Vishnu Varathan
Senior Economist
[email protected]
Chang Wei Liang
FX Strategist
[email protected]
Asia FX Strategy
― Apr ‘16: Hi-Jack? ―
With USD (overly?) compressed by deferred Fed rate hike expectations, USD/AXJ, and
as a corollary, EM Asia risk premium are underrated.
This unstable state of AXJ/EM Asia rallies may be hijacked as we say “hi” to a Jack-inthe-Box spring-back in USD/AXJ alongside risk aversion (on Fed hike trigger?).
Fact is, negative rates adopted by the ECB and BoJ, tend to foster (opportunistic) spurts of
aggressive yield-hunt; inevitably accentuating the ebbs and flows into EM Asia and the
corresponding swings in AXJ.
So while Oil and China gradually (and twitchily) find a firmer footing, AXJ volatility
could remain high; and disproportionate attention will remain in G3 policy shifts.
Meanwhile weak external demand and re-balancing to domestic demand impeded by higher
leverage means that underlying AXJ appreciation trend remains in a lower gear.
29 Apr 2016
Mizuho Bank, Ltd.
Asia and Oceania Treasury Department
Executive Summary
•
Shifts in risk sentiment and financial market volatility dominate G3 currency
moves as EUR and JPY strengthened on safe haven buying
•
AXJ: Rallies are dis-proportionately driven by USD capitulation; with the
high-beta/commodity FX out-performance flagging near-term downside risks.
•
CNY: CNY NEER slip below is not a mercantilist tactic. Rather it is a byproduct of PBoC buffering excessive (upside) volatility in AXJ.
•
INR: Dialling down the “beta” as drift up in oil prices mute bullish instinct in
the INR; performance to be more pedestrian; but downside tail risks reined in.
•
SGD: Ostensible defiance of MAS easing to rally is not at odds with headroom
within the policy bands; but watch for “parallel” shift down on USD rebound.
•
MYR: Subdued export outlook and 1MDB debt disputes could keep MYR
bullish sentiment in check.
•
IDR: BI’s bias towards further easing could offset interim relief from uplift in
commodities and improving China outlook.
•
THB: Political concerns and still lacklustre external demand suggest nearterm downside risks for THB.
•
PHP: Presidential elections are the key event risk in May.
•
VND: Risks of another devaluation are vastly diminished as shift to marketbased rate setting based on loose NEER allows contiguous adjustments.
•
AUD: Scope for volatility in ore prices and dovish RBA cues from inflation
keep near-term downside to 0.70 intact; durable rebound into 2017.
•
KRW: Buoyancy from JPY uplift checked by weak external demand and
potential reform hurdles
•
China proxy (KRW, AUD, MYR and IDR) turn favourable further out; but
near-term risk of buckles if USD bears and/or risk appetite are hijacked.
USD/JPY
EUR/USD
USD/CNY
USD/INR
USD/KRW
USD/SGD
USD/IDR
USD/MYR
USD/PHP
USD/THB
USD/VND
AUD/USD
29 Apr 16
107
1.14
6.48
66.5
1139
1.34
13205
3.91
46.9
34.9
22250
0.77
Jun 16
113
1.10
6.52
68.5
1160
1.38
13600
4.05
47.0
35.9
22500
0.74
Sep 16
110
1.14
6.42
66.5
1150
1.36
13300
4.05
46.4
35.4
22300
0.76
-1-
Dec 16
108
1.15
6.36
64.5
1140
1.35
13000
3.90
45.7
34.9
22300
0.78
Mar 17
104
1.16
6.30
63.5
1120
1.33
12850
3.87
44.8
34.7
22400
0.80
Jun 17
103
1.17
6.28
62.0
1100
1.32
12500
3.85
43.9
34.5
22150
0.80
Global FX: Expecting elevated volatility
US growth slowdown hindering rate normalization
But leading indicators show improved momentum
US GDP (2q/2q saar)
5.0
US - ISM Manufacturing/Non-manufacturing
60
4.0
3.0
55
2.0
1.0
0.0
50
-1.0
-2.0
Mar 14
Jun 14
Sep 14
Dec 14 Mar 15
Jun 15
Sep 15
45
Jan 12
Dec 15 Mar 16
Consumption
Pvte Investment
Government
Change in stocks
Net exports
GDP 2q/2q saar
Jan 13
Jul 13
ISM manufacturing
Sources: CEIC, Mizuho Bank Singapore Treasury
Jan 14
Jul 14
Jan 15
Jul 15
BoJ disappointment rankles USD/JPY and Nikkei
EUR/USD vs Bund-UST 10Y spread
Japan - Nikkei vs USD/JPY
22000
-120
130
21000
1.16
19000
-140
120
18000
1.12
115
17000
-150
1.10
16000
-160
1.08
1.06
1.04
May 15
125
20000
-130
1.14
Aug 15
EUR/USD
Nov 15
Feb 16
110
15000
105
-170
14000
-180
13000
100
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
May 16
Nikkei 225
Negative deposit rates
Bund-UST 10Y spread (rhs, bps)
Sources: IMF, Mizuho Bank Singapore Treasury
Jan 16
ISM non-manufacturing
Sources: Reuters, Mizuho Bank Singapore Treasury
EUR/USD looks extended relative to Bund-UST spread
1.18
Jul 12
USD/JPY (rhs)
Surprise QQE II
Sources: Reuters, Mizuho Bank Singapore Treasury
•
While April’s FOMC policy statement did not signal if a hike is under consideration for
June, it removed a phrase citing risks related to “global economic and financial
developments”, which reflects improved global financial conditions since March.
•
The USD has also been broadly softer given quite soft US data reads, with Q1 GDP
growth slipping to 0.5% saar, weighed by slower business investment and exports.
•
Still, we think the economy should regain traction into Q2 given the broad easing of
financial and credit conditions, but elevated uncertainty could keep the Fed on the side of
caution and result in increased two-way volatility for the USD.
•
Meanwhile, the ECB looks to be on hold for a period of time while assessing the
impact of the aggressive easing measures already announced in March.
•
EUR/USD has actually benefitted from a perceived narrowing of policy divergence
with the US, which had led to a reduction of spec shorts to a 9-week low.
•
We expect EUR volatility to increase as we head into key event risks related to the
take-up of TLTRO II and Brexit referendum slated for June.
•
BoJ surprised markets by leaving policy unchanged in its April meeting even as it
pushed out the expected timeframe to reach its 2% inflation target to FY17, and cut its
growth forecast for FY2016 to 1.2% (from 1.5%).
•
Markets were positioned wrongly into the meeting, as media reports have stated that
BoJ was considering negative rates for lending to banks, and this led to a sharp sell-off
in USD/JPY and the Nikkei on disappointment of no easing.
•
With a widening disconnect between markets’ and BoJ’s assessement of the
Japanese economy, we think USD/JPY could remain quite volatile as prospects of
additional stimulus hang in the balance.
