Quarterly Market Outlook 2Q2020 - hlb.com.my Quarterly Market Outlook ... Bank Negara Malaysia 2.50

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Transcript of Quarterly Market Outlook 2Q2020 - hlb.com.my Quarterly Market Outlook ... Bank Negara Malaysia 2.50

  • Quarterly Market Outlook 2Q2020 Global Markets

    April 2020

  • Content

    15

     Macro Landscape

     FX Outlook

     Fixed Income Outlook

  • Global Growth Outlook

    Source: Bloomberg, official sources, IMF

    Figures in ( ) are previous forecasts

    *FY ending Mar-20 and Mar-21 respectively

    Real GDP Latest 2 Quarters Actual Forecast Forecast (IMF)

    (% YOY)

    3Q19 4Q19 2019 2020 2021 2020 2021

    World - - 2.9 -1.0 (3.4) 3.6 -3.0 (3.3) 5.8 (3.4)

    DM/ G10 1.6 0.8 1.7 -1.3 (1.5) 2.2 - -

    US 2.1 2.1 2.3 -3.0 (1.8) 3.3 -5.9 (2.0) 4.7 (1.7)

    Eurozone 1.3 1.0 1.2 -3.4 (1.0) 2.5 -7.5 (1.3) 4.7 (1.4)

    UK 1.3 1.1 1.4 -2.9 (1.0) 2.3 -6.5 (1.4) 4.0 (1.5)

    Japan 1.7 -0.7 0.7 -2.2 (0.4) 1.4 -5.2 (0.7) 3.0 (0.5)

    BRICs 5.0 5.0 5.2 2.6 (5.1) 5.5 - -

    China 6.0 6.0 6.1 3.0 (5.9) 6.5 1.2 (6.0) 9.2 (5.8)

    India* 5.1 4.7 6.1 4.9 (5.1) 5.2 1.9(5.8) 7.4 (6.5)

    Asia ex-Japan 5.1 5.1 5.3 3.1(5.2) 5.6 - -

    EMEA 2.3 3.0 2.5 0.5 (2.5) 2.7 - -

  • Global Central Banks Policy Rates Outlook

    4Source: Bloomberg, Global Markets Research

    Current 2Q20 3Q20 4Q20 1Q21 Remarks

    United States

    0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 No further cut in 2020Federal Reserve

