abc Global Research Chinese exports improve, but fixed asset investment slows and CPI falls below 2% Asian central banks on hold for now, but tightening bias evident, except Thailand New in this issue: momentum heatmaps and indispensable China data dashboard Not quite there With Lunar New Year distortions dropping out of the data, March and April provided the first clean read on economic momentum in Asia. The verdict: no real sign of a bounce. In China, investment slowed further last month and loan growth spluttered. Across the region, exports also disappointed, better data in the West notwithstanding. In Thailand, political turmoil is starting to take a greater toll on growth. But, it’s not all discouraging. In Japan, the initial signs are that the economy is taking the sales tax hike in its stride. Producers appear quite optimistic about a rebound in the coming months. The Bank of Japan also struck a confident note, leading many observers, including us, to push back expectations of further easing. Meanwhile, in Australia, better employment data and robust building approvals also suggest underlying strength. Inflation continues to be subdued across much of Asia. One exception is India, where the CPI ticked up last month. The persistence of price pressures, despite weaker growth, raises the chance of another rate hike by the central bank. With a new administration set to take the reins shortly, however, it may get trickier for the RBI to deliver this. An added risk is that the monsoon this year may deliver below average rainfall, which could put upward pressures on agricultural prices. Central banks in Australia, Korea, Indonesia, and Malaysia held rates in recent weeks. So did the BSP in the Philippines, even if it raised the reserve requirement ratio. In New Zealand, as expected, officials raised the cash rate. Across the region, the various statements had a hawkish tint, hinting at some (gentle) tightening to come in the next several quarters. Thailand, alas, is an exception: with political uncertainty still elevated, and fiscal policy out of commission, another cut may seems likely. Check out our new heatmaps and China dashboard inside! Macro Asian Economics On top of the data Following the flow in Asia 15 May 2014 Frederic Neumann Economist The Hongkong and Shanghai Banking Corporation Limited +852 2822 4556 [email protected]Ronald Man Economist The Hongkong and Shanghai Banking Corporation Limited +852 2996 6743 [email protected]Joseph Incalcaterra Economist The Hongkong and Shanghai Banking Corporation Limited +852 2822 4687 [email protected]Rini Sen Economics Associate Bangalore View HSBC Global Research at: http://www.research.hsbc.com Issuer of report: The Hongkong and Shanghai Banking Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of i t
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abcGlobal Research
Chinese exports improve, but fixed asset
investment slows and CPI falls below 2%
Asian central banks on hold for now, but tightening bias evident, except Thailand
New in this issue: momentum heatmaps and indispensable China data dashboard
Not quite there With Lunar New Year distortions dropping out of the data,
March and April provided the first clean read on economic
momentum in Asia. The verdict: no real sign of a bounce. In
China, investment slowed further last month and loan growth
spluttered. Across the region, exports also disappointed,
better data in the West notwithstanding. In Thailand, political
turmoil is starting to take a greater toll on growth.
But, it’s not all discouraging. In Japan, the initial signs are that
the economy is taking the sales tax hike in its stride. Producers
appear quite optimistic about a rebound in the coming months.
The Bank of Japan also struck a confident note, leading many
observers, including us, to push back expectations of further
easing. Meanwhile, in Australia, better employment data and
robust building approvals also suggest underlying strength.
Inflation continues to be subdued across much of Asia. One
exception is India, where the CPI ticked up last month. The
persistence of price pressures, despite weaker growth, raises
the chance of another rate hike by the central bank. With a
new administration set to take the reins shortly, however, it
may get trickier for the RBI to deliver this. An added risk is
that the monsoon this year may deliver below average rainfall,
which could put upward pressures on agricultural prices.
Central banks in Australia, Korea, Indonesia, and Malaysia held
rates in recent weeks. So did the BSP in the Philippines, even
if it raised the reserve requirement ratio. In New Zealand, as
expected, officials raised the cash rate. Across the region, the
various statements had a hawkish tint, hinting at some (gentle)
tightening to come in the next several quarters. Thailand, alas,
is an exception: with political uncertainty still elevated, and
fiscal policy out of commission, another cut may seems likely.
Check out our new heatmaps and China dashboard inside!
Macro Asian Economics
On top of the data
Following the flow in Asia
15 May 2014 Frederic Neumann Economist The Hongkong and Shanghai Banking Corporation Limited +852 2822 4556 [email protected]
Ronald Man Economist The Hongkong and Shanghai Banking Corporation Limited +852 2996 6743 [email protected]
Joseph Incalcaterra Economist The Hongkong and Shanghai Banking Corporation Limited +852 2822 4687 [email protected]
Rini Sen Economics Associate Bangalore
View HSBC Global Research at: http://www.research.hsbc.com
Issuer of report: The Hongkong and Shanghai Banking Corporation Limited
Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it
What’s New Change in forecast – change in growth bias
