Asia FX Update - ocbc.com outlook... · Short term FX/bond market views and commentary USD-Asia 10y...
17
Asia FX Update: Optimism from reopening of economies overplayed? 21 May 2020 Treasury Research & Strategy Global Treasury Terence Wu (+65) 6530-4367 [email protected] 1
Transcript of Asia FX Update - ocbc.com outlook... · Short term FX/bond market views and commentary USD-Asia 10y...
Asia FX Update: Optimism from reopening of economies overplayed?
21 May 2020
Treasury Research & Strategy
Global Treasury
Terence Wu
(+65) 6530-4367
1
Asian FX Key Themes
• Investors continue to react asymmetrically to positive vaccine- and reopening-related headlines (p. 6, 9). Arguably,
excessive optimism from reopening is not justified by early Chinese data (p. 3), and we remain skeptical that the rest of
Asia will see a V-shaped recovery shortly after reopening (p. 3-5, 7). Meanwhile, improvements in the portfolio flow
environment have started to stall, although there is also no signs of deepening outflows (p. 14, 15).
• Summary of research view: Until we see stronger evidence of a V-shaped recovery, we will still be looking for a higher
USD-Asia (p. 12). Nevertheless, the Asian currencies still found a number of reasons to stay resilient while staring the
negative macro spiral, ranging from still-subdued Sino-US tensions, positive risk sentiment and lack of renewed outflow
momentum (p. 10-11, 14-15). USD bulls may have bank on a significant downturn in Sino-US relations. Overall, we
expect USD-North to be reactive to gyrations in global sentiment, while USD-South moves on its own domestic tangents
(p. 12). In particular, we continue to be wary about ongoing TWD resilience (p. 13). On the USD-SGD front, we expect
the SGD NEER to ease lower ever so slightly, and for the USD-SGD downside to base off at the 1.4100 floor in the near
term (p. 16). Elsewhere, the lack of inflationary pressures should allow Asian central banks to stay on the rate cutting
path and keep liquidity flush. Thus, we expect Asian govie yields to remain on a heavy posture (p. 8).
2
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
China ↔/↑
↔/↑ The PBoC pledged “more powerful policies” to support the economy – a nice sound-bite, but without
specific details. China is essentially first-in-first-out in this virus episode, and if its reopening experience is
any guide, the subsequent recovery is still going to be slow. Sino-US tensions have also dialed up
gradually on both sides in the past two weeks. NPC meeting later this week, and we will look for further
details in terms of fiscal and monetary stimulus. Apr official and Caixin PMIs continued to show
normalization, supported by domestic demand. However, the weak export orders component is still a
concern. Apr industrial production continue to print better than expected (3.9% yoy vs mkt: 1.5% yoy) but
retail sales continue to weigh heavily (-6.0% yoy vs. mkt: -7.5% yoy). April exports rose 3.5% yoy, against
expectations of -11.0% yoy. 1Q GDP at -6.8% yoy vs. expected -6.0% yoy. Apr CPI prints continue to be
softer than expected at 3.3% yoy, while the PPI shows -3.1% yoy. Apr growth in monetary aggregates
were firmer than expected. Expect USD-CNH and USD-CNY to track USD prospects for now.
S. Korea ↔
↔/↓ A new cluster emerged as South Korea reopens its economy, and that may pause the process for now and
cast doubt on the pace of the subsequent recovery. BOK held rates unchanged in its scheduled April
meeting, saving bullets for potentially more stressed needs later. 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 ↔/↑
↔/↓ The CBC still has room to cut its policy rate, although fiscal policy is playing a larger role in supporting the
economy. FY2020 growth forecast cut to 1.3-1.8% yoy. Preliminary 1Q GDP growth at 1.54% yoy, softer
than estimated. Apr man. PMI slumped to 42.2, but still relatively supported compared to other Asian
economies. April exports printed -1.30% yoy, slipping further from the Mar numbers. Apr headline CPI at -
0.97% yoy, worse than expected. The TWD has consistently been relatively resilient, and is now
expensive on an NEER basis. Do not rule out some upside pressure for USD-TWD for now. 3
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
Singapore ↔/↑ ↓ Global macroeconomic outcomes may have been worse than initially expected, resulting in downside risks
to the current growth forecast. Correspondingly, the SGD NEER may have to adjust lower to
accommodate the larger than expected macro hit. Advanced 1Q 2020 growth saw a -2.2% contraction, do
not rule out deeper pain in 2Q. Apr NODX rose 9.7% yoy vs. mkt. expectation of -5.0% yoy, still supported
by pharma exports and a low base effect (Sino-US trade war in 1H 2019). 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. Continue to see the USD-SGD support at 1.4100.