-2-
AXJ: Hi-Jack
16
After a dismal start, equity inflows for EM Asia have turned more
constriuctive on China back-stop, Fed hike deferment & Oil
(4wkma, US$ bn)
25
25
20
15
15
10
10
5
5
0
0
(5)
(5)
(10)
(10)
(15)
(25)
06
07
08
(25)
09
10
11
12
13
14
15
16
With the Key Exports Growth Engine Collapsing since
2012, most of EM Asia is stuck in Sub-par Growth
40
4
0
0
(4)
(8)
Jan-16
40
30
30
20
20
10
10
8
4
(20)
Sources: Bloomberg, Mizuho Bank
05
12
BoJ disappointment on 28th
April sent USD/JPY slumping
from mid-111 to 107
8
(15)
TIIP*
TIIP*: Thailand, India,
Total
Indonesia, Philippines
Korea & Taiwan
(20)
(cumulative % Chg since end-2015)
12
20
16
USD weakness accentuates AXJ performance; with
higher-beta/commodity FX (IDR, MYR & AUD) leading
Feb-16
AUD
AXJ
JPY
USD index
Mar-16
(4)
INR
IDR
MYR
(8)
Apr-16
May-16
Sources: Bloomberg, Mizuho Bank
Emerging Asia - Private Non-financial Sector
Debt to GDP (%)
250
200
150
0
50
0
(10)
Japan
China
Others
US
EU
Chinese Exports
100
0
(10)
Total ex-China
(20)
02
03
04
05
(20)
06
07
08
KR
MY
2015
Sources: CEIC, Mizuho Bank.
01
CN
09
10
11
12
13
14
TH
2005
IN
ID
Sources: BIS, Mizuho Bank
15
•
AXJ1 rallies extended as a corollary of USD capitulation opportunistically evolving to
improved risk sentiments; capital flight from early-2016 reversed back as inflows.
•
This compression in risk premium and USD/AXJ is however unsettling given that
conditions have deteriorated rather than picked up in Q1 – exports remain weak, if not
in outright contraction and growth sub-par.
•
Hence it is negligent to ignore risks of AXJ/EM Asia asset boost being hijacked by a
risk event such as Fed rate hikes re-appearing in the horizon or soft spots in China.
•
Upshot: Say “Hi” to a “Jack-in-the-Box” spring-back in USD/AXJ and risk premium.
•
To be sure, this will mostly be broad-based USD adjustment, but the danger that
follows is that consequent capital outflows may prove destabilizing for asset markets.
•
But we think only fleetingly so as demand boost from China’s stimulus and
stabilizing commodity/oil prices reinforce a positive loop and lift markets. And as disinflation fades as a corollary, re-narrowing G3 policy divergence will tame USD.
•
In turn, this will boost Asian currencies more durably heading into mid-2017. The
China cog may benefit KRW, AUD, MYR and IDR most; alongside SGD. INR even as it
rises, may under-perform AXJ peers if oil prices stabilize higher durably.
•
For now, that the SGD has rallied despite the MAS unexpectedly revoking appreciation
bias for S$NEER policy is most telling of the perverse – as is the smile that “Jack” wears
– nature of the current brand and drivers of AXJ rally.
1
AXJ: Asia ex-Japan Currencies
-3-
CNY: Slip, Not Slide
Recent bout of USD weakness has exaggerated AXJ/EM
strength. In this context, PBoC allowing some CNY NEER
slippage is not unreasonable.
106
But equally, this is not a slide in CNY NEER with; consistent
with some 3% cumulative appreciation since 2010.
110
106
110
(Index end-2014=100)
(Index end-2014=100)
104
104
CNY NEER
105
102
102
2% appreciation p.a. (start-2010)
CNH NEER
100
100
105
One-off devaluation ==> measured
"catch-down" for trade-weighted CNY.
Consistent with broader stability at
reasonable valuation.
4% appreciation p.a. (start-2010)
100
100
CNY NEER
98
98
2% appreciation p.a. (start-2010)
95
96
One-off devaluation ==> measured
"catch-down" for trade-weighted
CNY. Consistent with broader
stability at reasonable valuation.
94
94
92
92
90
90
95
4% appreciation p.a. (start-2010)
96
3% appreciation p.a.
CNH NEER
90
90
85
85
Sources: CFETS (PBoC), Bloomberg, Mizuho Bank
88
Jan-14
88
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
CNY bounce-back on USD weakness has been more subdued vis-avis other Asia FX; but closing CNY-CNH gap is critical
6.70
6.60
6.50
Sources: CFETS (PBoC), Bloomberg, Mizuho Bank
80
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
China property sales picking up will help revive investments
back-stopping wider growth and stabilizing commodities
6.70 75
80
40
6.60
11-Aug: 1.9% reference devaluation
followed by a few sessions of selfreinforcing sell-off as fixing shifted
to market-based mechanism. CNY
sell-off quelled by PBoC
intervention/clarification.
Stronger
CNY
6.40
50
30
6.50
6.40 25
6.30
20
6.30
0
6.20
6.20
USD/CNY
Upper Band
6.10
6.10
Lower Band
USD CNY Fix
6.00
Floor Space Sold (LHS, YoY)
FAI Real Estate YTD (RHS, YoY)
6.00
USD/CNH
5.90
Jan-13
Sources: Reuters, Mizuho Bank
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
10
Land Purchased (LHS, YoY)
(25)
(50)
5.90
Jan-16
Real Estate Inv. (RHS; YoY)
0
Sources: CEIC, Mizuho Bank
08
09
10
11
12
13
14
15
16
•
Trade-weighted (NEER) under-performance of CNY may be due to overdone USD
pullback exaggerating AXJ/EM jump; in effect dampening CNY volatility.
•
Admittedly, CFETS2 NEER has slipped below 100 –ballpark around which the PBoC
deems CNY to be fairly valued. But this is a temporary slip, not a slide.
•
Fact is, the 100-handle for CNY NEER is not some line in the sand; especially in the
context of excessive USD-driven volatility, where USD/CNY stability is preferable.
•
And the bigger picture is that CNY remains consistent with some 3% sustained
appreciation since 2010 on a trade-weighted basis. What’s more, reined in CNY-CNH
gap reflects stable CNY expectations and conforms to SDR inclusion conditions.
•
Looking through this period of FX market volatility, USD/CNY is poised to ease back
to 6.30; perhaps below by mid-2017. This, as monetary and fiscal stimulus kicking in
shores up growth; and encouraging signs are already emerging in the property market.
•
But near-term, if JPY bears emerge on fresh BoJ stimulus in coming months while
USD picks up on Fed hike prospects, USD/CNY could surge through 6.50-6.55.
•
This bout of CNY slip should however be fleeting as CNY stability – helping to allay
capital outflows – overlaid with USD upside tapering off as global monetary policy
divergence fades.
2
China Foreign Exchange Trading System (CFETS) under the PBoC
-4-
INR: Pedestrian
Bottoming in Oil price suggest some de-compression in Oil imports with
a 2-3 mth lag; prices suggest further reduction Oil imports (3mma US$bn)
16
14
RBI has built up FX reserves; much stronger position
than during "taper tantrum" (USD bn)
140
120
FX Reserves (LHS)
Others (LHS)
400
12
100
10
80
8
60
Oil Imports
6
Oil Prices (advanced 3 months U$/bbl; RHS)
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
20
Jul-16
Jan-16
And this suggests that trade deficit reduction is stretched, with some
reversal in the works; nudging Q2 C/A deficit higher (3mma US$bn)
(20)
(18)
140
120
(16)
80
(12)
(10)
60
(8)
Trade Bal
(6)
Oil Prices (advanced 3 months U$/bbl; RHS)
Jul-12
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
20
Jul-16
Jan-16
12
250
10
200
8
150
6
100
4
50
2
50
Passenger Vehicles Sales
Industrial Production
Infrastructure Industries
Steel
40
30
10
10
0
0
08
09
10
11
12
13
14
15
External Debt as (% of FX Reserves) show reduction in short-term and non-NRI
external liabilities.