Australia BIAS Retail sales, business confidence and export volumes have picked up further, while the labour market is continuing to improveNew Zealand BIAS New Zealand remains on track to post one of the strongest growth rates amongst the OECD economies China BIAS HSBC Manufacturing PMI remained in contraction in April. IP and FAI growth also eased pointing to downside risks to Q2 14 growthHong Kong BIAS Growth is expected to rise 3.6% y-o-y in Q1. However risks tilt to the downside owing to weak exports growth to slowing MainlandIndia BIAS Weak PMIs have increased downside risks to growth in the near term. A strong mandate government would lift medium-term growth biasIndonesia BIAS Monetary tightening is slowing growth as BI intended, and we retain our growth forecast of 5.2% for this year Japan BIAS Real household spending spiked 10.5% m-o-m sa in March, posing upside risks to our 8.7% q-o-q saar estimate in Q1 14 consumptionKorea BIAS Korea adopted the 2008 system of national accounts, which poses upside risks to our 3.2% 2014 GDP forecast on statistical groundsMalaysia BIAS We retain our view for growth forecast of 5.2% for this year. Domestic demand will moderate, but net exports should pick up the slackPhilippines BIAS Inflation rose 4.1% y-o-y in April from 3.9% in March; with output lower this year, prices will likely accelerate in the summer monthsSingapore BIAS Upside risk to growth following better-than-expected factory output and improving PMIsSri Lanka BIAS Upside risk to growth thanks to additional monetary policy stimulus this yearTaiwan BIAS Robust manufacturing and private consumption kept growth at 3.0% y-o-y in Q1, in line with our estimates for the full-yearThailand BIAS Political uncertainty poses downside risks to growth. Although household debt is high, we continue to expect one more cut from the BOTVietnam BIAS The headline PMI Index increased sharply to 53.1 in April from 51.3 in March. Output, new orders, and employment roseSource: HSBC
Data surprises
Australia Trimmed mean CPI increased by +2.6% y-o-y in Q1 (market had +2.9%)New Zealand Employment increased by +3.7% y-o-y in Q1 (market had +3.4% y-o-y)China April FAI growth ytd eased to 17.3% y-o-y (vs. BBG consensus 17.7%)Hong Kong Retail sales value fell 1.3% y-o-y in March vs. Bloomberg expectations of +7.4%India March IIP fell 0.5% y-o-y vs. consensus expectations of -1.5% y-o-y. April CPI came in slightly higher than expected (8.6% y-o-y vs. 8.5% consensus)Indonesia Q1 GDP was weaker than expected. Net trade subtracted more than we thought. Although consumption beat our forecast, investment was sub-trendJapan Real household spending spiked 7.2% y-o-y in March vs. consensus expectations of 2.0%Korea April export growth beat expectations, but the weaker new export orders suggest the strong momentum may be difficult to sustain Malaysia The trade surplus widened more than expected to MYR9.6bn in March. Imports were weaker, while exports were stronger than expectedPhilippines The BSP raised the RRR by 1 ppt to 20%; S&P upgraded the Philippines to BBB ratingSingapore March industrial production rose 12.1% y-o-y (vs. consensus expectation of 6.4%). Mar CPI rose 1.2% y-o-y (vs. 1.1% consensus expectation)Sri Lanka April CPI inflation rose to 4.9% y-o-y, below consensus expectation of 5.0 % y-o-yTaiwan Export orders rose 5.9% y-o-y in March, up from 5.7% in the previous month and consensus expectations of 4.7% Thailand Exports and imports disappointed with 3.1% and 14.2% y-o-y contraction, respectively. Current account surplus surprised on the upside at USD2.9bnVietnam Inflation stayed steady at 4.4% y-o-y in April from 4.4% in MarchSource: Bloomberg, HSBC
Did you know? Time to pay up! Number of hours it takes to prepare and pay taxes (2013)
Source: World Bank, HSBC; NB: Time to prepare and pay taxes is the time, in hours per year, it takes to prepare, file, and pay (or withhold) the corporate income tax, the value added or sales tax, and labor taxes, including payroll taxes and social security contributions.
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BR VN MX JA CH IT TH ID IN TU GE SL SA PH KR RU US NZ MA FR CA SW UK AU SI HK
Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14Australia 44.8 47.9 48.6 42.6 49.2 51.5 41.8 52.3 50.0 49.3 39.6 45.5 -7.5 12.8 4.5
Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14Australia 62.8 67.7 75.1 31.9 31.1 25.8 43.6 45.0 47.4
Source: Markit, HSBC; HK PMI services stands for whole economy PMI, business activity for output, New business for New orders and Outstanding business for backlogs of work, US data is ISM non-manufacturing
Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14 Apr 14 Mar 14 Feb 14Australia 48.6 48.9 55.2 47.7 45.3 52.7 49.8 51.8 53.7China (HSBC) 51.4 51.9 51.0 50.3 51.7 50.8 51.4 51.3 51.4 49.7 49.8 48.6China (NBS) 54.8 54.5 55.0 50.2 51.4 50.9 50.8 50.8 51.4Hong Kong 49.7 49.9 53.3 49.5 51.1 50.4 47.2 50.5 54.1India 48.5 47.5 48.8 49.8 51.2 50.1 48.4 47.6 49.5 52.1 52.2 48.2Japan 46.4 52.2 49.3 51.8 50.9 52.0 48.8 52.4 51.9 50.2 50.6 49.4
NB: Numbers in parenthesis are consensus as of Apr 2014; Regional aggregates are nominal GDP USD weighted, Asia excludes Australia and New Zealand Source: Thomson Reuters Datastream, CEIC, HSBC, Consensus Economics
Industrial Production IP (red denotes an improvement, grey denotes a deterioration or unchanged from previous reading; ▲,▼, ◄► denotes relative to consensus)
Source: Thomson Reuters Datastream, CEIC, HSBC; * Australia, New Zealand and Hong Kong IP are available on a quarterly basis, rest are monthly data, ▲,▼, ◄► denotes above, below or no-change from Bloomberg consensus respectively
Asia IP (% y-o-y, weighted average) Asia IP (% y-o-y)
Source: Thomson Reuters Datastream, CEIC, HSBC *NB: regional aggregates are nominal GDP USD weighted, Asia excludes Australia and New Zealand; India annual numbers are fiscal year.
Exports Exports* (red denotes an improvement, grey denotes a deterioration or unchanged from previous reading; ▲,▼, ◄►denotes relative to consensus)
Source: Thomson Reuters Datastream, CEIC, HSBC; ▲,▼, ◄► denotes above, below or no-change from Bloomberg consensus respectively. *Growth rates are calculated using the export series in local currency terms. Rest are calculated using the export series in USD terms.
Asia exports (% y-o-y, weighted average) Asia exports (% y-o-y)
Source: Thomson Reuters Datastream, CEIC, HSBC, Australia and New Zealand data are exports of goods and services; Regional aggregates data are nominal GDP USD weighted, Asia excludes Australia and New Zealand
Source: Thomson Reuters Datastream, CEIC, HSBC; * Hong Kong Consumer confidence is available on a quarterly basis (latest being 4Q-2013), rest are monthly data
Headline CPI Headline CPI (red denotes an improvement, grey denotes a deterioration or unchanged from previous reading; ▲,▼, ◄► denotes relative to consensus)
Source: Thomson Reuters Datastream, CEIC, HSBC; * Australia and New Zealand CPI are available on a quarterly basis, rest are monthly data; ▲,▼, ◄► denotes above, below or no-change from Bloomberg consensus resp.
