global economics & markets research email ... · homes sales as key economic data to look out...

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Monday, 27 February 2017 Markets Overview HIGHLIGHTS AHEAD This week, taking centre stage is President Donald Trump’s address to a joint session in Congress on Tuesday (28 Feb) as markets will look for possible details into his economic, tax & fiscal plans. Depending on what details Trump provides, that may shape the tone of FOMC Chair Janet Yellen’s speech in Chicago on Friday (3 Mar). This is probably the last opportunity for the markets to listen to Yellen before the Fed enters the “black-out week” period ahead of the 13/14 March FOMC. Today, we have U.S durable goods orders and U.S pending homes sales as key economic data to look out for. In Asia this week, the attention is on the Feb Manufacturing PMI surveys and Feb CPI data from countries including Thailand, Indonesia (both on Mar 1) and South Korea (Mar 3). With inflation turning higher, the room for further interest rate cuts in Asia has been greatly reduced. For the PMI numbers that will start coming in from Wed, investors will be watching out for the official China Feb manufacturing & non- manufacturing PMI surveys and China Caixin manufacturing PMI (all on Wed) but the readings may come in lower though likely remaining above 50, affected by the proximity to the Lunar New Year holidays. India’s 4Q16 GDP on Tue will also be of interest. The IMF warned last week of larger-than-expected negative impact on the economy in the short term from the Nov 2016 demonetisation through weaker private consumption, though this is not expected to extend beyond two quarters. In Singapore, we will be getting the monetary and banking statistics for Jan from the MAS monthly statistical bulletin on Tue (28 Feb) while Singapore’s official PMI and electronics sector PMI for Feb will be out on Thur (Mar 2) followed by the Nikkei Singapore PMI on Fri. In China, the annual proceedings of its legislative body National People’s Congress (NPC) will convene on Sun (Mar 5), while the country’s top advisory body National Committee of the Chinese People’s Political Consultative Conference (CPPCC), will begin on Fri (Mar 3). The CPPCC and NPC sessions are the closest China has to a parliament and provide a glimpse of the government’s policy and priorities in a public forum. The most important parts of the “Two Sessions” will be the Government Work Report and annual budget (both delivered on the first day of the NPC), and the closing press conference. The growth/ economic targets for 2017 will also be announced. For the 2017 NPC, we believe there is scope that the GDP growth range could be widen further to 6.0-7.0% from 6.5-7.0% in Global Economics & Markets Research Email: [email protected] URL: www.uob.com.sg/research 2016. The Communist Party of China (CPC) will hold its 19th National Congress in the autumn of 2017 to elect new Party leadership. The “Two Sessions” will thus be seen as as a key platform for preparation leading up to the National Congress, which is expected to identify and put in position the country’s next generation of top leaders. For today, Hong Kong and Thailand will be reporting their Jan trade data. Thailand’s custom export at 12 pm is expected to register stronger growth at 8.75% y/y compared to 6.2% in Dec. Indian markets reopen after Fri holiday. Taiwan markets will be closed on Mon-Tue while South Korean will be celebrating Independence Day holiday on Wed (Mar 1). Myanmar will celebrate Peasant’s Day holiday on Thur. Singapore Deputy Prime Minister Teo Chee Hean is visiting China from Sun-Tue. The Joint Council for Bilateral Cooperation (JCBC) - the highest-level bilateral forum between Singapore and China will be held today. CENTRAL BANK OUTLOOK The Bank of Canada (BOC) is the only G7 central bank with a policy decision this week (1 Mar) and BOC is expected to stay on pause again. Bank Negara Malaysia (BNM) is widely expected to keep its Overnight Policy Rate (OPR) unchanged at 3.00% on Thur. FX The U.S. dollar traded mix on Friday, gaining against the EUR, GBP and AUD while losing ground against the JPY. EUR/USD fell 0.18% to 1.0563 on Friday, closing lower for a third straight week as political uncertainty within the euro-bloc is gradually priced in. GBP/USD fell 0.75% to 1.2462, paring back all of the prior day’s gains but still largely in familiar ranges. USD/JPY fell 0.44% to 112.12 as investors grew cautious over a possible delay in the Trump administration’s “phenomenal” tax reform. AUD/USD also gave back gains above the key 0.7700 level to finish 0.51% lower at 0.7676. Asian currencies were broadly firmer against USD in the past week with KRW (+1.3%) and SGD (+1.0%) leading gains. On Fri, MYR and IDR closed 0.2% firmer at 4.4405/ USD and 13,331/USD respectively. KRW closed up by 0.6%

