reports
- Jim Walker
- Sharmila Whelan
Better Days Ahead
Like bourses around the region, Taiwan’s stock market has rebounded from its January low and is up over 10% in two months. Underpinning investor optimism are expectations that Taiwan stands to benefit disproportionately from the fiscal and monetary policy easing underway in China, that China and the US will get to some kind of trade deal and a positive reaction to TSMC’s 2019 dividend pay-out plan.
- Sharmila Whelan
Dim Outlook
It may not feel like it. It may not smell like it. But make no mistake Hong Kong is in recession. Last year’s reported full year growth of 3% is purely down to base year effects. Activity has contracted for three straight quarters and fell by a further 0.5% QoQ in the final quarter of 2018. And it is not just down to poor export performance although overseas shipments did decline at the fastest rate since 1Q16, by a whopping 3% QoQ. Bar government consumption, weakness is evident across the bo...
- Sharmila Whelan
On Hold
After two rounds of tightening we expect the Monetary Authority of Singapore to delay further adjusting the exchange rate band for the Singapore dollar when it next meets in April. Headline inflation, which guides the MAS’s decision making, is easing. Both headline and core consumer prices showed smaller gains in January, rising by 0.4% and 1.7% YoY, respectively, compared with 0.5% YoY and 1.9% YoY in December. On the back of this the authorities have cut the full year headline inflation fore...
- Sharmila Whelan
Upcycle Intact
Japan GDP rebounded in the final quarter of 2018 after the contracting unexpectedly in 3Q when natural disasters disrupted economic activity across the board. In the final three months of 2018 Japan grew by 0.3% QoQ compared with -0.7% QoQ previously. At first glance the rebound looks weak i.e. nothing to write home about, dig deeper though the picture that emerges is of an economy expanding at a healthy pace led by domestic demand which in the current fraught global trade environment is a posit...
- Jim Walker
A Tale of Two Countries
In January we visited two of Asean’s most populous countries. Between them, Indonesia and Vietnam account for more than half of Asean’s 650m people. They are also the two most obvious potential beneficiaries of the fallout from the ongoing trade dispute between the US and China. Regardless of the outcome of talks between the two largest economies on earth, the damage to the existing world manufacturing trading order has already been done. China plus one is no longer a preferential industri...
- Sharmila Whelan
Growing Headwinds
There is no upside for corporate Korea is the untarnished conclusion of Aletheia Capital Asianomics Country Report, Korea – Growing Headwinds, 4 February. The Bank of Korea is forecasting 2.6% growth in 2019. This may well be achieved. Government spending is set to rise sharply. Tax breaks and rising minimum wages should buoy consumption and an improvement in the global dollar purchasing power in 2H help stabilise exports. But make no mistake the underlying growth story is deteriorating. ...
- Sharmila Whelan
No Quibbles
It was a given that there would some fiscal slippage in FY19. It was also a given that with the Modi government facing General Elections in May and having not done very well in last year’s key state elections, the FY20 Budget would be full of fiscal hand-outs aimed at winning over voters. We have pored over the budget and have to confess we have no quibbles. The numbers add up.
- Jim Walker
Ceteris Imparibus Revisited
“Import elasticities. Ease of transferring business between countries. Reliability of alternative supply chains. Time taken to relocate production. The list of unknowns again goes on and on but the bottom line is that uncertainty has been raised and that is bad news for global growth.†- Asianomics Group Strategy Report No. 10/2018, Ceteris Imparibus, 2 October, p.7 It started with Apple. The latest victims – in profit terms – of the ‘China slowdown’ are Caterpillar, Intel, Stanley ...
- Sharmila Whelan
Rough Start
We wrote last week in Asianomics Macro Flashnote – Ripple effect, 18 January that even though Asian exports had held up in the first three quarters of 2018, the US- China trade war and the erosion in global dollar purchasing power were taking their toll. Asian export pricing power was weakening with Korean, Taiwanese and Malaysian exporters having to not only absorb the full costs of the tariff increases but charging customers less for the same goods compared with a year ago. Our expectation i...
- Sharmila Whelan
- Jim Walker
- Jim Walker
Acceleration!