160
100
60
60
Total ex-NRI
20
0
09
10
11
16
10
The Capital Account (Surplus) to C/A (deficit) remains
positive for the INR - capital inflows comfortably finance
the C/A gap - but boost could fade if C/A deficit rewidens on firmer Oil. Regardsless though, INR is far
less vulnerable now compared to 2013 "taper tantrums".
8
6
4
4
12
13
14
15
C/A Deficit (% of GDP)
2
2
Capital Inflows (% of GDP)
Sources: Bloomberg, CEIC, Mizuho Bank
0
0
08
15
6
Sources: CEIC; Mizuho Bank
07
14
(4Qma, % of GDP)
8
40
20
06
13
If C/A Deficit re-widens the "cushion" for BOP from Capital
Account may fade, tempering INR gains
10
Short-Term
40
05
12
120
80
Total
11
140
80
NRI
10
16
NRI external debt refers to financial assets held by nonresident Indians. As this isoften less flighty stripping this
large component out gives a better sense of the external
debt risks from capital flight and INR weakness.
ECB
09
(10)
Sources: CEIC, Mizuho Bank
07
08
30
20
06
07
40
20
(10)
0
06
Sources: CEIC, Mizuho Bank
60
50
100
300
0
Jan-13
India: Infrastrcuture activity appears to have bottomed, but steel
industries drag amid global pressures. (3mma % YoY)
60
120
14
40
Sources: CEIC; Mizuho Bank
(4)
Jan-12
140
350
100
(14)
160
16
40
Sources: CEIC; Mizuho Bank
4
Gold (LHS)
Imports cover (RHS, ratio)
0
06
07
08
09
10
11
12
13
14
15
16
16
•
From out-performing AXJ sometime back, the INR is now likely to show more
pedestrian performance as oil prices stabilizing higher erodes INR advantages.
•
In particular, sustained (albeit gradual) pick up in Oil since late-Jan bumping up cost of
oil imports will likely widen trade and C/A deficit into Q2 – decisive INR dampener.
•
To be sure, accumulation of FX reserves and reined in C/A deficit – complemented by
capital flows funding the gap very comfortably – INR tail risks are vastly diminished
compared to the sell-off during the “taper tantrums” in 2013.
•
Admittedly, soft spots in industrial production as global steel and other industrial
overcapacity cast a pall on INR. What’s more, the banking sector’s NPL overhang will
probably chip away at potential growth and thus INR out-performance.
•
Nonetheless, the big picture is that INR footing is undeniably enhanced from 2013
“taper tantrums” with reduced external (debt) vulnerabilities. And despite reform
setbacks from loss of political capital in state elections, prospects are not all dire.
•
Upshot: INR will be defined by loss of propensity for out-performance rather than
being rendered abysmal (when it was a “fragile five”) as erosion (rather than reversal) of
capital account buffer and less favourable shifts in C/A weigh; basically pedestrian.
•
Near-term, USD/INR may be squeezed to 70 if higher oil coincides with USD
rebound; but scope for INR to ease back below 63 into mid-2017 remains as AXJ
recovery further out is tracked with the RBI overseeing trade-weighted stability.
-5-
SGD: Unfazed
MAS: Surprise revocation of appreciation bias (0% policy slope); no change to policy band
mid-point or width. Weaker than envisaged global demand/growth & more subdued inflation.
110
(Apr 08) Band: Re-centre mid-pt
(higher) to prevailing NEER.
106
(Apr 12) Crawl: "Slightly"
steepen slope.
(Apr 10) Band: Re-centre mid-pt (higher) to Band: Restore narrower
prevailing NEER level.
bands
Crawl: Re-instate "modest & gradual"
(Jan 15) Crawl:
Reduce slope.
102
(Oct 08) Crawl: Flatten SGD
NEER appreciation to 0%.
98
(Oct 12, Apr 13, Oct
13, Apr 14 & Oct 14)
Status Quo
(Oct 15) Crawl:
"Slightly" reduce
slope
94
(Apr 15) Crawl:
Remove
appreciation bias
(0% appreciation
slope)
(Oct 11) Crawl: "Slightly"
ease NEER slope.
90
(Apr 11) Band: Re-centre mid-pt (higher)
BUT below the prevailing NEER.
(Oct 10) Band: Widen band.
Crawl: Slightly steepen the slope
(appreciation bias).
(Apr 09) Band: Re-centre mid-pt
(lower) to prevailing NEER.
86
NEER
Mid-Point
Sources: MAS, Bloomberg, CEIC , Mizuho Bank.
82
08
09
10
11
12
Despite removing appreciation bias, S$NEER is trading at firm side
of the policy band getting ahead of inflation.
13
1.30
8
400
6
300
4
200
2
100
0
0
S$NEER tends to trade at the stronger side of the policy
mid-point (+ve deviation) corresponding to inflation unless
there are negative shocks to growth. So softer than expected
inflation could coincide with sub-mid-point S$NEER.
(4)
(6)
(8)
05
06
CPI (% YoY; LHS)
SGD NEER Mid-pt Deviation (bps, smoothed weekly, RHS)
07
08
09
10
11
12
13
14
15
16
USD/SGD, inverted; +/-2% bands)
1.30
1.32
1.32
1.34
1.34
1.36
1.36
1.38
1.38
(100) 1.40
(2)
14
Unexpected revocation of S$NEER appreciation bias only
triggered transient SGD slip; USD & Oil induce volatility.
1.40
Stronger
SGD
(200) 1.42
1.42
SGD (Actual)
SGD (Mid Pt)
(300) 1.44
1.44
Sources: Bloomberg, CEIC, Mizuho Bank
15
16
Sources: Bloomberg, Mizuho Bank
(400) 1.46
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
1.46
May-16
•
SGD bulls are unfazed by surprise revocation of S$NEER policy appreciation bias
(“crawl”) in the midst of USD capitulation, firmer oil and fairly upbeat risk sentiments.
•
To be sure, this is not purely attributable to USD slippage, which mainly manifests as
parallel shift down in the policy bands whereas S$NEER has jumped to the stronger
side of the policy bands.
•
At first glance it S$NEER “out-performance” appears counter-intuitive given
downside skew in inflation, as per the MAS’ lower for longer, benign inflation outlook.
•
But equally, remaining at the firmer side of the policy bands at zero appreciation bias
will come at a lower policy cost. To be precise, MAS’ comfort with S$NEER levels
and firmer than expected oil square with S$NEER buoyancy.
•
Specifically, firmer oil works into both pipeline inflation as well as MYR outperformance – which has a large weight on S$NEER weights – fuelling SGD upside.