Asia CPI (% y-o-y, weighted average) Asia CPI (% y-o-y)
NB: Numbers in parenthesis are consensus as of Apr 2014; Regional aggregates data are nominal GDP USD weighted, Asia excludes Australia and New Zealand Source: Thomson Reuters Datastream, CEIC, HSBC, Consensus Economics
Core CPI Core CPI (red denotes an improvement, grey denotes a deterioration or unchanged from previous reading)
Source: Thomson Reuters Datastream, CEIC, HSBC; * Australia and New Zealand CPI is available on quarterly basis, rest are monthly data; Australia data is trimmed mean inflation
Asia core CPI (% y-o-y, weighted average) Asia core CPI (% y-o-y)
Source: Thomson Reuters Datastream, CEIC, HSBC; Australia data is trimmed mean; Regional aggregates data are nominal GDP USD weighted, Asia excludes Australia and New Zealand
Asset Prices Real Estate Prices (red denotes an increase, grey denotes decrease or unchanged)
NB: China: Property price ytd avg; New Zealand: median sales price of dwellings; Hong Kong: Property price index, domestic price; Korea, Malaysia, Thailand, Australia: Housing price Index; India: 15 city average of Housing Price Index, National Housing Bank; Taiwan: Sinyi Residential Property price Index for Taipei area; Indonesia and Singapore: Residential property price Index; India m-o-m data is nsa; Source: CEIC, HSBC, Thomson Reuters Datastream
Real Estate Prices (% y-o-y) Real Policy Rates (%)
NB: forecasts in italics; New Zealand and Australia implied rates are OIS swap rates. Singapore implied rates are calculated through 'the Bloomberg FWCM function'; Rest of the implied rates are based on recommendation from our local rates strategy team. For implied rates comparison, 3m compares to 2Q-2014, 6M to 3Q-2014 and 12 months to 1Q-2015; Source: Bloomberg, CEIC, HSBC
Asia nominal vs. core deflated real Policy rate (%) Expected change in Policy rate (bps)
Note: Rates strategy recommendations from HSBC: Asia-Pac Rates: A decline in term and political premium as of 24 April 2014; forecasts in italics, 3m compares to 2Q-2014, 6M to 3Q-2014 and 9 months to 4Q-2014. For US, UK, Euro forecasts are for 3M, 6M and 12M. Source: HSBC, CEIC & Bloomberg
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TH JN AU CH HK ID SL TA VN NZ IN KR MA PHOver 6 months Over 12 months
NB: forecasts in italics; % change from May 8, 2014 to end 4Q 14; FW rates are from Bloomberg FXFC function using forward rate; for forward rate comparison, 3M compares to 2Q-2014, 6M to 3Q-2014, and 12M to 1Q-2015; Source: HSBC, Bloomberg
Asia REER (% y-o-y) Exchange rate- 2014 upside/downside vs. spot rates (%)
Source: BIS, HSBC Source: Bloomberg, HSBC, Spot returns as of May 14, 2014
HSBC Asia FX policy sustainability dashboard — (negative readings denoted in red)
NB: (1) short term debts are 2014 estimates and FX reserves are the latest released; forecasts in italics; (2) Re-exports are excluded from Taiwan’s export no.s; (3) USD export values are used. Source: HSBC, CEIC.
US 6.3 6.7 6.7 6.6 US 82.3 83.9 78.3 79.4 Eurozone 11.8 11.8 11.8 Eurozone -12.7 -11.7 Germany 6.7 6.7 6.7 6.8 Germany 8.5 8.5 8.3 7.7 Japan 3.6 3.6 3.7 Japan 36.9 37.6 39.7 Brazil 5.0 5.1 4.8 Brazil 106.3 107.2 107.1 108.9 Russia 5.4 5.6 5.6 China 107.9 103.1 101.1 Turkey 10.1 Turkey 78.5 72.7 69.2 72.4 Mexico 4.8 4.6 5.1 Mexico 90.3 88.79 84.52 84.5
4Q13 3Q13 2Q13 1Q13 4Q13 3Q13 2Q13 1Q13 China 4.1 4.1 4.0 4.1 Russia -11.0 -7.0 -6.0 -7.0 South Africa 17.5 17.6 18.2 South Africa -5.7 -6.9 -7.8 1.2
Note: Japan exports is in local currency, rest are in USD terms; Eurozone retail sales is ex-motor vehicles, Eurozone IP is ex-construction, Germany Consumer confidence is Gfk consumer confidence index, South Africa unemployment rate is average of Black African, coloured, Indian and white, India inflation data is WPI; Source: CEIC, Thomson Reuters Datastream
Australia’s fiscal settings are currently in focus, given the release of Budget 2014/15 on 13 May. To provide a guide to government spending reform, the new government had appointed a Commission of Audit, which released its report recently. Two key themes were highlighted among the report’s 86 recommendations. First, that without cuts to spending or boosted tax revenue, Australia faces the prospect of persistent budget deficits. Second, Australia can implement gradual reform to get the budget deficit under control, without the need for urgent fiscal austerity. This room for gradual reform reflects Australia’s low – by international standards – level of net public debt.
Data Trends
The economy continues to rebalance away from mining-led growth towards other drivers. Low rates and rising asset prices are supporting a rise in consumer spending, with retail sales up 5.7% y-o-y in March, while resource export volumes continue to rise strongly. More broadly, businesses are reporting improved trading conditions, consistent with a further increase in domestic demand. Stronger activity is also supporting the labour market, with solid jobs growth in April and the unemployment rate holding steady at 5.8%, down from 6.0% in February. Higher frequency indicators continue to point to further improvement in the labour market.
On 12 May, the State Council issued new capital market reforms to be rolled out in the next five years. These include inroads into the equity, bond and futures markets to reduce government involvement and broaden private sector participation in financing growth. The Ministry of Industry and Information Technology on 10 May announced it is granting telecom pricing autonomy to all operators in China. Telcos can now freely design service packages and set prices based on consumer needs and market conditions.
Data Trends
At 48.1 in April, the HSBC manufacturing PMI continued to disappoint although domestic demand and output stabilized from their March readings. The HSBC services PMI also eased in the month. Export figures rebounded after two consecutive months of contraction. Exports and imports rose 0.9% y-o-y and 0.8% y-o-y respectively in April. IP eased to 8.7% y-o-y whereas retail sales fell to 11.9% y-o-y in April. Disinflationary pressures continued to build this month – CPI eased to 1.85% y-o-y on declining vegetable and pork prices. On the credit side, M2 growth rebounded in April but lending still remains weak, likely weighing on investment growth.
China GDP China PMI
Source: CEIC, HSBC Source: Markit, HSBC
China HSBC manufacturing PMI China HSBC services PMI
The HKMA stated that the risks to Hong Kong banks from lending to Mainland China are manageable, as it is supported by genuine economic activity. Loans to Chinese borrowers by banks in Hong Kong, including branches of Mainland banks, surged 30% last year. The increased holdings of bonds traded in China’s interbank market and trade-related activities are also among the reasons for the increase, according to Arthur Yuen, the HKMA’s deputy chief executive. The Hong Kong Stock Exchange plans to list coal and industrial metal futures on its trading platform. It also expects to offer RMB-denominated futures for zinc, copper and nickel by the end of 2014.