Thailand ↓
↔/↓ BOT cut policy rates further by 25 bps, in a close 4-3 vote in the committee. 1Q GDP fell 1.8% yoy, against
expectations of a -3.9% yoy contraction. Official growth forecast downgraded to -6.0% to -5.0% yoy. Even
as the economies reopen, the tourism-reliant Thai economy may not see a strong recovery so long as
global travel does not pick up. 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. 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. Broad USD
prospects seem to be have limited traction on the USD-THB. Expect the pair to run on domestic
imperatives for now, with the BOT raising concerns over THB strength.
Malaysia ↔/↑
↔/↓ 1Q GDP turned out firmer than expected at 0.7% yoy (mkt: -1.0% yoy), supported by strong private
consumption. Nevertheless, a contraction is expected in 2Q, with private consumption likely hampered by
MCO restrictions. BNM cuts its policy rate by 50 bps in April. It appears that the BNM is putting priority on
growth at this stage. Nevertheless, calls for further cuts by the BNM may stay relatively muted in the
coming months. 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. Still expect the USD-MYR to edge northwards to the upper
half of the recent 4.3000 to 4.4000 range.
4
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
India ↔ ↓ Selected relaxation of restrictions for certain industries and offices are under way, even though the virus
count continue to rise. The latest fiscal stimulus plan came across as disappointing, as the focus was more
on medium term supply side improvements, rather than immediate demand support. 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. Apr man. PMI sunk to 27.4, from 51.8 prior. Apr exports shrank -60.3% yoy,
highlighting the extent of the supply chain disruption in the economy.
Indonesia ↔/↓
↔/↓ The BI kept rates unchanged again at 4.50% on 19 May, preferring to prioritise IDR stability. One would
have thought that with USD-IDR south of 15,000, it would have been a good opportunity to cut while not
overly jeopardizing IDR prospects. Nevertheless, the BI continue to see scope for further cuts. 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. April exports slumped 7.02% yoy, worse than
the expected -3.95% yoy. USD-IDR expected to run on its own tangent for now.
Philippines ↔/↓ NA The BSP is highlighting a pause from rate cuts after substantial easing this year, although the room to cut
is still present. Calls for fiscal support is also stepped up. 1Q 2020 GDP shrank -0.2% yoy, against
expectations of 2.9% yoy. 2Q GDP expected to take a bigger hit compared to 1Q. 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. Feb remittances grew 2.5% yoy, softer than expected.
5
COVID-19: Daily number of confirmed cases plateaued
• Total confirmed cases are north of
4.8m, with countries like Russia and
Brazil rising quickly among the
countries with most confirmed cases.
Daily increase in total number of
confirmed cases have plateaued, but
still not showing signs of decline.
• From an epidemiological standpoint,
issues like mutations and complications
make the virus containment efforts
more complicated. However, market
sentiment continue to lean positive on
the reopening of economies and
potential vaccines.
• Charts drawn from the daily COVID-19
Monitor. Please refer to the publication
for further details.
6
Exports to be challenged; Lack of inflationary pressures
• If the April export prints in South
Korea are any guide, the export
sector in Asia should turn further
south. The other major economies,
Europe and the US, remains locked in
their own economic issues, and their
import demand may not recover
quickly.
• Headline and core inflation prints
remain soft across Asia, effectively
leaving Asian central banks with
much room for rate cuts. We expect
rate cuts at Asian central banks to
persist into 3Q 2020 at least.
• Overall, we retain the view that the
threat of further growth downgrades
are material.