•
Above all, SGD is fairly unfazed as the revoked S$NEER crawl was exceptionally
gradual (~1% per annum) after two slope reductions last year, whereas our estimate of
current S$NEER around 50bp above the mid-point leaves ~1.5% headroom.
•
But that said, risk of overarching “parallel” S$NEER policy band shift from USD
rebound on hardening Fed rate hike expectations is significant. In which case, upside
in USD/SGD could shift up to 1.40 or slightly higher into mid/Q3 2016.
•
But with inflation turning positive into 2017 and CNY traction (alongside softer USD),
USD/SGD should target 1.32-1.33 by mid-2017; unfazed by a bumpy ride.
-6-
MYR: Heightened risks on exports, 1MDB
Export contraction worsened in Q1 amidst slack demand
Persistent inflation reduces scope for policy support
Malaysia - Trade Developments
Malaysia - Headline CPI (y/y)
% 3m/3m saar
USD bn
30
20
4.0
3.5
20
10
0
10
3.0
0
2.5
-10
-10
2.0
-20
-20
-30
-40
-30
1.5
-40
1.0
-50
0.5
-60
0.0
Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16
Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16
Trade Bal (rhs, USDbn, 3m saar)
Imports 3m/3m saar
Exports 3m/3m saar
Headline CPI y/y 3mma
Sources: CEIC, Mizuho Bank Singapore Treasury
Sources: CEIC, Mizuho Bank Singapore Treasury
Broad-based export slippage across all destinations
Bond sentiment potentially at risk over 1MDB default
Malaysia - Exports by Destinations (y/y, 3mma)
USD/MYR and MY-US 10Y yield spread
10
4.60
5
4.40
0
4.20
-5
4.00
-10
3.80
-15
3.60
-20
3.40
Jan 15
Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16
CN/HK
SEA
US
EU
JP
Others
Sources: Reuters, Mizuho Bank Singapore Treasury
GST-adjusted Core CPI y/y 3mma
Exports y/y 3mma
240
230
220
210
200
190
180
170
160
150
Apr 15
Jul 15
USD/MYR
Oct 15
Jan 16
Apr 16
MY-US 10Y spread
Sources: CEIC, Mizuho Bank Singapore Treasury
•
We think the MYR rally could be at risk of unwind in Q2 on the lack of external
demand drivers as well as 1MDB concerns.
•
Hopes of a more sustained export recovery given cheaper MYR valuations have
proved fleeting, with exports contracting again at a faster pace in Q1 this year.
•
While a significant proportion of the decline is due to lower export prices, real volumes
have also not picked up substantially, reflecting the dismal state of external demand
for Malaysian exports. Export weakness has been broad-based across all destinations too.
•
With the Malaysian economy being highly dependent on exports, we think economic
conditions have little prospects of improving in the near term and thus BNM should
maintain an accommodative monetary policy stance even after the change in Governor.
•
However, still strong underlying inflation suggest that rate cuts to support growth are not
likely to come through in the near-term, but further adjustment in the statutory reserve
requirement could be possible as credit growth has slowed significantly.
•
While 1MDB’s selective default of its sukuk bond appears to relate to contractural
disputes rather than financial strength, we believe that recently buoyant MGS bond
sentiment could see a setback and trigger renewed MYR weakness.
•
As such, we think USD/MYR could risk a test towards the 4.05 level in June,
especially if markets start positioning for a Fed rate hike in June or July.
-7-
IDR: Supported on China/commodities relief
Non-oil exports showing signs of stabilization
Sustained commodity recovery could underpin IDR
Indonesia - Commodity Prices (USD)
Indonesia - Non-Oil and Gas Trade
60
30
40
20
20
10
0
0
-20
-10
-40
-20
150
1200
1100
130
1000
110
900
90
800
700
70
600
50
-60
500
-30
30
400
Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15 Oct 15 Apr 16
Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16
Non-O&G Trade Balance (rhs, USD bn 3m saar)
Non-O&G Exports (3m/3m saar)
Non-O&G Imports (3m/3m saar)
Indonesian Coal HBA
Tapis Oil
Crude Palm Oil (rhs)
Sources: CEIC, Mizuho Bank Singapore Treasury
Sources: CEIC, Mizuho Bank Singapore Treasury
Price declines remain main drag for exports
Improving liquidity eases JIBOR rates
Exports y/y - Price vs Volume Effects
10.00
20
15
IDR JIBOR 1Y vs BI reference rate
9.00
10
5
8.00
0
-5
7.00
-10
6.00
-15
-20
5.00
-25
-30
Jan 14
Apr 14
Jul 14
Oct 14
Export Volume Index y/y 3mma
Jan 15
Apr 15
Jul 15
Oct 15
4.00
Jan 10
Jan 16
Export Price Index y/y 3mma
Sources: Reuters, Mizuho Bank Singapore Treasury
Jan 11
Jan 12
Jan 13
Jan 14
BI 1Y Reference Rate
Export Value Index y/y 3mma
Jan 15
Jan 16
1Y JIBOR
Sources: CEIC, Mizuho Bank Singapore Treasury
•
IDR has been supported by a recovery in sentiment towards commodity and
emerging markets, but further upside looks capped with BI still biased towards taking
advantage of a stabilization of capital flows by cutting rates to support growth.
•
There has also been a tentative recovery in non-energy exports in Q1. On a volume
basis, exports have began to grow on a steady basis, suggesting that the weakened IDR
could be cushioning the sharp decline in commodity export prices.
•
On a forward looking basis, the rebound seen in coal, oil and palm oil prices of late
bodes well for both the growth and export outlook, helping to relieve tensions in the
commodity sectors and could spur further equity market inflows into Indonesia.
•
China-related fears have also subsided since February, with iron ore and steel prices
rising sharply on anticipation of a large Chinese stimulus. Continued recovey in the
Chinese steel industry could help lift Indonesian coal exports going into 2H 2016.
•
Meanwhile, BI announced that it is shifting its policy rate from the BI reference rate
to the 7D reverse repo rate comes August as a means to improve policy transmission.
•
The impact should be neutral, although there is scope for longer-term money market
rates to ease. In any case, a resumption of inflows have helped to ease liquidity
conditions and JIBOR rates, although there is still a large spread above the policy rate.
•
Given the need to ease liquidity and another potential rate cut, IDR upside still look
a tad limited despite the commodity lift and we think USD/IDR could still be
supported towards 13600 by June.