Data Trends
The HSBC Hong Kong PMI fell further to 49.7 in March, the lowest reading since August 2013, on slowing output and a sharp reversal in new business from China. Retail sales were also weak in March, contracting 1.3% y-o-y and 2.3% y-o-y in value and volume terms respectively, while the trade deficit also widened. However, price pressures remained subdued in March, with CPI unchanged at 3.9% y-o-y. The unemployment rate was unchanged for the third consecutive month in March at 3.1%, the lowest rate since the 1990s. A relatively tight labor market is therefore not translating into higher prices just yet.
Hong Kong GDP HSBC Hong Kong PMI
Source: CEIC, HSBC Source: Markit, HSBC
Hong Kong Inflation v/s Policy rate HSBC Hong Kong PMI
Exit polls suggested the NDA-led coalition would comfortably win the elections, but these polls have been unreliable in the past (source: Reuters). The Planning Commission will recommend a more business friendly version of the land acquisition bill to the new government. Lower expenditure due to election code of conduct may have lowered FY14 fiscal deficit to 4.5% (vs. 4.6% revised estimate) according to a finance ministry official. The World Bank estimated that India is the third largest economy in PPP terms. The current account deficit for FY13-14 fell to USD32bn (1.7% of GDP), according to the finance ministry. India Meteorological Department expects monsoon rainfall to be 5% below normal due to El Nino.
Data Trends
The manufacturing PMI was broadly unchanged despite softer readings for output. This was largely the result of firmer domestic demand, which countered the slowdown in export orders. Meanwhile, services PMI readings for activity and new business flows improved, but remained below the water line. The trade balance was broadly unchanged in April at USD10.1bn vs. USD10.5bn in March. Exports bounced back and imports declined further in annual terms. Industrial production continued to contract in annual terms in March. Meanwhile, CPI inflation rose more than expected due to food price, but core CPI eased slightly.
India GDP India PMI
Source: CEIC, HSBC Source: Markit, HSBC
HSBC India manufacturing PMI HSBC India services PMI
The official tally of the 9 April legislative polls confirmed that the PDI-P had won the most votes (18.9%), followed by Golkar and Gerinda, at 14.8% and 11.8%, respectively. Including NasDem and the PKB, the PDI-P-led coalition garnered 34.7% of the vote. PDI-P presidential nominee Joko Widodo said he would phase out fuel subsidies gradually over four years if elected, because the subsidy bill was too large and could be used for more productive industries. S&P reaffirmed the country’s credit rating just one notch below investment grade at BB+, saying that fiscal reform and the state of governance would be important in its future assessment.
Data Trends
Q1 GDP growth slowed to 5.2% y-o-y from 5.7% in Q4. Seasonally adjusted, q-o-q growth decelerated to 1.0%, the slowest since the Lehman crisis and below long-term trend growth of around 1.5%. Although private consumption was stronger than we expected, sub-trend investment spending and a sequential contraction in imports suggest that monetary tightening will continue to cool domestic demand in a broad-based manner. After the GDP report Bank Indonesia (BI) kept policy on hold, but trimmed its 2014 growth forecast to 5.1-5.5% from 5.5-5.9% earlier. April inflation remained stable at 7.3% y-o-y, while trade balance posted a modest surplus of USD673m in March.
Indonesia GDP Indonesia PMI Manufacturing
Source: CEIC, HSBC Source: Markit, HSBC
Indonesia Inflation v/s Policy rate HSBC Indonesia manufacturing PMI
US President Obama made a state visit to Japan on 23-25 April. Though there were hopes that the President's visit would yield a breakthrough in the stalled Trans-Pacific Partnership negotiations, the two sides were unable to reach an agreement. According to media reports, progress was made on tariff discussions for beef, dairy, rice, barley, and sugar. However, there remained disagreements over pork tariffs and safety standards for US auto exports to Japan. Discussions will continue at the ministerial level at TPP talks in Vietnam (12-15 May). Meanwhile, in early April, Japan announced that it had concluded an economic partnership agreement (EPA) with Australia after seven years of negotiation.
Data Trends
Consumption-related indices registered a sharp pick-up in March, thanks to front-loaded spending in the run-up to the 1 April tax hike. Department store sales were up 25% y-o-y, and retail sales jumped 6.3% m-o-m sa in March. Meanwhile, real household spending surged 10.8% m-o-m sa, beating even the most aggressive analyst estimates. Preliminary reports from retail shops – though highly anecdotal – suggest that the "payback" from the tax hike has been no worse than feared. April business surveys have shown deterioration in corporate sentiment, with Reuters Tankan, Shoko Chukin SME survey, and Markit PMIs all pointing to a slowdown in activity. But firms see momentum picking up again in the near term.
Japan GDP Japan PMI
Source: CEIC, HSBC Source: Markit, HSBC
Japan Inflation v/s Policy rate Japan manufacturing PMI
The 16 April Sewol ferry disaster is expected to weigh on Korea’s economic activity in Q2. In response, the government announced on 9 May that it will increase its front-loaded spending by allocating 57% of its 2014 budget into H1 from 55%. The Bank of Korea will provide support to impacted firms, mainly from the transport and tourism industries, by using money from its small- and medium-sized enterprise lending facility. Private consumption growth, which fell from 0.6% q-o-q sa to 0.3% in Q1, may slow further and dip into negative territory in Q2.
Data Trends
Korea is on track to close its output gap by year-end. Strong sequential GDP growth was sustained in Q1 and export growth in April beat market expectations. However, the HSBC Korea PMI showed that manufacturers also recorded a decline in new export orders. Hence such strong shipment growth may be difficult to sustain. While growth is in line with the Bank of Korea’s baseline scenario, uncertainty over the growth in key emerging market economies, such as China, and the impact of the Sewol ferry incident remain a downside risk. We expect the Bank of Korea to keep its policy rate low at 2.50% in H1 2014 to support the recovery.
Korea GDP Korea PMI Manufacturing
Source: CEIC, HSBC Source: Markit, HSBC
Korea Inflation v/s Policy rate HSBC Korea manufacturing PMI
Second finance minister Datuk Seri Ahmad Husni Hanadzlah said efforts to reduce the cost of living and aspects of subsidy rationalization will continue to be the government’s main focus in preparing the 2015 budget, which is expected to be tabled in Parliament on 10 October. There will also be emphasis on the entrepreneurship sector. Meanwhile the agriculture ministry said it was making plans to brace for El Nino in H2, with the weather pattern potentially hurting the production of rice and other crops. Separately, BNM Governor Zeti said the economy remains vibrant, and that the financial system is able to cope with volatility of capital flows.