    Fed Funds Rate

    Eurozone

    -0.50 -0.50 -0.50 -0.50 -0.50 No cut in 2020European Central Bank

    Deposit Rate

    United Kingdom

    0.10 0.10 0.10 0.10 0.10 No further cut in 2020Bank of England

    Bank Rate

    Japan

    -0.10 -0.10 -0.10 -0.10 -0.10 No cut in 2020Bank of Japan

    Policy Balance Rate

    Australia

    0.25 0.25 0.25 0.25 0.25 No further cut in 2020Reserve Bank of Australia

    Cash Rate

    New Zealand

    0.25 0.25 0.25 0.25 0.25 No further cut in 2020Reserve Bank of New Zealand

    Official Cash Rate

    Malaysia

    2.50 2.00 2.00 2.00 2.00 50bps cut by 2QBank Negara Malaysia

    Overnight Policy Rate

    Thailand

    0.75 0.50 0.25 0.25 0.25 Further cuts in 2020The Bank of Thailand

    1-Day Repurchase Rate

    Indonesia

    4.50 4.25 4.00 4.00 4.00 Further cuts in 2020Bank Indonesia

    7-day Reverse Repo Rate

    Philippines

    3.25 2.75 2.50 2.50 2.50 Further cuts in 2020Bangko Sentral ng Pilipinas

    Overnight Reverse Repo Rate

  • 5

    The US – Decade long expansion unraveled by global pandemic

    Housing recovery to pause as social distancing curbs activity

    Job losses and unemployment rate set to spike in 2Q as Covid-19

    pandemic deepens

    Services and manufacturing poised to see larger contraction ahead

    Steady 4Q GDP growth, 1Q20 contraction to outsize 2008-2009 recession

    -9

    -7

    -5

    -3

    -1

    1

    3

    5

    7

    2 0 0 8

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    GDP QOQ %

    GDP YOY %

    %

    -40

    -30

    -20

    -10

    0

    10

    20

    30

    40

    50

    -80

    -60

    -40

    -20

    0

    20

    40

    60

    2 0 0 8

    2 0 0 8

    2 0 0 8

    2 0 0 9

    2 0 0 9

    2 0 1 0

    2 0 1 0

    2 0 1 0

    2 0 1 1

    2 0 1 1

    2 0 1 2

    2 0 1 2

    2 0 1 3

    2 0 1 3

    2 0 1 3

    2 0 1 4

    2 0 1 4

    2 0 1 5

    2 0 1 5

    2 0 1 5

    2 0 1 6

    2 0 1 6

    2 0 1 7

    2 0 1 7

    2 0 1 8

    2 0 1 8

    2 0 1 8

    2 0 1 9

    2 0 1 9

    2 0 2 0

    Housing Starts, YOY %

    Existing Home Sales, YOY %

    30

    35

    40

    45

    50

    55

    60

    65

    2 0 0 7

    2 0 0 8

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    ISM Manufacturing

    ISM Services

    0

    2

    4

    6

    8

    10

    12

    -1000

    -800

    -600

    -400

    -200

    0

    200

    400

    600

    800

    2 0 0 7

    2 0 0 9

    2 0 1 1

    2 0 1 3

    2 0 1 5

    2 0 1 7

    2 0 1 9

    '000 %

    Non Farm Payroll (LHS)

    Unemployment Rate (RHS)

  • The EU and UK – Pandemic shattered already weak growth trajectory

    Manufacturing to experience deeper contractions Services PMIs plunged to fresh lows, falling victim to strict social

    distancing rules

    Stabilization in GDP growth to be broken off by pandemic Jobless rates set to climb again despite fiscal policies to protect jobs

    3

    4

    5

    6

    7

    8

    9

    10

    11

    12

    13

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    2 0 2 0

    %

    EU Unemployment rate (%)

    UK ILO Unemployment rate (%)

    -6

    -4

    -2

    0

    2

    4

    2 0

    0 6

    2 0

    0 7

    2 0

    0 8

    2 0

    0 9

    2 0

    1 0

    2 0

    1 1

    2 0

    1 2

    2 0

    1 3

    2 0

    1 4

    2 0

    1 5

    2 0

    1 6

    2 0

    1 7

    2 0

    1 8

    2 0

    1 9

    %

    Eurozone Real GDP (% YOY)

    UK Real GDP (% YOY)

    30

    35

    40

    45

    50

    55

    60

    65

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    2 0 2 0

    Eurozone Manf PMI

    UK Manf PMI

    20

    30

    40

    50

    60

    70

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    2 0 2 0

    Eurozone Services PMI

    UK Services PMI

  • China – Economy rebooted after virus peaked in Hubei province, expect rebound in 2Q.

    Retail sales is expected to recover somewhat but remain weak. Sharp rebound in PMIs, but NBA cautions against too much

    optimism

    Expect GDP to contract 2.8% YOY in Q1, returning to +4.4% in Q2 Exports market crimped by pandemic supply disruption and as buyers

    worldwide shut businesses

    6.5

    6.4 6.2

    6.00

    4

    5

    6

    7

    8

    9

    10

    11

    12

    13

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    %

    GDP YOY, %

    -20

    -15

    -10

    -5

    0

    5

    10

    15

    20

    25

    2 0 0 8

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    %

    Industrial Production YOY, %

    -25

    -20

    -15

    -10

    -5

    0

    5

    10

    15

    20

    25

    30

    2 0 0 5

    2 0 0 6

    2 0 0 7

    2 0 0 8

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    %

    Retail Sales YOY, %

    -40

    -30

    -20

    -10

    0

    10

    20

    30

    40

    50

    60

    -35

    -15

    5

    25

    45

    65

    85

    2 0

    1 4

    2 0

    1 5

    2 0

    1 6

    2 0

    1 7

    2 0

    1 8

    2 0

    1 9

    2 0

    2 0

    %US$, bn Trade Balance, US$ (LHS) Exports YOY, % (RHS) Total Imports YOY, %

    Note: Retail sales, IPI and trade data are for Jan-Feb 2020

    25

    30

    35

    40

    45

    50

    55

    60

    65

    2 0 0 7

    2 0 0 8

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8

    2 0 1 9

    2 0 2 0

    NBS Manufacturing PMI

    NBS Services PMI

  • 8

    Japan – Further contraction and lower inflation, as Olympic-related boost delayed to 2021

    Temporary distortion to spending amidst adjustment to sales tax hike,

    gains to reverse going forward

    Economy contracted in 4Q as expected following typhoon and sales tax

    hike.

    Renewed weakness in labour market; as seen in falling job availability.

    Manufacturing downturn deteriorated on the back of poor overseas

    demand and disruption caused by typhoon, tax hike

    -60

    -40

    -20

    0

    20

    40

    60

    -50

    -40

    -30

    -20

    -10

    0

    10

    20

    30

    40

    2 0 0 7

    2 0 0 8

    2 0 0 9

    2 0 1 0

    2 0 1 1

    2 0 1 2

    2 0 1 3

    2 0 1 4

    2 0 1 5

    2 0 1 6

    2 0 1 7

    2 0 1 8