7
-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)
-3.0
-1.5
0.0
1.5
3.0
4.5
6.0
7.5
9.0
Jan
-01
De
c-0
1
No
v-0
2
Oct
-03
Sep
-04
Au
g-0
5
Jul-
06
Jun
-07
May
-08
Ap
r-0
9
Mar
-10
Feb
-11
Jan
-12
De
c-1
2
No
v-1
3
Oct
-14
Sep
-15
Au
g-1
6
Jul-
17
Jun
-18
May
-19
Headline Inflation
Asia (Ex-Japan & China) China
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Jan
-01
De
c-0
1
No
v-0
2
Oct
-03
Sep
-04
Au
g-0
5
Jul-
06
Jun
-07
May
-08
Ap
r-0
9
Mar
-10
Feb
-11
Jan
-12
De
c-1
2
No
v-1
3
Oct
-14
Sep
-15
Au
g-1
6
Jul-
17
Jun
-18
May
-19
%
Core Inflation
Asia (Ex-Japan & China) China
Asian 10y yields: Flush conditions keep yields depressed
• With bond supply expected to increase to finance fiscal deficits, expect the Asian central banks to step up their
involvement in the primary market, or keep liquidity flush to allow banks to absorb the bond supply. Policy rates may
also be retained at current levels or be further lowered. Overall, continue to expect yields to grind lower.
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
Ma
y-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
Ma
y-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
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
Ma
y-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
Ma
y-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
Ma
y-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
Ma
y-2
0
%TH
5.60
6.10
6.60
7.10
7.60
8.10
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
Ma
y-2
0
%IN
0.60
1.10
1.60
2.10
2.60
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
Ma
y-2
0
%SG
8
Asymmetric reactions in investor risk sentiment
• The FX Sentiment Index (FXSI)
has dipped into the Risk-Neutral
zone, the first time since late
February. At this juncture, investors
appear to react asymmetrically in
favour of positive headlines, even
sketchy ones like the Moderna
vaccine trial announcement this
week.
• Our caution have yet to pay off.
Stress points that are much more
permanent, such as the macro
challenges and Sino-US tensions,
continue to be overlooked by the
market. In the near term, this
dynamic leaves the USD bulls
with a higher wall to climb, and
favours Asian FX. How long will
the music last? -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
9
-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
Asia currencies well supported, but concerns remain
• Despite the increased warnings from central bank officials on the
upcoming risks in the economy, and the rising Sino-US tensions
since the last Update, the Asian currencies, especially the THB
and IDR, have been resilient against the USD. Investors seem
more than happy to downplay these concerns. In the near term, we
attribute this to hopes of a V-shaped recovery upon the re-
opening of the economies, and expectations that Sino-US
tensions will not explicitly spill over. Moreover, the extensive QE
operations by DM central banks may also have supported risk
sentiment more than expected.
• But how sustainable are these favourable drivers? If the
reopening of the Chinese economy is any guide, the consumption
side may take time to recover. Meanwhile, the export sector may stay
sluggish while the US and European economies remain under
pressure (see p. 7). Various Asian central bankers have also voiced
warnings against a V-shaped recovery. Meanwhile, even though
Sino-US tensions are not spilling over just yet, the direction is clear to
see. This relative calm may be challenged as we head deeper into
the US election season.
10
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
Foreign reserves in Asia have held up well
• Fundamentally, the foreign reserves have held up reasonably well through the market stresses and aggressive
outflows earlier in the year. This is in contrast to the deeper declines seen in some Asian countries during the 08/09
period. Apart from short term risk sentiment-related drivers, this is probably provides a bulwark for Asian currencies
on a structural horizon.
11
SK
TW
IN
PH
TH
ID
MY
CN
-8.0
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
-4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0
Sp
ot
FX
3M
%
Foreign reserves: 3M % chng
-14.0
-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
Apr-
11
Oct-
11
Apr-
12
Oct-
12
Apr-
13
Oct-
13
Apr-
14
Oct-
14
Apr-
15
Oct-
15
Apr-
16
Oct-
16
Apr-
17
Oct-
17
Apr-
18
Oct-
18
Apr-
19
Oct-
19
Apr-
20
6m% Foreign Reserves
CN KR TW IN
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Apr-
11
Oct-
11
Apr-
12
Oct-
12
Apr-
13
Oct-
13
Apr-
14
Oct-
14
Apr-
15
Oct-
15
Apr-
16
Oct-
16
Apr-
17
Oct-
17
Apr-
18
Oct-
18
Apr-
19
Oct-
19
Apr-
20
6m%Foreign Reserves
MY PH TH ID
Still biased for USD-Asia upside, but it will be a grind
• The optimism from the reopening of economies remains unsupported by actual outcomes. Higher USD-Asia cannot be
ruled out on a structural basis until we see firmer evidence of a V-shaped recovery from the reopening economies.