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Page 1: Global Economics & Markets Research Email ... · homes sales as key economic data to look out for. ... the room for further interest ... recapitulation of ballots

Monday, 27 February 2017 Markets OverviewHIGHLIGHTS AHEAD

This week, taking centre stage is President Donald Trump’s address to a joint session in Congress on Tuesday (28 Feb) as markets will look for possible details into his economic, tax & fiscal plans. Depending on what details Trump provides, that may shape the tone of FOMC Chair Janet Yellen’s speech in Chicago on Friday (3 Mar). This is probably the last opportunity for the markets to listen to Yellen before the Fed enters the “black-out week” period ahead of the 13/14 March FOMC.

Today, we have U.S durable goods orders and U.S pending homes sales as key economic data to look out for.

In Asia this week, the attention is on the Feb Manufacturing PMI surveys and Feb CPI data from countries including Thailand, Indonesia (both on Mar 1) and South Korea (Mar 3). With inflation turning higher, the room for further interest rate cuts in Asia has been greatly reduced. For the PMI numbers that will start coming in from Wed, investors will be watching out for the official China Feb manufacturing & non-manufacturing PMI surveys and China Caixin manufacturing PMI (all on Wed) but the readings may come in lower though likely remaining above 50, affected by the proximity to the Lunar New Year holidays.

India’s 4Q16 GDP on Tue will also be of interest. The IMF warned last week of larger-than-expected negative impact on the economy in the short term from the Nov 2016 demonetisation through weaker private consumption, though this is not expected to extend beyond two quarters.

In Singapore, we will be getting the monetary and banking statistics for Jan from the MAS monthly statistical bulletin on Tue (28 Feb) while Singapore’s official PMI and electronics sector PMI for Feb will be out on Thur (Mar 2) followed by the Nikkei Singapore PMI on Fri.

In China, the annual proceedings of its legislative body National People’s Congress (NPC) will convene on Sun (Mar 5), while the country’s top advisory body National Committee of the Chinese People’s Political Consultative Conference (CPPCC), will begin on Fri (Mar 3). The CPPCC and NPC sessions are the closest China has to a parliament and provide a glimpse of the government’s policy and priorities in a public forum. The most important parts of the “Two Sessions” will be the Government Work Report and annual budget (both delivered on the first day of the NPC), and the closing press conference. The growth/economic targets for 2017 will also be announced. For the 2017 NPC, we believe there is scope that the GDP growth range could be widen further to 6.0-7.0% from 6.5-7.0% in

Global Economics & Markets ResearchEmail: [email protected]: www.uob.com.sg/research

2016. The Communist Party of China (CPC) will hold its 19th National Congress in the autumn of 2017 to elect new Party leadership. The “Two Sessions” will thus be seen as as a key platform for preparation leading up to the National Congress, which is expected to identify and put in position the country’s next generation of top leaders.

For today, Hong Kong and Thailand will be reporting their Jan trade data. Thailand’s custom export at 12 pm is expected to register stronger growth at 8.75% y/y compared to 6.2% in Dec.

Indian markets reopen after Fri holiday. Taiwan markets will be closed on Mon-Tue while South Korean will be celebrating Independence Day holiday on Wed (Mar 1). Myanmar will celebrate Peasant’s Day holiday on Thur.

Singapore Deputy Prime Minister Teo Chee Hean is visiting China from Sun-Tue. The Joint Council for Bilateral Cooperation (JCBC) - the highest-level bilateral forum between Singapore and China will be held today.

CENTRAL BANK OUTLOOK

The Bank of Canada (BOC) is the only G7 central bank with a policy decision this week (1 Mar) and BOC is expected to stay on pause again.

Bank Negara Malaysia (BNM) is widely expected to keep its Overnight Policy Rate (OPR) unchanged at 3.00% on Thur.

