Asia ex-Japan: The week ahead – ING

The export-led recovery appears to have run its course and inflation isn’t an issue in much of the region and a case for prolonged stable CB policies is strong, according to Prakash Sakpal, Economist at ING.

Key Quotes

“We think the last batch of 3Q GDP releases from the region this week may largely go unnoticed for two reasons; first, two out of three of these are merely revised numbers, and second, the focus has already shifted to growth in the final quarter of the year. Nonetheless, our interest was is Thailand’s 3Q GDP data, of which the first report came in today, for what means for the Bank of Thailand’s monetary policy. Steady acceleration in headline GDP growth this year has masked underlying weakness in domestic spending, which is what matters for BoT policy. Without a solid recovery in domestic demand, the BoT will be among the last Asian central banks in moving to tightening, in our view.”

“October industrial production releases from Singapore and Taiwan, the other two 3Q GDP reporting countries this week, will provide a glimpse into the fourth quarter performance. Singapore reported strong NODX data for October on Friday, though it was a clawback of weakness in September. Judging from October export data from the region, this year’s export surge seems to have run its course. And for electronics exporters Singapore and Taiwan, the seasonal product replacement cycle for flagship mobile devices is nearing its end. Fading export strength will likely weigh on GDP growth in the final quarter of the year.”

“What about inflation around the region? Higher energy prices are adding to inflation pressures, but apart from a few countries, inflation isn’t a worry. Malaysia’s CPI data stands out for this reason (Hong Kong and Singapore are other two economies reporting CPI data this week). Inflation is running close to the top end of BNM’s 3-4% target for this year and is likely to remain high in the rest of the year due to rising oil prices and supply shocks to food prices from floods in some states. We saw hints of an early rate hike in the latest BNM MPC statement, which, with a strong GDP report for 3Q, suggests they could hike as early as 1Q18.”