China’s fourth quarter 2018 GDP numbers were released earlier today and, predictably, Bloomberg led with “China posts weakest growth since 2009†headline. The fact that the number was still 6.4% YoY, good by almost all standards, was given little attention. Being fickle, we immediately turned to the nominal GDP series – which the media continue to ignore completely – only to find that, on a quarterly annualised basis, the fourth quarter marked an acceleration in growth, from 8.5% annua...
- Sharmila Whelan
Ripple Effect
Asian exports have held up well. As recently as October aggregate Asian exports hit another record high. But the trade war and erosion in US dollar purchasing power have taken their toll. Figure 1 shows that Korean, Taiwanese and Malaysian export prices – which can be considered as proxies for the region – have, measured on a year on year basis, been easing since 2017 and more quickly in 2018. By November not only were Taiwanese and Korean exporters fully absorbing higher input costs and US ...
- Jim Walker
Solving The Puzzle
In 2011 the world experienced the best year of demand expansion – in US dollar terms – in any year since the financial crisis, until 2018 that is. But you would hardly realise that that was the case by reading the newswires, the story there since early 2018 has been about ‘synchronised slowdown’ and, in particular, the demand downdraft from China. The reality is that developed countries (the US, EU, UK and Japan) plus developing Asia (China, India and the Asean-4) produced US$4.09bn of â...
- Jim Walker
The Shambles
As we write, 0700 hours UK time, the vote to determine whether or not Theresa May’s, the UK Prime Minister’s, Withdrawal Agreement with the European Union is scheduled to go ahead tomorrow. We make the proviso “as we write†because almost a month ago it was also scheduled to be voted on “tomorrowâ€. Then the government pulled the vote because it knew that it would be heavily defeated.
- Sharmila Whelan
Party Poopers
Normally it is when the host takes away the punch bowl that you know the party is drawing to an end and that it’s time to go home. There is no risk of that happening in Japan. The Bank of Japan unlike its advanced world peers – the US Fed, ECB and Bank of England – is no hurry to take away the punch bowl. We are expecting no significant adjustments to the central bank’s asset purchase programme this year. Just this week BoJ Governor Haruhiko Kuroda reiterated that interest rates will sta...
- Sharmila Whelan
Waning Appetite
Global appetite for US dollar credit has been waning as cheap liquidity becomes less plentiful as quantitative tightening has replaced QE and the cost of dollar debt increases. Non-financial borrowers, mostly corporates in emerging markets, have grown less enthusiastic about raising funds through the issuance of US dollar-denominated bonds. The share of emerging market US dollar corporate debt has been stable at around 32% of total global US dollar credit outstanding since 4Q17.
- Jim Walker
Vietnam Country Visit Day 1
On Thursday 27 December 2018 the General Statistics Office (GSO) in Hanoi announced that Vietnam had grown by 7.08% (7.1% to us mere mortals) for full year 2018. Magically, this was exactly the same number as that forecast by the Asian Development Bank in April, long before the travails that affected the rest of the region in the second half of the year. It was also an outlier among economic forecasters (with the IMF in July projecting just 6.6% for last year). Even more magically, the GSO was a...
- Jim Walker
Profits and The Investment Cycle
It might be unpopular but we are attaching another upbeat report on global growth prospects and the Asian region. Admittedly, the market mood could change fundamentally if the US and China make progress on their trade talks. In addition, it is clear that the Fed is beginning to back off from its previously held interest-rate hiking course. In the attached report, Profits and The Investment Cycle, we look more closely at the signal being sent by returns on equity in Asian and global stock marke...
- Sharmila Whelan
Downside Surprise
Disappointing market expectations, economic activity softened in the final quarter of 2018. Advanced estimates showed Singapore expanded by 1.6% QoQ against forecasts of an acceleration to 3.6% QoQ growth. Now some moderation was to be expected after 3Q18 growth was revised by 50bp to 3.5%. Further, measured on a year on year basis – and this we would suggest is the more important metric to look at because quarterly data tend to be unusually volatile thanks to Singapore’s large bio-medical a...
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