FX

The U.S. dollar traded mix on Friday, gaining against the EUR, GBP and AUD while losing ground against the JPY. EUR/USD fell 0.18% to 1.0563 on Friday, closing lower for a third straight week as political uncertainty within the euro-bloc is gradually priced in. GBP/USD fell 0.75% to 1.2462, paring back all of the prior day’s gains but still largely in familiar ranges. USD/JPY fell 0.44% to 112.12 as investors grew cautious over a possible delay in the Trump administration’s “phenomenal” tax reform. AUD/USD also gave back gains above the key 0.7700 level to finish 0.51% lower at 0.7676.

Asian currencies were broadly firmer against USD in the past week with KRW (+1.3%) and SGD (+1.0%) leading gains. On Fri, MYR and IDR closed 0.2% firmer at 4.4405/USD and 13,331/USD respectively. KRW closed up by 0.6%

Page 2: Global Economics & Markets Research Email ... · homes sales as key economic data to look out for. ... the room for further interest ... recapitulation of ballots

Markets Overview Monday, 27 February 2017 2 P a g e

UOB Global Economics & Markets Research

at 1,131.09/USD while THB and TWD gained 0.3% to end at 34.89/USD and 30.650/USD respectively. In South Korea, expectation that Samsung will be releasing new smartphone (expected to be Galaxy S8) on Mar 29 for its much-anticipated comeback, could support sentiment.

USD/SGD hit a low of 1.4023 before recovering to close largely unchanged at 1.4050 on Fri. On the trade-weighted basis, the SGD NEER has climbed to 0.9% above the mid-point this morning from around 0.7% last Fri. This is the strongest since last Sep. We expect the SGD NEER to trade between 0.5%-1.5% above the midpoint for today, implying a USD/SGD range of 1.3968-1.4108 based on current FX levels.

There was no major market impact on the CNY from US President Trump’s comments last week that China is the “grand champion” of currency manipulation. CNY ended the week marginally weaker at 6.8691/USD. For this week, other than the PMI numbers, market will be watching China’s NPC parliamentary session and this could keep the CNY market fairly quiet. This morning, our UOB RMB fixing model predicts that the PBoC will set the midpoint slightly stronger at 6.8632/USD, from 6.8655/USD on Fri.

EQUITIES

U.S equities rallied in the closing hour of Friday’s trade to earlier session losses and finished slightly higher, as investors awaited President Trump’s address to Congress next week. The Dow Jones closed at a record high of 20,821.76 (+0.05%) for an 11th straight session, longest streak of records since 1987. The S&P 500 recovered from a 0.5% decline earlier in the session to finish 0.15% higher, at 2,367.34. Similarly, the Nasdaq Composite Index also added 0.17% to close 5,845.31.

Asian equity indexes ended mixed on Fri. Nikkei 225 ended down by 0.5% and HSI lost 0.6% while Shanghai CI closed up 0.1% on Fri. In the SE Asian bourses, STI fell 0.7%. KLCI and Thai SET also registered losses but the Jakarta CI managed a gain of 0.2%.

US TREASURIES

U.S treasuries gained, with the yield on benchmark 10-year notes falling six basis points to 2.311%. The benchmark yield now threatens to break below the two-month holding pattern between 2.30% to 2.50%, if President Trump continues to keep mum of the details of his economic plans in the upcoming address to Congress.

COMMODITIES

U.S WTI crude settled down 46 cents at $53.99 a barrel on Fri but ended the week overall 1.1% higher.

Spot gold hit its highest levels in 3-1/2 months on Friday, briefly touching above $1,260 per ounce before finishing at $1,257.19 (+0.61%), helped by rising geopolitical risks and a directionless U.S dollar.

ECONOMIC NEWS & DATA

In economic news, U.S. new home sales rose 3.7% in January, below estimates of +6.4%. Meanwhile, U.S consumer sentiment as measured by University of Michigan printed its first drop post U.S elections, easing to 96.3 in February from 98.5 in January, which was the highest since 2004.

ECB’s Weidmann reassured that the central bank will not end asset purchases all of a sudden. Given high debt levels in some Euro zone countries, government bond purchases could create pressure on monetary policy to keep interest rates low longer than is absolutely necessary.