Data Trends
Bank Negara Malaysia (BNM) left its policy rate unchanged at 3.00% in May. But it said “the degree of monetary accommodation may need to be adjusted” and that “inflation ... is expected to remain above its long-run average due to higher domestic cost factors”. We look for two 25bp rate hikes from the 10 July meeting, taking the policy rate to 3.50% by the year-end. March CPI remained stable but above BNM’s comfort range at 3.5% y-o-y, but our estimates of core suggested that underlying inflation continued to creep higher to 2.4% y-o-y. Meanwhile the trade surplus narrowed slightly in March, to MYR9.6bn, as exports rose 8.4% y-o-y and imports gained just 0.5% y-o-y.
Malaysia GDP Malaysia Commodity Prices
Source: CEIC, HSBC Source: CEIC, HSBC
Malaysia Inflation v/s Policy rate Malaysia Exports v/s IP
The RBNZ has offered its initial assessment of the macro-prudential tools it adopted last year. It sees the policy as having been effective, having restricted the pace of high loan-to-value ratio (LVR) lending to 4.8% of new lending (below the mandated 10% maximum), down from a rate of 25% prior to implementation. Credit growth has also slowed and the RBNZ’s modelling suggests the policy has dampened house price inflation. Despite this, house price inflation is currently at +8.5% y-o-y and near-record levels of migrant inflows are likely to provide on-going support. The RBNZ indicated that LVR restrictions are likely to remain in place until at least later this year.
Data Trends
Recent data continue to point to strong growth in New Zealand. Inward migration was at the second highest level on record in March. New Zealand’s labour market continues to improve, with employment growth running at +3.7% y-o-y in Q1 and business confidence remains well above average levels. With the economy continuing to pick up strongly, the RBNZ raised its cash rate by a further 25bp in April. Further rate hikes are likely in the near term, as economic momentum continues to build. However, the recent strength of the NZD and the recent fall in dairy prices from very elevated levels should also help to keep the economy from overheating.
S&P raised the Philippines' rating one notch to BBB. Following the upgrade, Governor Tetangco commented that the strengthening of the PHP will help temper inflationary pressures. Weather experts estimate that the Philippines will likely receive below-average rainfall in Q4 2014 and Q1 2015 and have a more volatile tropical cyclone pattern. This means that while the impact of Typhoon Haiyan is still lingering, the Philippines will potentially experience more supply shocks in H2 2014. While the Supreme Court extended indefinitely the temporary restraining order it issued against Manila Electric Company over the increase of electricity prices, risks to accelerating inflation remain.
Data Trends
Inflation rose 4.1% y-o-y in April from 3.9% in March; with the storm season approaching and agricultural output lower this year, prices will likely accelerate in the summer months. M3 increased in March to 34.8% y-o-y due to higher deposits; credit also accelerated to 18.3% y-o-y from 18.0% in February. Excess liquidity is a concern but manageable; the BSP kept policy rates on hold but raised the RRR by 1ppt to 20%. Net FDI declined by 59% in February to USD350m, according to the BSP.
Deputy Prime Minister Tharman Shanmugaratnam took over as Chairman of the Singapore Economic Development Board (EDB)’s international advisory council (IAC) on 1 May. As per the EDB, manufacturers in Singapore are upbeat about their prospects over the next six months; the precision engineering cluster is the most optimistic. Singapore attracted 15.6m tourists in 2013, a record for the country. Singapore and the US agreed to facilitate compliance of Singapore financial institutions with US tax laws.
Data Trends
CPI inflation picked up, mainly on account of a smaller fall in car prices. Contributions from all other sectors, except accommodation, were also slightly higher. Non-oil domestic exports fell in March, with the volatile pharmaceuticals sector pulling down growth. Manufacturing output continued to grow at a sharp pace in March supported by both the biomedical and the transport engineering clusters. PMIs from April indicate that the pickup in factory output is set to continue supported by new export orders.
The IMF raised its 2014 GDP growth forecast for Sri Lanka from 6.5% to 7%. The government is confident of achieving its target of a per-capita income of USD4,000 by 2015, one year before the target date. The central bank governor has asked banks to change their attitude towards lending to SMEs and allocate more loans to these. On the recent UNHRC resolution against Sri Lanka, the president noted that “except for an international inquiry, we are in the process of implementing all other demands made by sponsors of the resolution”. Fitch affirms Sri Lanka's rating at 'BB-' with stable outlook. It believes risks to the rating outlook were well balanced.
Data Trends
The central bank of Sri Lanka kept policy rates on hold as expected in April. The statement noted that inflation continued to moderate, but also that the drought may push up food inflation in coming months. Annual inflation picked up in April on a weak base in the previous year and price increases for food. Meanwhile, core CPI was unchanged. The trade deficit continued to narrow as a result of an increase in exports and a decline in imports. Remittance and tourism receipts improved as well, helping to lower the current account deficit.
Sri Lanka GDP Sri Lanka Trade
Source: CEIC, HSBC Source: CEIC, HSBC
Sri Lanka Inflation v/s Policy rate Sri Lanka Domestic credit v/s Money supply
Source: CEIC, HSBC Source: CEIC, HSBC
-20246810121416
-202468
10121416
Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
GDP y-o-y (LHS) GDP q-o-q saar (RHS)
% y -o-y % q-o-q saar
-150
-75
0
75
150
-60
-30
0
30
60
Feb-12 Aug-12 Feb-13 Aug-13 Feb-14
Balance of Trade (RHS) Imports (LHS) Exports (LHS)
In a bid to contain soaring property prices, the Legislature’s Finance Committee approved an amendment to increase the minimum and maximum housing tax to 1.5% (from 1.2%) and 3.6% (from 2%) respectively. If passed, the amendment will come into effect in May 2015, affecting 15% of Taiwan’s population. Labour Minister Pan Shih-wei said that the basic minimum wage could be adapted differently by region to mitigate the widening wealth gap between the north and south. There was renewed speculation that Taiwan’s move to merge its four public pension funds (combined assets of USD100bn) will eventually lead to the creation of a sovereign wealth fund.
Data Trends
Taiwan’s Q1 2014 GDP was in line with market expectations at 3.0% y-o-y. Strong private consumption and lower imports offset weak investment. However, sequential growth slowed to 0.3% q-o-q sa from 1.3% in Q4 2013. The HSBC Taiwan PMI eased further to 52.3 in April from 52.7 in March although new export orders accelerated, and actual export orders also picked up in March, rising 5.9% y-o-y. Meanwhile, CPI rose 1.65% y-o-y in April, marginally higher than consensus expectations. We expect prices to trend upwards in Q2 but remain well under the CBC’s comfort zone.