-8-
THB: Demand weighed by political risks
Lacklustre production amidst dour demand
Consumer confidence still weighed by political uncertainty
Thailand - Consumer Confidence Index
Thailand - Value-added Production (y/y, 3mma)
2.0
85
83
81
79
0.0
-2.0
77
75
73
71
69
67
65
-4.0
-6.0
-8.0
Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16
Food/Beverage
Mineral Products
VA Production (y/y 3mma)
Vehicles
Others
Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16
Consumer Confidence Index
Sources: CEIC, Mizuho Bank Singapore Treasury
Interim export recovery could unwind into Q2
%, 6m/6m saar
Equity inflows have supported THB recovery
Thailand - SET Index vs USD/THB
Thailand - Real Exports vs THB
6
29.0
4
30.0
2
31.0
1700
1650
1600
1550
1500
1450
1400
1350
1300
1250
1200
Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16
32.0
0
33.0
-2
34.0
-4
35.0
-6
36.0
-8
37.0
-10
38.0
Apr 14
Jul 14
Oct 14
Jan 15
Real Exports (6m/6m saar)
Apr 15
Jul 15
Oct 15
Jan 16
Apr 16
USD/THB (rhs, inv, month avg)
Sources: CEIC, Mizuho Bank Singapore Treasury
3Y avg
Sources: CEIC, Mizuho Bank Singapore Treasury
SET Index
30
31
32
33
34
35
36
37
USD/THB (rhs, inverted)
Sources: CEIC, Mizuho Bank Singapore Treasury
•
The Thai economy continues to be mired in soft domestic and external demand.
While growth momentum has improved in recent months on a pick-up in exports and
fiscal stimulus, this reflects more of a stabilization rather than a return to buoyancy.
•
In particular, industrial production growth has slipped again at the start of the year.
Vehicle production has been a drag as consumers held back on discretionary spending
amidst high household debt and an uncertain outlook.
•
Consumer confidence is also hampered by elevated political risks. While a draft
constitution has been released for a referendum vote in August, political opposition
against the entrenchment of military influence suggests that passage could be complicated.
•
While exports rebounded significantly in Q1, much of the increase is driven by one-off
gains in gold and military exports, and thus the underlying export profile remains soft.
•
On the positive side, services activity growth has been strong. Tourist arrivals continue
to pick up steadily while hotel vacancy rates are near historical peak levels.
•
Given continued negativity in both domestic and external demand, BoT has cut its 2016
growth forecast to 3.1% last month. However, officials maintain that rates should be
kept steady on concerns of record-high household debt (at 71% of GDP).
•
Despite a challenging outlook, portfolio inflows have rebounded as fears of Fed rate
hikes were assuaged, lifting the THB to a 9-month high against the USD.
•
We expect subdued export growth, political tensions and further US rate
normalization to weigh on the THB, targeting 35.9 for USD/THB by June.
-9-
PHP: Presidential election risks looms large
PHP slipped after polls showed Duterte as front-runner
Rebound in remittances should support consumption
Philippines - Remittances Growth (y/y 3mma)
USD/PHP vs PSE Index
8500
8000
42.00
16
43.00
12
8
44.00
4
7500
45.00
7000
46.00
6500
0
-4
47.00
-8
48.00
-12
Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15
6000
49.00
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
PSE Index
Others
Europe
Americas
Overseas Remittances (y/y, 3mma)
USD/PHP (rhs, inv)
Sources: CEIC, Mizuho Bank Singapore Treasury
Middle East
Oceania
Asia
Sources: CEIC, Mizuho Bank Singapore Treasury
Duterte widens lead against conventional Poe, Roxas
Philippines - Presidential Candidate
Poll Results
40%
BSP to remain on hold given still soft inflation pressures
Philippines - Inflation (%)
6.0
5.0
35%
4.0
30%
25%
3.0
20%
2.0
15%
10%
1.0
5%
0%
Rodrigo Duterte
Grace Poe
Social Weather Station (18 April Survey)
Mar Roxas
Jejomar Binay
0.0
Mar 13
Sources: CEIC, Mizuho Bank Singapore Treasury
Sep 13
CPI (6m/6m saar)
Pulse Asia (16 April Survey)
Mar 14
Sep 14
Mar 15
Core CPI (6m/6m saar)
Sep 15
Mar 16
BSP Inflation Target
Sources: Reuters, Mizuho Bank Singapore Treasury
•
The Presidential elections in May look on course for an upset. Recent polls showed
that more conventional and policy-oriented candidates, Grace Poe and Mar Roxas,
have lost their lead to Rodrigo Duterte, who is considered to be a wild card.
•
While Duterte is well known for his successful reduction of crime as mayor of Davao,
the methods he advocated are controversial and could potentially cast a pall on
confidence if implemented nationally.
•
Furthermore, it is far from clear what his policy platform is, with his populist rhetoric
largely based on clamping down crime and corruption. Even as Duterte has promised a
continuation of policies that “ worked” and completion of infrastructure projects, risks of
a stall in reform momentum are perhaps higher than if a more technocratic candidate wins.
•
USD/PHP rose sharply to hit our Q2 target of 47.0 after poll results were published,
suggesting a degree of jitteriness at the unexpected turn in political developments. We
expect PHP volatility to remain elevated heading into the 9 May Presidential election.
•
From the medium term perspective, an upturn of remittances since Q4 is likely to
support consumption growth and allow BSP to anchor monetary policy despite
external headwinds.
•
Thus, we think USD/PHP can revert lower post-elections as robust growth and
diminished political uncertainty encourage a return of inflows. We maintain our end
2016 USD/PHP target at 45.7.
- 10 -
VND: Contiguous Policy; but Distinct Paradigm Shift
Incremental adjustments in reference rate mitigates risk of abrupt 1-2% devaluation, consequently
reducing VND "risk premium"; but two-way volatility remains
23,000
Weaker VND
22,500
VND (Monthly Avg)
23,000
SBV Reference Rate
22,500
12 Aug 2015: USD/VND trading bands doubled to +/-2% from +/-1%
19 Aug 2015: USD/VND trading bands widened (again!) to +/-3%.
And VND mid-point devlaued 1% to 21,890.
22,000
22,000
Annual devaluation of 1% each
in Jun 2013 and Jun 2014.
21,500
21,500
21,000
21,000
Three episodes of 1% devluation each in 2015:
1) Jan (7th) from 21,246 to 21,458; 2) May (7th) to 21,673; 3) Aug (19) to 21,890
Sources: CEIC, Reuters Mizuho Bank
20,500
Jan 13
20,500
Jul 13
Jan 14
Jul 14
FX Reserves plunge depsite net trade surplus reveals USD
funding issues; could have abated after FX regime shift!
3000
3000
(US$ mn, 3mma)
2000
Jan 15
Jul 15
25
20
2000
1000
Food
Transport
CPI (% y/y)
1000
20
0
0
(1000)
Housing
Others
Non-food CPI (% y/y)
15
(1000)
(2000)
FX Reserves Chg
(3000)
(2000) 15
Trade Bal
06
07
08
09
10
11
12
13
14
15
10
(3000)
Sources: CEIC, Mizuho Bank
05
16
Modest uptick in Net Trade is a relief; but may not negate VND pressures
if USD regains ground against EUR, JPY, CNY & other Asia FX ($bn; Qtrly)
6
Jan 16
When Oil Dis-inflation fades and food price pressures
emerge, policy space diminishes (Inflation Contribution; %-pts)
6
4
4
2
2
0
0
(2)
10
5
5
(2)
(4)
(4)
(6)
(8)
(10)
(8)
(10)
Sources: CEIC, Mizuho Bank.
06
07
08
09
10
11
12
13
14
15
0
0
(6)
C/A (LHS)
Net Exports (3m Rolling RHS)
16
Sources: CEIC, Mizuho Bank .