Bundesbank’s Dombret said clean break from EU single market after Brexit would likely end London’s role as gateway to Europe’s financial markets. Also, it seems that the prospects for market access through the UK look rather dim post Brexit.

Singapore’s industrial production (IP) grew 2.2% y/y in Jan, a much slower growth rate from the 22.1% y/y rate in December, as well as consensus expectations of 9.5% y/y. The slower growth rate was due in part to base effects (as the Lunar New Year fell in Jan this year, while it was in Feb last year), as well as a contraction in the output of the biomedical manufacturing cluster. Excluding biomedical manufacturing, IP grew by a stronger 7.0% y/y.

Singapore Deputy Prime Minister Teo Chee Hean said that Singapore has consistently abided by its “One China policy” and been a consistent friend and supporter of China’s peaceful development, highlighting cooperation between the two countries despite different perspectives on some issues.

China Foreign Ministry said that the country has no intention of using currency devaluation to seek advantages, in response to Trump remarks on currency manipulation.

The Jakarta General Elections Commission (KPU) was aiming to make an official announcement on the organizing of the run-off election on Mar 4 after it completed the recapitulation of ballots. Campaign for the run-off election for the Jakarta governor is expected to start on Mar 7 with the poll expected on Apr 19.

Page 3: Global Economics & Markets Research Email ... · homes sales as key economic data to look out for. ... the room for further interest ... recapitulation of ballots