Nevertheless, we concede that the potential upside may be a slow grind. The asymmetric reaction to vaccine- and
reopening-related headlines make it difficult for the USD to make headways on Asian FX. Moreover, with heavy portfolio
outflows already seen earlier in the year, the bar for another round of disorderly outflows may be high (see p. 14, 15).
• Thus, USD bulls in Asia may need to see a significant worsening of Sino-US tensions to gain traction. In the
meantime, expect USD-North and USD-SGD to remain most reactive to shifts in the risk sentiment. South Asian
currencies should instead run more on domestic drivers for now.
Asian FX Short-term Heat Map
USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR
USD 2 1 1 1 1 1 1 9 1 1
JPY 2 2 1 1 1 2 1 1 1 1
CNH 1 2 2 2 1 9 1 2 1 1
SGD 1 1 2 1 2 2 1 2 1 1
MYR 1 1 2 1 2 2 1 2 1 1
KRW 1 1 1 2 2 1 2 1 2 1
TWD 1 2 9 2 2 1 1 2 1 1
THB 1 1 1 1 1 2 1 2 2 1
PHP 9 1 2 2 2 1 2 2 1 1
INR 1 1 1 1 1 2 1 2 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 2 1 1 1 1 1 1 9 1 1
JPY 2 2 1 1 1 2 1 1 1 1
CNH 1 2 2 2 1 9 1 2 1 1
SGD 1 1 2 1 2 2 1 2 1 1
MYR 1 1 2 1 2 2 1 2 1 1
KRW 1 1 1 2 2 1 2 1 2 1
TWD 1 2 9 2 2 1 1 2 1 1
THB 1 1 1 1 1 2 1 2 2 1
PHP 9 1 2 2 2 1 2 2 1 1
INR 1 1 1 1 1 2 1 2 1 1
12
90919293949596979899
100101102103104105106107
31
/12
/14
30
/4/1
5
31
/8/1
5
31
/12
/15
30
/4/1
6
31
/8/1
6
31
/12
/16
30
/4/1
7
31
/8/1
7
31
/12
/17
30
/4/1
8
31
/8/1
8
31
/12
/18
30
/4/1
9
31
/8/1
9
31
/12
/19
30
/4/2
0
31/12/2014= 100
CFETS RMB Index
NEERs: Concerns over TWD persist
• North Asian currencies have retreated on an NEER basis since the last Update, with the exception of the TWD. We
continue to see TWD resilience as inconsistent with the current global macro trajectory and its own equity outflow
conditions (p. 14 and 15). Elsewhere, note that the mean reversion in THB NEER has effectively stalled.
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
-3.92 -3.88 -3.79
-2.42
-1.34
1.87 2.062.55
-6.00
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
THB IDR KRW INR MYR SGD PHP CNY TWD
Year-to-date Asian NEER performance
20/05/2020
%
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
Improvements in flow environment stalled…
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
• No signs that quantitative easing in the major central banks have started to flow into Asian local assets. With the
exception of South Korea, it is clear that the improvements in the flow environment have stalled across Asia. Asian FX
may have over-reacted to the upside in response to these improvements in the near term.
14
…but no signs of disorderly outflows
• Asian FX probably have not depreciated enough for the Asian local assets to come across as attractive again. However,
apart from equity outflows from Taiwan, there are no signs of an acceleration of outflows. Translated to USD-Asia, this
suggests that the upside pressures persist in the background, but no immediate risks of an aggressive spikes.
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: Remain heavy on domestic macro cues
• The “circuit breaker” period will be over on 1 June, but many of the restrictions remain. We do not expect this is
materially change the domestic macro outlook for now. All eyes will be on DPM’s announcement next week, with
expectations of further fiscal support. On the currency front, we continue to expect the SGD NEER to ease lower
to account for the weaker macro outlook.
• Translated to the USD-SGD, we may expect the 1.4100 floor to hold in the near term, barring a wider capitulation in the
broad USD. For now, bias remains for the pair to ease northwards towards the top-end of the recent range at 1.4300.
-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 19 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