(5)
(5)
10
11
12
13
14
15
16
•
Adoption of contiguous, market-based3 VND policy is a distinct paradigm shift. This
is perhaps an underappreciated point in the context of hard-wired expectations for annual
bouts of VND devaluation that is now defunct.
•
Fact is, previously, VND rigidity – from a fixed reference rate and intra-band flexibility
undermined by VND stuck at the weaker half – created pent-up pressures for “sticky”
self-perpetuating devaluations.
•
In contrast, trade-weighted, market-driven daily VND reference rate allows
incremental and timely adjustments that boost transparency and diminish
uncertainty – critical pre-condition to instil investor confidence in VND.
•
And this is a game-changer insofar that diminished risks of (irreversible) devaluation
gradually motivates exporters and investors to scale back on precautionary USD
hoarding and convert to VND, helping address chronic onshore USD shortfall.
•
What’s more, net exports feeding into C/A surplus, help fundamental pressures on VND
abate – broadly supportive of stable trade-weighted exchange rates. This further
bolsters macro stability by buffering against (imported) inflation, seen rising in 2017.
•
For now though, the main point is that VND flexibility means that broad-based USD
trends, with a skew to USD/CNY leads will probably be reflected in the USD/VND.
•
Thus, VND is set to dip into and around mid-2016 as amid hardening expectations of
Q3 hike by the Fed before late-2016 and 2017 rebound as CNY firms. Volatility for
VND will be lower than most Asia FX due to trade-weighted guidance.
3
The SBV has indicated that the “market based” reference rate will be based against eight currencies – USD, EUR, CNY, JPY, TWD, KRW,
THB and SGD – which account for 70-80% of Vietnam’s exports/imports.
- 11 -
AUD: Not Clear-Cut
6
Fuel and Food dis-inflation exaggerate inflation pullback; though
compression of services inflation gives RBA a wider berth
6
5
(%-pt contribution, YoY)
5
4
4
3
3
2
2
1
1
0
0
Bottoming in Commodities is encouraging; but specualtion distorts
durability; Broadening China stabilization awaited further out.
20
20
(Cum.% Chg from end-2012)
0
(1)
(2)
05
200
180
160
140
120
100
80
60
40
20
Jan-10
10000
Automotive Fuel
Total Housing ex-energy
Services
Food
CPI
06
07
08
09
H/H Energy
Tpt-ex Fuel
Alcohol & Tobacco
Inflation ex-Fuel & Energy
10
11
12
13
(1)
(2)
14
15
16
1.20
Gold
(80)
Sources: Bloomberg, Mizuho Bank
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16
Terms of Trade (Index, RHS) driven mainly by Commodity Prices have
dented expectations of mining investments (A$bn, 4Qma; LHS)
140
Sources: Bloomberg, Mizuho Bank
130
120
1.00
110
80
100
0.60
Jan-14
Jan-15
90
40
Mining
70
Sources: CEIC, Mizuho Bank
0
60
06
1.2
80
Terms of Trade
20
Jan-16
Especially in the context of less buoyant Ore prices. Thus downside
risks to 0.70 remain distinctive.
(80)
100
0.80
9000
07
08
09
10
11
12
13
14
15
16
50
Actual Private Sector Capex - Mining investments tumbles to mid-2011
levels, Other Non-Mfg Capex Softens Too (A$bn)
50
40
Mining
40
Manufacturing
Others
1.1
30
30
20
8000
1.0
7000
0.9
20
0.8
10
6000
Brent
120
0.70
Jan-13
(60)
Copper
60
AUD
Jan-12
(40)
Iron Ore
1.10
0.90
Jan-11
(20)
(40)
(60)
AUD traction is perhaps justifiably founded on bottoming iron ore
prices; but may be getting a little ahead ....
Iron Ore
0
(20)
Copper
AUD
5000
0.7
Sources: Bloomberg, Mizuho Bank
4000
Jan-10
Jan-11
Jan-12
0.6
Jan-13
Jan-14
Jan-15
10
0
0
06
07
08
09
10
11
12
13
14
15
Sources: CEIC, Mizuho Bank
Jan-16
•
AUD bulls stumbled to 0.76 from near-0.78 as unexpectedly soft Q1 inflation
brutally upped rate cut bets. But the case for easing is not clear-cut; on two counts.
•
First, Q1 CPI slip overstates underlying dis-inflation trends. Fact is, transient food and
fuel inflation exaggerate generalized dis-inflation. Nonetheless, deceleration in services
inflation provides the RBA with a much wider berth to ease for now.
•
Second, and crucially, even if the RBA were to respond to inflation tumble, doves are
on a short leash. In other words, the RBA has a pretty narrow window in which it can
ease comfortably; no later than Q3, we suspect.
•
Point being, as commodity (oil and ore) prices bottom more emphatically and
durably – beyond short-burst speculative bets in iron ore – later in 2016, scope for RBA
easing diminishes; both from energy inflation dynamics and terms of trade angle.
•
The upshot is that the profile of monetary policy options/flexibility resonates with our
view of near-term (3-6 month) downside risks potentially testing 0.70-handle; but
beyond that rebounding towards 0.80 into 2017.
•
Meanwhile, volatility may be the name of the game as clear-cut directional cues elude.
•
Critically, AUD ostensibly having gotten ahead of dramatic (but speculative) iron ore
price run-up alongside copper under-performance means near-term two-way swings
with a downside skew; more so if China tightens the screws on speculation.
•
Upshot: Despite recent correction, near-term downside risks to AUD linger; in line
with our less than “ore-some” AUD views last month. But a supportive Budget passing
election risks, some China tailwinds will boost AUD more durably into 2017.
- 12 -
KRW: Diminished growth to weigh
Export volume contraction for first time since 2009
But domestic construction has turned more robust
Korea - Export Volume and Price Growth
Korea - Construction Activity (y/y 6mma)
10
50
5
40
0
30
-5
20
-10
10
0
-15
-10
-20
-20
Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
13 13 13 13 14 14 14 14 15 15 15 15 16
Volume
Price
Jan 13
Exports 2q/2q saar
Sources: CEIC, Mizuho Bank Singapore Treasury
Jul 13
Jan 14
Bldg Permits Vol y/y 6mma
Jul 14
Jan 15
Jul 15
Jan 16
Construction Started Vol y/y 6mma
Sources: CEIC, Mizuho Bank Singapore Treasury
Domestic demand growth has eased somewhat
Sharp external demand slippage from China and Asia
Korea - Exports by Country (q/q saar)
Korea - GDP 2q/2q saar
20
6
10
4
0
2
-10
0
-20
-2
-30
-4
Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
13 13 13 13 14 14 14 14 15 15 15 15 16
China
Japan
USA
Asia ex-China/Japan
Europe
Others
Exports (q/q saar)
Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16
Consumption
Govt
Investment
Stocks
Net Exports
GDP 2q/2q saar
Sources: CEIC, Mizuho Bank Singapore Treasury
Sources: CEIC, Mizuho Bank Singapore Treasury
•
Korea’s Q1 growth momentum slipped on the back of a slowdown in investment and
drag from net exports. Domestic consumption, hower, remained fairly robust.
•
With real exports contracting for the first time on a 2q/2q sequential basis since 2009,
headwinds from external demand have clearly not abated.
