysis on the SGD NEER done early in the COVID-19 episode

(see FX Viewpoint – SGD NEER: Virus-stricken, 6 Feb) suggests that the SGD NEER may fall to -0.80% to -1.30%

below parity at the height of the COVID-19 situation, and put an initial floor at -1.00% below parity. Thus, we think the

current weakening of the SGD NEER (to approximately -0.80% below parity) is within expectations.

• Looking forwards, forward points and risk reversals are signaling for a weaker SGD. Expect the USD-SGD to track the

broad USD higher at this juncture.

-0.6000

-0.5000

-0.4000

-0.3000

-0.2000

-0.1000

0.0000

0.1000

0.2000

Contribution of SGD NEER component currencies (since coronavirus)

INR

AUD

IDR

KRW

GBP

CNY

THB

TWD

JPY

MYR

EUR

USD

SGD strengthens agst currency

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

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

15

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Co.Reg.no.:193200032W

Treasury Research & Strategy

Macro Research Selena Ling

Head of Research & Strategy

LingSSSelena@ocbc.com

Tommy Xie Dongming

Head of Greater China Research

XieD@ocbc.com

Wellian Wiranto

Malaysia & Indonesia

WellianWiranto@ocbc.com

Terence Wu

FX Strategist

TerenceWu@ocbc.com

Howie Lee

Thailand, Korea & Commodities

HowieLee@ocbc.com

Carie Li

Hong Kong & Macau

carierli@ocbcwh.com

Dick Yu

Hong Kong & Macau

dicksnyu@ocbcwh.com

Credit Research

Andrew Wong

Credit Research Analyst

WongVKAM@ocbc.com

Ezien Hoo

Credit Research Analyst

EzienHoo@ocbc.com

Wong Hong Wei

Credit Research Analyst

WongHongWei@ocbc.com

Seow Zhi Qi

Credit Research Analyst

ZhiQiSeow@ocbc.com

16