The Constitutional Court ruled that caretaker PM Yingluck and nine other cabinet ministers acted illegally in the transfer of former national security head Thawil Pliensri in 2011 (source: Bloomberg, 7 May). Following the verdict, Ms Yingluck could be impeached, but that would require a 3/5 vote from the senate. The 20 July election date is now also in doubt. Separately, the anti-corruption office also indicted Ms Yingluck over the controversial rice scheme; if also found guilty by the Supreme Court, she could face a five-year ban from politics.
Data Trends
Headline inflation rose to a 12-month high of 2.5% y-o-y in April, bringing the four-month average to 2.1% vs. 2% in Q1. Core inflation also grew at a faster pace of 1.7%, as the dry season damaged crops and lifted processed food prices. Meanwhile the trade balance reverted to a surplus of USD706m in Q1 2014 vs a deficit of USD2.6bn in Q4 2013. However this was on the back of weak imports (as domestic demand slowed), rather than exports. The latter was down -3.1% y-o-y in March after a brief upturn in February.
Thailand GDP BoT Investment and Consumption Indicators (%3m/3m saar)
Source: CEIC, HSBC Source: CEIC, HSBC
Thailand Inflation v/s Policy rate Thailand Business Sentiment Index
Source: CEIC, HSBC Source: CEIC, HSBC
-40-30-20-100102030405060
-20-15-10-505
1015202530
Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
GDP y-o-y (LHS) GDP q-o-q saar (RHS)
% y -o-y % q-o-q saar
-20
-10
0
10
20
30
40
-50
-25
0
25
50
75
100
Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14
Investment Index (LHS) Consumption Index (RHS)
% 3m/3m saar % 3m/3m saar
0.000.751.502.253.003.754.505.256.00
-6-4-202468
10
05 06 07 08 09 10 11 12 13 14
Inflation (LHS) Policy rate (RHS)
% y -o-y %Mar-14 Feb-14 Jan-14
Business Sentiment Index 46.4 46.0 45.5New Orders 45.3 46.1 44.9Inventories 46.4 46.2 43.0
The head of management of Vietnam Railway Authority was arrested for allegedly “abusing positions and powers while performing official duties” (source: Bloomberg, 9 May). He will be the sixth official detained in connection with the Japanese ODA funded Hanoi urban railway project. The Prime Minister approved 127 public works projects requiring foreign investment by 2020, including a refinery, airport and railway. For example, the first phase of Long Thanh International Airport requires USD5.6bn of foreign investment. The Bien Hoa - Vung Tau Railway project requires USD5bn in foreign investment.
Data Trends
The headline PMI Index increased sharply to 53.1 in April from 51.3 in March. Output, new orders, new export orders, and employment rose. New export orders have increased in the past two months to reflect rising demand from the US and the Eurozone. However, Thailand is expected to dump its rice stockpile into the global market in Q2 2014, which will likely drive global prices lower, reducing the value of Vietnam rice exports. CPI rose slightly in April on a month-on-month basis but was still very low in comparison to the historical average. Even with an assumption of higher social service and electricity costs in August and September, we expect headline to end at 5.6% y-o-y in 2014.
Asia Brief Should we worry about corporate leverage in Asia?
In recent years, corporations in much of Asia – as in other parts of the world – have shifted their funding mix away from equity towards debt. This is partly the result of quantitative easing by central banks in advanced markets, as well as credit easing in China. Our first chart below shows the decline in equity issuance last year compared with 2007. Note the drop in China, where the equity market was roaring in 2007 but has treaded water since. Singapore and Japan are two exceptions. The former is a regional financial centre and the data might therefore not reflect a rise in stock issuance by local companies. In the latter, the liquidity-fuelled rally in the equity market last year probably explains the rise in issuance, but this may prove temporary as corporate Japan remains awash in cash and debt financing as cheap as anywhere in the world.
One measure of corporate leverage is the debt-to-equity ratio. Chart 2 shows this for listed companies in Asia (excluding financial firms). Note that the debt-to-equity ratio has risen in most markets, and quite sharply so in China, Thailand, the Philippines, and Singapore last year compared to 2007. However, there are other markets where it has declined in recent years, with listed firms in Indonesia, for instance, now having the lowest debt-to-equity ratio in Asia. In short, from this perspective, the build-up in corporate leverage has been quite uneven across the region in the last few years.
The trouble with the analysis so far, of course, is that it focuses on listed firms. This is a good starting point, since data is available in greater detail than for the corporate sector as a whole. However, most companies in Asia are not listed. It’s therefore useful to look at total private sector indebtedness (although this also includes loans to households, which is not corporate debt). Chart 3 uses a definition from the World Bank. Note that, as a share of GDP, this has increased everywhere since 2007, except for Sri Lanka and Japan.
But back to listed companies. That debt has become a more prominent source of funding than equity is clear from the data. But, to what extent, are firms taking on too much leverage? One useful measure is “interest cover” or the ratio of profits to interest rate expenses. If this falls, then companies have a smaller cushion against unforeseen shocks, such as a rise in interest rates or a downturn in profits. Compared with 2007, the interest cover has fallen in most Asian markets and in some cases quite sharply; Taiwan, Hong Kong, and Malaysia are the exceptions. In sum: keep an eye on corporate leverage.
Chart 1: Lower equity raised in all markets except Japan and Singapore Chart 2: Leverage has risen, but below pre-Asian financial crisis levels
Source: Bloomberg, HSBC equity strategy team. NB: based on announcement by firms Source: Thomson DataStream, Bloomberg, HSBC. NB: MSCI (ex financials) country indices, India is FY13
Chart 3: However, economies are more credit driven now Chart 4: Profit cover has declined despite lower interest rates
Source: World Bank, HSBC Source: Thomson DataStream, Bloomberg, HSBC. NB: MSCI (ex financials) country indices, India is FY13
-10
10
30
50
70
90
110
130
150
CH HK IN AU SK TW SG JP
Equity issuance (USD bn)
2007 2013
0
20
40
60
80
100
HK MA SK ID IN TW SG CH TH PH
Leverage (Debt/Equity)
2007 2013
0
50
100
150
200
250
JN SL AU SK PH IN VN ID BD MA CH SG TH HK
Indebtedness (Total private credit/GDP)
2007 2012
0
5
10
15
20
25
30
CH TH PH SG IN ID SK MA HK TW
Interest cover (EBITDA/interest expenses)
2013 2007
Frederic Neumann, Economist The Hongkong and Shanghai Banking Corporation Limited +852 2822 4556 [email protected]
Source: CEIC, HSBC. Colour codes are based on the z-score of the year-on-year figures on a rolling 36 months basis.