Markets Overview Monday, 27 February 2017 3 P a g e

UOB Global Economics & Markets Research

Economic IndicatorsDate Time Indicators Month Actual Market Forecast Previous

23 Feb 0858 KRW Base Rate Feb 1.25 1.25 1.25%

0900 CN Swift Global Payments CNY Jan 1.68 - 1.68%

1300 SG CPI Core y/y Jan 1.5 1.4 1.2%

1300 SG CPI y/y Jan 0.6 0.6 0.2%

1300 SG CPI m/m nsa Jan 0.2 0.3 0.2%

1600 TW Industrial Production y/y Jan 2.77 2.95 6.25%

2130 US Chicago Fed Nat Activity Index Jan -0.05 0.00 0.18

2130 US Initial Jobless Claims Feb 18 244 240 238k

2130 US Continuing Claims Feb 11 2060 2068 2077k

24 Feb 0830 TW Unemployment Rate Jan 3.84 3.80 3.83%

1300 SG Industrial Production y/y Jan 2.2 9.5 22.1%

1300 SG Industrial Production m/m sa Jan -6.0 -2.5 6.7%

1530 TH Foreign Reserves USD Feb 17 180.9 - 180.3bn

2300 US New Home Sales Jan 555 571 535k

2300 US U. of Mich. Sentiment Feb 96.3 96.0 95.7

2300 US U. of Mich. Current Conditions Feb 111.5 - 111.2

2300 US U. of Mich. Expectations Feb 86.5 - 85.7

27 Feb 1630 HK Trade Balance HKD Jan -20.8 -45.5bn

1630 HK Exports y/y Jan 8.4 10.1%

1630 HK Imports y/y Jan 8.8 8.7%

2130 US Durable Goods Orders Jan 1.7 -0.5%

2130 US Durables Ex Transportation Jan 0.5 0.5%

2300 US Pending Home Sales m/m Jan 1.0 1.6%

2330 US Dallas Fed Manf. Activity Feb 19.4 22.1

28 Feb 0801 UK GfK Consumer Confidence Feb -6 -5

0801 UK Lloyds Business Batometer Feb - 29

1530 TH Exports USD Jan - 18072mn

1530 TH Imports USD Jan - 16025mn

1530 TH Trade Balance USD Jan 2248 2047mn

1350 TH BoP Current Account Balance USD Jan - 3719mn

2000 IN GVA y/y 4Q - 7.1%

2000 IN GDP y/y 4Q - 7.3%

2000 IN GDP Annual Estimate y/y 2017 - 7.9%

2130 US GDP Annualized q/q 4Q 2..1 1.9%

2130 US Persoal Consumption 4Q 2.5 2.5%

2130 US GDP Price Index 4Q 2.1 2.1%

2130 US Core PCE q/q 4Q 1.3 1.3%

2130 US Advance Goods Trade Balance USD Jan -66.0 -64.4bn

2130 US Wholesale Inventories m/m Jan 0.4 1.0%

2130 US Retail Inventories m/m Jan - 0.0%

2245 US Chicago Purchasing Manager Feb 53.0 50.3

2300 US Conf. Board Consumer Confidence Feb 111.0 111.8

2300 US Conf. Board Expectations Feb - 99.8

2300 US Richmond Fed Manufact. Index Feb 10 12

Page 4: Global Economics & Markets Research Email ... · homes sales as key economic data to look out for. ... the room for further interest ... recapitulation of ballots

Markets Overview Monday, 27 February 2017 4 P a g e

UOB Global Economics & Markets Research

01 Mar 0800 SK Exports y/y Feb - 11.2%

0800 SK Imports y/y Feb - 18.6%

0800 SK Trade Balance USD Feb - 3196mn

0830 AU GDP q/q sa 4Q - -0.5%

0830 AU GDP y/y 4Q - 1.8%

0830 MY Nikkei Malaysia PMI Feb - 48.6

0830 ID Nikkei Indonesia PMI Mfg Feb - 50.4

0830 TH Nikkei Thailand PMI Mfg Feb - 50.6

0830 TW Nikkei Taiwan PMI Mfg Feb - 55.6

0900 CN Manufacturing PMI Feb - 51.3

0945 CN Caixin China PMI Mfg Feb - 51.0

1130 TH CPI y/y Feb - 1.55%

1330 AU Commodity Index SDR y/y Feb - 55.7%

1730 UK Markit UK PMI Manufacturing sa Feb - 55.9

2000 US MBA Mortgage Applications Feb 24 - -

2130 US Personal Income Jan - 0.3%

2130 US Personal Spending Jan - 0.5%

2130 US Real Personal Spending Jan - 0.3%

2130 US PCE Core m/m Jan - 0.1%

2245 US Markit US Manufacturing PMI Feb - -

2300 US ISM Manufacturing Feb - 56.0

2300 US ISM Prices Paid Feb - 69.0

2300 US ISM New Orders Feb - 60.4

2300 US ISM Employment Feb - 56.1

2300 US Construction Spending m/m Jan 0.2 -0.2%

02 Mar 0700 SK Industrial Production y/y Jan - 4.3%

0830 SK Nikkei South Korea PMI Mfg Feb - 49.0

1130 TH Consumer Confidence Economic Feb - 63.1

1500 MYR O/N Policy Rate Mar 3.00 3.00%

1730 UK Markit/CIPS UK Construction PMI Feb - 52.2

2100 SG PMI Feb - 51.0

2130 US Initial Jobless Claims Feb 25 - -

2130 US Continuing Claims Feb 18 - -

Page 5: Global Economics & Markets Research Email ... · homes sales as key economic data to look out for. ... the room for further interest ... recapitulation of ballots

Disclaimer: This analysis is based on information available to the public. Although the information contained herein is believed to be reliable, UOB Group makes no representation as to the accuracy or completeness. Also, opinions and predictions contained herein reflect our opinion as of date of the analysis and are subject to change without notice. UOB Group may have positions in, and may effect transactions in, currencies and financial products mentioned herein. Prior to entering into any proposed transaction, without reliance upon UOB Group or its affiliates, the reader should determine, the economic risks and merits, as well as the legal, tax and accounting characterizations and consequences, of the transaction and that able to assume these risks. This document and its contents are proprietary information and products of UOB Group and may not be reproduced or otherwise.

Singapore Company Reg No. 193500026Z

UOB Global Economics & Markets Research

Foreign Exchange Rates (as at 24 Feb 2017)FX Close Asian High Asian Low NY High NY Low