•
Furthermore, weakness was reported across almost all destinations. A modest rebound
in exports to the US was not able to offset the large drag from a contraction of
exports to China and Asia.
•
Furthermore, Korean shipbuilders and offshore marine builders are also facing
structural demand headwinds as global trade appears to have plateaued, while offshore
oil has become quite uncompetitive relative to shale.
•
Despite the weak Q1 GDP and external outlook, growth could stay subdued but supported
given increased construction activity and expanded fiscal stimulus.
•
Over the medium term, a bigger concern is the failure of the governing Saenuri Party
to secure a majority in the National Assembly. We think this could pose hurdles to
President Park’s efforts to enact structural reforms, particularly in the labor market.
•
With 4 out of 7 BoK board members replaced in April, we also expect the composition
of the board to have turned more dovish, which could lower resistance to a rate cut.
•
While KRW could be lifted in the interim by ongoing JPY strength due to BoJ
inaction, the still negative outlook and prospects of a rate cut could support
USD/KRW towards the 1160 mark by June.
- 13 -
FX Positioning & Flows
Figure 1. Non-commercial longs in EUR
Figure 2. Non-commercial longs in JPY
10
1.50
5
1.45
0
1.40
-5
1.35
-10
1.30
-15
1.25
-20
1.20
-25
1.15
-30
1.10
-35
1.05
90
5
95
100
0
105
-5
110
-10
115
-15
120
-20
-40
1.00
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
Non-commercial longs (USD bn)
10
125
-25
130
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
EUR/USD (rhs)
Non-commercial longs (USD bn)
USD/JPY (rhs, inverted)
Sources: CFTC, Bloomberg, Mizuho Bank Singapore Treasury
Sources: CFTC, Bloomberg, Mizuho Bank Singapore Treasury
Figure 3. Non-commercial longs in AUD
Figure 4. Non-commercial longs in USD
8
0.98
6
0.93
4
2
100
0.88
30
0.83
20
-4
95
90
85
10
0.78
-6
105
50
40
0
-2
60
80
0
-8
0.73
75
-10
-10
-12
0.68
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
-20
70
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
Non-commercial longs (USD bn)
AUD/USD (rhs)
Non-commercial longs (USD bn)
Sources: CFTC, Bloomberg, Mizuho Bank Singapore Treasury
Figure 5. India - Foreign equity inflows
Figure 6. Indonesia - Foreign equity inflows
60
56
40
58
60
20
DXY (rhs)
Sources: CFTC, Bloomberg, Mizuho Bank Singapore Treasury
62
0
20
11000
15
11500
10
12000
5
12500
0
13000
-5
13500
-10
14000
-15
14500
64
-20
66
-40
68
-60
70
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
Foreign equity inflows (20dma, ann.)
USD/INR (rhs, inverted)
Sources: SEBI, Bloomberg, Mizuho Bank Singapore Treasury
Sources: JSE, Bloomberg, Mizuho Bank Singapore Treasury
Figure 7. Thailand - Foreign equity inflows
Figure 8. Korea - Foreign equity inflows
10
30.0
5
31.0
0
-20
15000
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
Foreign equity inflows (20dma, ann.)
USD/IDR (rhs, inverted)
90
60
32.0
-10
35.0
-15
-20
1100
0
1150
-30
36.0
-60
1200
37.0
-25
38.0
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
Foreign equity inflows (20dma, ann.)
USD/THB (rhs, inverted)
Sources: SET, Bloomberg, Mizuho Bank Singapore Treasury
USD bn
34.0
1050
30
33.0
-5
1000
-90
1250
May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16
Foreign equity inflows (20dma, ann.)
USD/KRW (rhs, inverted)
Sources: Korea Exchange, Bloomberg, Mizuho Bank Singapore Treasury
- 14 -
Currency Forecast Ranges
USD Crosses
USD/JPY
EUR/JPY
JPY/CNY
JPY/INR
JPY/KRW
JPY/SGD
JPY/IDR
JPY/MYR
JPY/PHP
JPY/THB
JPY/VND
AUD/JPY
Jun 16
104 - 116
(113)
122 - 130
(124)
5.39 - 6.01
(5.70)
0.55 - 0.64
(0.61)
9.76 - 11.03
(10.39)
1.18 - 1.28
(1.23)
113 - 126
(119)
3.43 - 3.78
(3.60)
0.39 - 0.43
(0.41)
0.29 - 0.33
(0.31)
184 - 207
(195)
77 - 88
(82)
Sep 16
106 - 114
(110)
122 - 130
(125)
5.59 - 6.08
(5.84)
0.58 - 0.63
(0.60)
9.87 - 11.04
(10.45)
1.21 - 1.29
(1.25)
115 - 127
(121)
3.53 - 3.84
(3.68)
0.41 - 0.44
(0.42)
0.31 - 0.33
(0.32)
197 - 212
(205)
76 - 85
(80)
Dec 16
103 - 111
(108)
120 - 128
(124)
5.64 - 6.14
(5.89)
0.57 - 0.62
(0.60)
9.96 - 11.15
(10.56)
1.21 - 1.29
(1.25)
115 - 126
(120)
3.50 - 3.81
(3.66)
0.41 - 0.44
(0.42)
0.31 - 0.34
(0.32)
199 - 214
(206)
77 - 85
(81)
Mar 17
100 - 108
(104)
118 - 126
(121)
5.80 - 6.31
(6.06)
0.59 - 0.64
(0.61)
10.16 - 11.37
(10.77)
1.24 - 1.32
(1.28)
118 - 130
(124)
3.59 - 3.91
(3.75)
0.41 - 0.45
(0.43)
0.32 - 0.35
(0.33)
206 - 222
(214)
76 - 84
(80)
Jun 17
100 - 108
(103)
118 - 126
(121)
5.84 - 6.35
(6.10)
0.59 - 0.64
(0.60)
10.08 - 11.28
(10.68)
1.24 - 1.32
(1.28)
116 - 127
(121)
3.60 - 3.92
(3.76)
0.41 - 0.44
(0.43)
0.32 - 0.35
(0.33)
210 - 225
(217)
76 - 85
(80)
JPY Crosses