Exports by destination
Source: CEIC, HSBC. Colour codes are based on the z-score of the year-on-year figures on a rolling 36 months basis.
Industrial Production
Source: CEIC, HSBC. Colour codes are based on the z-score of the year-on-year figures on a rolling 36 months basis.
Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14ChinaHong KongIndiaIndonesiaJapanKoreaMalaysiaPhilippinesSingaporeSri LankaTaiwanThailandVietnamAsiaAsia ex JNAsia ex JN & CH
Above average and rising Above average but falling Below average but rising Below average & falling
Dec-13 Jan-14 Feb-14 Dec-13 Jan-14 Feb-14 Dec-13 Jan-14 Feb-14 Dec-13 Jan-14 Feb-14ChinaHong KongIndiaIndonesiaJapanKoreaMalaysiaPhilippinesSingaporeSri LankaTaiwanThailandVietnamAsiaAsia ex JapanAsia ex Japan & China
Above average and rising Above average but falling Below average but rising Below average & falling
World US EU China
Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14ChinaHong KongIndiaIndonesiaJapanKoreaMalaysiaPhilippinesSingaporeSri LankaTaiwanThailandVietnamAsia ex JN & HK (simple)Asia ex JN & HK (weighted)
Above average and rising Above average but falling Below average but rising Below average & falling
Source: Markit, CEIC, HSBC. Colour codes are based on the z-score of the year-on-year figures on a rolling 24 months basis, black denotes z-score less than -1.0, light grey denotes z-score between -1.0 and -0.5, white denotes z-score between -0.5 and 0.5, pink denotes z-score between 0.5 and 1.0, and red denotes z-score greater than 1.0.
Headline CPI
Source: CEIC, HSBC. Colour codes are based on the z-score of the year-on-year figures on a rolling 36 months basis.
NB: (1) short-term debts are 2014 forecasts and FX reserves are the latest released; forecasts in italics; (2) Re-exports are excluded from Taiwan’s export numbers; (3) USD export values are used; (4) BoP exports: goods only. Source: CEIC, HSBC
NB: Consensus as of April 2014; India and Bangladesh annual data are for fiscal year; Asia aggregate data are nominal GDP USD weighted; US quarterly data are q-o-q annualised; forecasts in italics, actual in normal font. Regional Consensus forecasts are calculated using Consensus Economics country forecasts re-weighted on Nominal GDP basis in order to make them comparable to HSBC Asia aggregate forecasts. Source: HSBC, CEIC, Consensus Economics
NB: Australia and New Zealand are quarterly data; India annual data are for fiscal year and target refers to end 2014 target as per new monetary policy framework transition path; *Thailand target for core inflation; Sri Lanka targets money supply; Malaysia has implicit preference; Hong Kong government forecasts underlying CPI for 2014 at 4.5%; and composite CPI at 4.5%; Taiwanese directorate general of budget’s forecasts for 2014 is 1.1%; forecasts in italics; Singapore CPI estimate by MAS; JP: 2014 CPI forecast includes the effects of the April 2014 consumption tax hike. Source: HSBC, CEIC, various central banks.
NB: New Zealand and Australia implied rates are OIS swap rates; the rest implied rates are based on recommendation from our local rates strategy team. Source: Bloomberg, CEIC, HSBC
HSBC Asia reserve requirement outlook (%)
Pre-crisis level (15 Sep 2008) Cumulative change to date Current HSBC forecast
China 17.5/16.5 +250/150 bps 20.0/18.0 RRR likely to be unchanged, but there is room for cuts if needed
India 9.0 -500 bps 4.00 Expect CRR to be on hold
NB: Two RRR rates for China refer to the ratio for large banks and the ratio for small banks, respectively. Source: HSBC & Bloomberg
HSBC Asia public debt forecast — (grey denotes improvement, red denotes deterioration)
Budget balance (Local currency bn) ___ Budget balance (% of GDP) ____ _____ Public debt (% of GDP) ______ 2013e 2014f 2015f 2013e 2014f 2015f 2013e 2014f 2015f
NB: India figures are in fiscal year, forecasts in italics, Japan and Malaysia are gross central government debt; HK budget balance data is the government’s revised estimate for 2013-14 fiscal year, released in February 2014; HK public debt figures are sourced from IMF, WEO October 2013. Source: HSBC, CEIC, IMF
Asian Economics Desk Reference 12 May 2014
For inquiries please contact Asian Economics Team: [email protected], Phone: +852 2822 4556
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HSBC Asia bond yields forecast (% pa)
_______________ 5yr ________________ ______________ 10yr _______________ Rates strategy comment current +3m +6m +9m current +3m +6m +9m 9m view
Note: Rates strategy recommendations from HSBC: Asia-Pac Rates: A decline in term and political premium as of 24 April 2014; forecasts in italics, 3m compares to 2Q 2014, 6M to 3Q 2014 and 9 months to 4Q 2014. For US, UK, Euro forecasts are for 3M, 6M and 12M. Source: HSBC, CEIC & Bloomberg
HSBC Asia FX forecast (period end, vs. USD) (red denotes appreciation or HSBC above forward rate, grey denotes depreciation or HSBC below forward rate)
NB: forecasts in italics; % change from May 8, 2014 to end 4Q 2014; FW rates are from Bloomberg FXFC function using forward rate; for forward rate comparison, 3M compares to 2Q 2014, 6M to 3Q 2014, and 12M to 1Q 2015. Source: HSBC, Bloomberg
For inquiries please contact Asian Economics Team: [email protected], Phone: +852 2822 4556
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Main DM economic indicators calendar
Date Location Local time Subject Unit Period of data Previous