EUR 1.0563 1.0618 1.0540 1.0618 1.0557

GBP 1.2462 1.2570 1.2448 1.2570 1.2448

AUD 0.7676 0.7741 0.7665 0.7720 0.7665

NZD 0.7210 0.7247 0.7193 0.7238 0.7193

JPY 112.12 113.28 111.94 112.96 111.94

SGD 1.4050 1.4149 1.4022 1.4092 1.4022

MYR 4.4405 4.4497 4.4405 4.4497 4.4405

IDR 13331 13342 13318 - -

THB 34.89 35.01 34.83 - -

PHP 50.194 50.243 50.120 - -

INR - - - - -

TWD 30.650 30.735 30.650 - -

KRW 1131.09 1134.40 1127.76 - -

HKD 7.7609 7.7619 7.7586 - -

CNY 6.8691 6.8752 6.8678 - -

Market HolidaysCountry Date Event

IN Feb 24 Mahashivratri

TW Feb 27-28 Peace Day

US Mar 12 Daylight Saving Begin

IN Mar 13 Holi

JP Mar 20 Vernal Equinox Day

ID Mar 28 Saka New Year

CN/TW Apr 3-4 Tomb Sweeping Day/Children’s Day

IN Apr 4 Ram Navami

TH Apr 6 Chakri Memorial Day

TH Apr 9 Mahavir Jayanti

TH Apr 13-14 Songkran Festival

ID/PH/SG Apr 14 Good Friday

Stock Indices (as of 24 Feb 2017)

Indices Closing % chg ytd % chg

Dow Jones Industrial Average 20821.76 +0.05 +5.36

S&P 500 2367.34 +0.15 +5.74

NASDAQ Composite 5245.31 +0.17 +8.59

Tokyo Nikkei 225 19283.54 -0.45 +0.89

London FTSE 100 7243.70 -0.38 +1.41

Frankfurt DAX 11804.03 -1.20 +2.81

All Ordinaries 5786.88 -0.78 +1.19

FTSE Straits Times Index 3117.03 -0.65 +8.20

FTSE Bursa Malaysia KLCI Index 1698.35 -0.36 +3.45

Jakarta SE Composite Index 5385.91 +0.24 +1.68

Thailand SET Index 1564.59 -0.17 +1.40

Philippines SE PSEi Index 7258.99 -1.04 +6.12

Taiwan SE Weighted Index 9750.47 -0.19 +5.37

Korea SE KOSPI Index 2094.12 -0.64 +3.34

Hong Kong Hang Seng Index 23965.70 -0.62 +8.93

Shanghai SE Composite Index 3253.43 +0.06 +4.83

India Sensex 30 Index - - -

Commodities (as of 24 Feb 2017)

Commodities Closing % Chg

NYMEX Crude (Apr) 53.99 -0.84

Comex Gold (Feb) 1256.90 +0.54

Reuters CRB Index 190.93 -0.37

Bond Yields (as of 24 Feb 2017)Bond Yields Closing Net Chg

US 2-Year Bond 1.14 -4

US 10-Year Bond 2.31 -6

JP 10-Year JGB 0.07 -1

EU 10-Year Bund 0.19 -4

UK 10-Year Long Gilt 1.08 -7

UOB’s Estimation of SGD NEER (as of 27 February 2017) Assuming 2.0% on each side of the pivot point

Lower-End ........................................................................... 1.4475

Upper-End ........................................................................... 1.3907

Mid-Point ............................................................................. 1.4185

Interest RatesRates Current Next CB Meet UOB’s Forecast

USD Fed Funds Rate 0.50-0.75% 16 Mar 0.50-0.75%

EUR Refinancing Rate 0.00% 09 Mar 0.00%

GBP Repo Rate 0.25% 16 Mar 0.25%

AUD Official Cash Rate 1.50% 07 Mar 1.50%

NZD Official Cash Rate 1.75% 23 Mar 1.75%

JPY Official Cash Rate 0-0.10% 31 Jan 0-0.10%

SGD 3-Mth SIBOR 0.94% - -

MYR O/N Policy Rate 3.00% 02 Mar 3.00%

IDR 7-Day Repo Rate 4.75% 16 Mar 4.75%

THB 1-Day Repo Rate 1.50% 29 Mar 1.50%

PHP O/N Reverse Repo 3.00% 23 Mar 3.00%

INR Repo Rate 6.25% - 6.25%

TWD Discount Rate 1.375% 15 Mar 1.375%

KRW Base Rate 1.25% 13 Apr 1.25%

HKD Base Rate 0.50% - 0.50%

CNY 1-Yr Wking Capital 4.35% - 4.35%