USD/JPY
EUR/JPY
JPY/CNY
JPY/INR
JPY/KRW
JPY/SGD
JPY/IDR
JPY/MYR
JPY/PHP
JPY/THB
JPY/VND
AUD/JPY
Jun 16
104 - 116
(113)
122 - 130
(124)
5.39 - 6.01
(5.70)
0.55 - 0.64
(0.61)
9.76 - 11.03
(10.39)
1.18 - 1.28
(1.23)
113 - 126
(119)
3.43 - 3.78
(3.60)
0.39 - 0.43
(0.41)
0.29 - 0.33
(0.31)
184 - 207
(195)
77 - 88
(82)
Sep 16
106 - 114
(110)
122 - 130
(125)
5.59 - 6.08
(5.84)
0.58 - 0.63
(0.60)
9.87 - 11.04
(10.45)
1.21 - 1.29
(1.25)
115 - 127
(121)
3.53 - 3.84
(3.68)
0.41 - 0.44
(0.42)
0.31 - 0.33
(0.32)
197 - 212
(205)
76 - 85
(80)
Dec 16
103 - 111
(108)
120 - 128
(124)
5.64 - 6.14
(5.89)
0.57 - 0.62
(0.60)
9.96 - 11.15
(10.56)
1.21 - 1.29
(1.25)
115 - 126
(120)
3.50 - 3.81
(3.66)
0.41 - 0.44
(0.42)
0.31 - 0.34
(0.32)
199 - 214
(206)
77 - 85
(81)
Sources： Reuters, Mizuho Bank Singapore Treasury Division forecasts
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Mar 17
100 - 108
(104)
118 - 126
(121)
5.80 - 6.31
(6.06)
0.59 - 0.64
(0.61)
10.16 - 11.37
(10.77)
1.24 - 1.32
(1.28)
118 - 130
(124)
3.59 - 3.91
(3.75)
0.41 - 0.45
(0.43)
0.32 - 0.35
(0.33)
206 - 222
(214)
76 - 84
(80)
Jun 17
100 - 108
(103)
118 - 126
(121)
5.84 - 6.35
(6.10)
0.59 - 0.64
(0.60)
10.08 - 11.28
(10.68)
1.24 - 1.32
(1.28)
116 - 127
(121)
3.60 - 3.92
(3.76)
0.41 - 0.44
(0.43)
0.32 - 0.35
(0.33)
210 - 225
(217)
76 - 85
(80)
Growth & Inflation Tables
Key Economic Forecasts
Country
United States
Eurozone
Japan
ASIA (ex-Japan)
ASEAN-6
China
India
Korea
Singapore
Malaysia
Indonesia
Thailand
Philippines
Vietnam
Australia
GDP YoY
2.4
0.9
0.0
6.0
4.5
7.2
7.0
3.3
3.3
6.0
5.0
0.7
6.1
6.0
2.6
2014
CPI
1.6
0.4
2.7
4.2
4.4
2.0
6.6
1.3
1.0
3.2
6.4
1.9
4.2
1.8
2.5
CA (% GDP)
-2.3
2.4
0.5
1.7
2.2
2.1
-1.4
6.3
17.4
4.6
-3.0
3.5
4.4
4.9
-3.0
GDP YoY
2.4
1.4
0.5
6.2
4.7
6.9
7.3
2.6
2.0
5.0
4.8
2.8
5.8
6.7
2.3
2015
CPI
0.1
0.0
0.8
2.4
3.1
1.4
4.9
0.7
-0.5
2.1
6.4
-0.9
1.4
0.6
1.5
C/A (% GDP)
-2.6
3.2
3.3
2.4
2.5
2.8
-1.1
7.0
19.7
3.0
-2.1
8.9
2.9
0.2
-4.2
GDP YoY
2.0
1.5
0.6
6.6
4.9
6.9
7.2
2.8
1.9
4.3
4.9
3.0
6.0
6.0
2.8
2016
CPI
1.2
0.3
0.4
3.1
2.6
2.4
4.7
1.3
-0.3
2.8
4.2
0.4
1.9
2.3
2.1
C/A (% GDP)
-2.8
2.9
3.5
2.2
2.2
2.8
-1.8
6.5
19.0
2.6
-2.5
5.1
3.3
-0.5
-3.5
2017
CPI
2.0
1.4
1.8
3.5
3.7
2.4
5.3
2.1
1.3
2.8
5.2
2.1
3.3
3.6
2.6
GDP YoY
2.2
1.6
0.7
6.9
5.6
6.9
7.6
3.3
2.8
5.1
5.4
4.1
5.9
7.3
3.1
C/A (% GDP)
-2.8
2.6
3.3
2.0
1.7
2.6
-2
6.6
19.5
2.7
-2.7
4.8
3.5
-1.2
-3.2
Note: Asia (ex Japan) includes China, India, South Korea, Singapore, Hong Kong, Taiwan, Malaysia, Indonesia, Thailand, Philippines, Vietnam
Central Bank Policy Outlook
Central Bank Policy Outlook
Country
Central Bank
2015
Q4
China
PBoC
4.35
India
RBI
6.75
Korea
BoK
1.50
Singapore
Malaysia
Indonesia
Thailand
Philippines
Vietnam
Australia
MAS^*
BNM
BI**
BoT
BSP
SBV
RBA
Policy Rate
2016
Q1
Q2
1-Yr Lending Rate
4.00
4.00
Repo Rate
6.75
6.50
Base rate
1.50
1.25
Revoke Appreciation
Reduced slope
S$ NEER
bias
3.25
O/N Policy Rate
3.25
3.25
7.50
Benchmark Rate
6.75
6.75
1.50
1-Day repurchase rate
1.50
1.50
4.00
Reverse repurchase rate
4.00
4.00
6.50
Refinancing Rate
6.50
6.00
2.00
O/N Cash Rate
2.00
2.00
2017
Q3
3.50
6.25
1.25
Q4
3.50
6.25
1.25
Status Quo
3.25
3.25
5.50
5.50
1.50
1.50
4.00
4.00
5.50
5.50
2.00
2.00
Q1
3.50
6.25
1.25
Q2
3.50
6.25
1.50
Status Quo
3.50
3.50
5.50
5.50
1.75
1.75
4.25
4.25
5.50
5.50
2.25
2.50
Q3
3.50
6.25
1.50
Q4
3.50
6.50
1.50
Status Quo
3.50
3.50
5.50
5.75
1.75
1.75
4.25
4.25
6.00
6.00
2.50
2.75
^ Unlike other regional central banks, the MAS conducts monetary policy via FX. Specifically it adopts a trade-weighted appreciation of the SGD at a "modest and
gradual" (estimated to be 2% per annum) pace as the default policy.
** BI will set the 7 Day repurchase rate (currently at 5.50%) as the benchmark rate in August. In the transition period, the current benchmark rate prevails.
FX Deposit and Forward-Implied Rates
As of
29 Apr 16
USD
JPY
EUR
AUD
CNH
INR
KRW
SGD
IDR
MYR
PHP
THB
Spot
107
1.14
0.77
6.48
66.5
1140
1.34
13200
3.91
46.9
34.9
Deposit
0.63
-0.22
-0.39
2.10
2.23
7.10
1.57
0.66
5.95
3.32
n/a
1.49
1M
Fwd-Implied
-0.10
-0.63
2.36
2.34
8.09
1.32
1.51
6.69
3.74
2.72
1.85
Deposit
0.81
-0.26
-0.29
2.26
2.42
7.30
1.62
0.91
6.15
3.64
n/a
1.55
3M
Fwd-Implied
-0.24
-0.40
2.39
2.55
7.89
1.44
1.42
6.97
3.55
2.82
1.73
Deposit
1.28
-0.15
-0.03
2.66
3.62
7.60
1.47
1.28
7.80
3.84
n/a
1.91
*Deposit rate is mid of bid/offer rates **Fwd-implied rates derived from FX forwards and USD deposit rates
Sources：CEIC, Bloomberg, Reuters, International Monetary Fund (IMF), Mizuho Bank Singapore Treasury Division forecasts
- 16 -
1Y
Fwd-Implied
-0.15
-0.11
2.66
3.64
7.54
1.58
1.80
8.15
3.34
3.24
2.38
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