1-May US 02:00 Fed QE3 Pace USD bn Apr 55.0 1-May US 02:00 Fed Pace of Treasury Purchases USD bn Apr 30.0 1-May US 02:00 Fed Pace of MBS Purchases USD bn Apr 25.0 1-May US 02:00 FOMC Rate Decision % 30-Apr 0.25 1-May US 20:30 Initial Jobless Claims 000s Wk Apr 26 330.0 1-May US 20:30 Personal Income % m-o-m Mar 0.4 1-May US 20:30 Personal Spending % m-o-m Mar 0.5 1-May US 22:00 ISM Manufacturing Index Apr 53.7 2-May EMU 16:00 Manufacturing PMI final Index Apr 53.3 2-May EMU 17:00 Unemployment Rate % Mar 11.8 2-May US 20:30 Nonfarm Payrolls 000s Apr 203.0 2-May US 20:30 Unemployment Rate % Apr 6.7 2-May US 22:00 Factory Orders % m-o-m Mar 1.5 5-May Australia 09:30 Building Approvals % m-o-m Mar -5.4 5-May EMU 17:00 PPI % m-o-m Mar -0.2 5-May EMU 17:00 PPI % y-o-y Mar -1.7 5-May EMU 17:00 EC Publishes Spring Economic Forecast - - - 6-May Australia 12:30 Cash Rate Target % 6-May 2.50 6-May EMU 16:00 Services PMI final Index Apr 53.1 6-May EMU 16:00 Composite PMI final Index Apr 54.0 6-May EMU 17:00 Retail Sales % m-o-m Mar 0.1 6-May EMU 17:00 Retail Sales % y-o-y Mar 1.0 7-May Germany 14:00 Factory Orders % m-o-m Mar 0.9 8-May Australia 09:30 Employment Change 000s Apr 21.9 8-May Australia 09:30 Unemployment Rate % Apr 5.8 8-May Germany 14:00 Industrial Production sa % m-o-m Mar 0.4 8-May EMU 19:45 ECB Rate Decision % 8-May 0.25 8-May EMU 19:45 Marginal Lending Facility % 8-May 0.75 8-May EMU 19:45 ECB Deposit Facility Rate % 8-May 0.00 8-May US 20:30 Initial Jobless Claims 000s Wk May 3 344.0 9-May Australia 09:30 RBA releases Monetary Policy Statement - May - 13-May Germany 17:00 ZEW Survey Current Situation Index May 59.5 13-May Germany 17:00 ZEW Survey Expectations Index May 43.2 13-May US 20:30 Retail Sales % m-o-m Apr 1.2 15-May Japan 07:50 GDP-sa prelim % q-o-q 1Q-2014 0.2 15-May Japan 07:50 GDP saar prelim % q-o-q 1Q-2014 0.7 15-May Germany 14:00 GDP-sa prelim % q-o-q 1Q-2014 0.4 15-May Germany 14:00 GDP prelim % y-o-y 1Q-2014 1.4 15-May EMU 16:00 ECB Monthly Report - May - 15-May EMU 17:00 CPI % m-o-m Apr 0.9 15-May EMU 17:00 CPI final % y-o-y Apr - 15-May EMU 17:00 GDP-sa advance % q-o-q 1Q-2014 0.2 15-May EMU 17:00 GDP, sa advance % y-o-y 1Q-2014 0.5 15-May US 20:30 Empire Manufacturing Index May 1.29 15-May US 20:30 CPI % m-o-m Apr 0.2 15-May US 20:30 CPI Ex Food and Energy % m-o-m Apr 0.2
Source: Bloomberg
Economic Calendar – DM May 2014
For inquiries please contact Asian Economics Team: [email protected], Phone: +852 2822 4556
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Main DM economic indicators calendar
Date Location Local time Subject Unit Period of data Previous
15-May US 20:30 CPI % y-o-y Apr 1.5 15-May US 20:30 CPI Ex Food and Energy % y-o-y Apr 1.7 15-May US 20:30 Initial Jobless Claims 000s Wk May 10 - 15-May US 21:15 Industrial Production % m-o-m Apr 0.7 15-May US 22:00 Philadelphia Fed Business Outlook Index May 16.6 15-May US n/a Annual Manufacturing Revisions - - - 16-May Japan 12:30 Industrial Production final % m-o-m Mar 0.3 16-May US 20:30 Housing Starts Revisions - - - 16-May US 20:30 Housing Starts 000s Apr 946.0 16-May US 21:55 Univ. of Michigan Confidence prelim Index May 84.1 19-May Japan 07:50 Machine Orders % m-o-m Mar -8.8 19-May Japan 07:50 Machine Orders % y-o-y Mar 10.8 21-May Japan 07:50 Trade Balance JPY bn Apr -1446.0 21-May Japan 07:50 Exports % y-o-y Apr 1.8 21-May Japan 07:50 Imports % y-o-y Apr 18.1 21-May EMU 22:00 Consumer Confidence advance Index May -8.6 21-May Japan n/a 2014 Monetary Base Target JPY trn 21-May 270.0 22-May US 02:00 Fed Releases FOMC Meeting Minutes - Apr 29-30 - 22-May EMU 16:00 Manufacturing PMI prelim Index May 53.4 22-May EMU 16:00 Services PMI prelim Index May 53.1 22-May EMU 16:00 Composite PMI prelim Index May 54.0 22-May US 20:30 Initial Jobless Claims 000s Wk May 17 - 22-May US 22:00 Existing Home Sales M Apr 4.59 23-May Germany 14:00 GDP-sa final % q-o-q 1Q-2014 - 23-May Germany 14:00 GDP final % y-o-y 1Q-2014 - 23-May Germany 16:00 IFO Business Climate Index May 111.2 23-May US 22:00 New Home Sales Revisions - - - 23-May US 22:00 New Home Sales 000s Apr 384.0 25-May EMU n/a EC OECD Economic Outlook - - - 27-May US 20:30 Durable Goods Orders % m-o-m Apr 2.9 27-May US 20:30 Durables ex transportation % m-o-m Apr 2.4 27-May US 20:30 Cap Goods Orders Nondef Ex Air % m-o-m Apr 3.5 27-May US 20:30 Cap Goods Ship Nondef Ex Air % Apr 1.5 27-May US 22:00 Consumer Confidence Index May 82.3 27-May US 22:00 Richmond Fed Manufac. Index Index May 7.0 28-May EMU 17:00 Consumer Confidence final Index May - 29-May US 20:30 GDP Annualized % q-o-q 1Q-2014 0.1 29-May US 20:30 Initial Jobless Claims 000s Wk May 24 - 29-May US 22:00 Pending Home Sales % m-o-m Apr 3.4 30-May Japan 07:30 National CPI % y-o-y Apr 1.6 30-May Japan 07:30 Tokyo CPI Ex-Fresh Food % y-o-y May 2.7 30-May Japan 07:50 Industrial Production prelim % m-o-m Apr - 30-May US 20:30 Personal Income % m-o-m Apr 0.5 30-May US 20:30 Personal Spending % m-o-m Apr 0.9 30-May US 21:45 Chicago PMI Index May 63.0 30-May US 21:55 Univ. of Michigan Confidence final Index May -
Disclosure appendix Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Frederic Neumann, Hongbin Qu, Ronald Man, Paul Bloxham, Leif Eskesen, Trinh Nguyen, John Zhu, Su Sian Lim, Julia Wang, Izumi Devalier, Joseph Incalcaterra and Adam Richardson
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