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Bank Indonesia opted to hold out on rate hikes for now, keeping rates untouched to bolster the economic recovery Bank Indonesia Governor Perry Warjiyo has hinted that he will consider tightening policy if inflation becomes a problem 3.5% BI policy rate   As expected Central bank remains unfazed by simmering inflation pressures Bank Indonesia (BI) kept policy rates unchanged at 3.5%, matching the market consensus. BI Governor Perry Warjiyo cited concerns about the pace of global growth suggesting that Indonesia’s ongoing economic recovery would need support from monetary authorities. BI retained both growth and current account projections from the previous meeting but recognised the threat of rising price pressures.  Warjiyo indicated that inflation would remain under control although he admitted that inflation expectations warranted monitoring. BI may have felt less pressure to hike policy rates today after fiscal authorities rolled out a subsidy package to help contain the recent increase in food and energy prices.  Inflation remains on the uptrend but BI appears confident that fiscal measures can contain price pressures Source: Badan Pusat Statistik Bank Indonesia enacts dovish pause We had expected BI to keep policy rates unchanged at today’s meeting, however we believed that Governor Warjiyo would at least set the table for a June rate hike. Warjiyo did the exact opposite by pledging sustained support for the economic recovery and citing Indonesian rupiah (IDR) stability.  It appears the central bank remains confident that inflation can be contained by subsidies rolled out by fiscal authorities and that IDR would remain supported by a healthy trade surplus in the near term. As such, it appears BI is in no hurry to hike policy rates in the near term unless we see a substantial pickup in core inflation in the coming months and or heightened weakness from IDR. With BI enacting a dovish pause, expect IDR to come under some pressure as BI opts not to join the rate hike camp for now.      Read this article on THINK TagsInflation IDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Bank Indonesia has unexpectedly hiked rates in a preemptive move  Indonesia's central bank governor Perry Warjiyo 3.75% Policy rate   Higher than expected Surprise surprise... BI finally hikes rates Bank Indonesia (BI) unexpectedly raised its policy rate by 25bp today. BI Governor Perry Warjiyo carried out a preemptive hike in anticipation of a planned price increase for subsidised fuel. The central bank expects growth to settle at the top end of their 4.5-5.3% year-on-year forecast while headline inflation is forecast to exceed 5%.  BI tightens as headline and core inflation sustain rise Source: Badan Pusat Statistik and Bank Indonesia BI likely not done for the year BI finally hiked after staying on hold for the whole of 2022, confident that policy tightening would not derail the economy's recovery. BI also made particular mention of "high" food inflation and any future tightening could be triggered if food prices stay elevated. We expect at least two more rate hikes by the central bank this year.    BI indicated it would be active in buying government bonds on the long end while selling shorter-dated bonds resulting in a flatter yield curve. Meanwhile, the Indonesian rupiah (IDR) could gain support from the surprise rate hike in the near term and could strengthen further should Indonesia's trade surplus remain sizable.  Read this article on THINK TagsIDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Exports surge anew, keeping the trade balance in a hefty surplus         Source: Stenly Lam 28 Consecutive months trade balance in surplus   Trade balance hits $5.8bn Indonesia’s export sector bested market expectations, rising 30.2%YoY compared to a median forecast of 19.9%.  Increased demand for energy products helped exports to rise 61% while outbound shipments of non-oil and gas rose 28.7%.  Imports also posted double digit gains, increasing by 32.8%, only slightly higher than expected. Energy imports expanded 80.6% (fuel for road vehicles) while non-oil and gas imports rose 26.1% as economic activity continues to improve. The overall trade balance touched $5.8bn, much better than market expectations and the second highest level on record.  Trade surplus since May 2020 Source: Badan Pusat Statistik Stable IDR to limit BI's rate hike prospects? Not so fast Heightened demand for Indonesia’s commodity exports has supported the economy’s recovery in many ways this year.  Surging exports have in turn helped drive manufacturing activity, with PMI manufacturing indices staying in expansion for all of 2022.  Meanwhile, 28 straight months of trade surpluses have shored up the IDR and the currency has been relatively stable compared to regional peers.  The currency has also faced less depreciation than in previous episodes of intense financial market volatility, such as 2018 or early 2020.  A stable IDR has eased pressure on Bank Indonesia (BI) hike rates aggressively this year with the central bank, hiking by only 25bp so far. Today’s trade data limits somewhat expectations that BI Governor Warjiyo will carry out a 50bp rate hike next Thursday.  However, given Warjiyo’s surprise rate hike last August, we cannot put it past BI to front load tightening (50bp rate hike) in anticipation of a sharp uptick in inflation after the fuel price hike.           Read this article on THINK TagsIndonesian rupiah Indonesia Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

A key central bank meeting and regional inflation and trade figures are in focus next week In this article The week ahead RBA meets to discuss policy Most regional inflation readings to accelerate Korea and Taiwan trade data PMI readings from Indonesia, Philippines and Singapore All about reserves Source: Shutterstock The week ahead In the coming week, we'll get readings on inflation, trade and PMI reports from the region. Also, with FX markets battered, data on dollar reserves will be in focus. Lastly, the Reserve Bank of Australia (RBA) meets to discuss policy, with the chance of a 50bp hike increasing.  RBA meets to discuss policy Following some reasonable August labour market data, and stronger-than-expected retail sales figures, recent hints from the Reserve Bank of Australia that it may soon start to tighten rates at a slower pace are looking a bit less credible right now. With a strong and unified hawkish chorus from US Fed officials, the apparent ruling out by the US White House of a plaza-style currency agreement, and a further sliding of the Australian dollar, the odds are swinging back towards another 50bp RBA move at the coming meeting. Most regional inflation readings to accelerate Price pressures are likely to kick into high gear for both the Philippines and Indonesia which should keep their respective central banks on notice.   Indonesia's inflation has remained relatively subdued of late, but a recent price hike for subsidised fuel should push headline inflation past 6% year-on-year. Philippine inflation should also edge higher after a brief pause.   Meanwhile, the sharp depreciation of the Japanese yen should add pressure to inflation, with Tokyo CPI inflation expected to rise to 2.9%YoY in September. Inflation in Korea will also likely move higher, up 5.7%. Gasoline prices may have declined but food prices climbed quite sharply for the month. Lastly, Taiwan's inflation should have a strong correlation with its trade data. Our outlook is for a slowdown in trade due to fading purchasing power for US and European markets. The weakness in the trade sector suggests softer demand in Taiwan given its dependence on external trade. Thus we expect lower CPI and WPI inflation for Taiwan. Korea and Taiwan trade data Korea's September trade data will also be in focus for the coming week. Set for release over the weekend, we expect export growth to slow to 2%YoY given the unfavourable calendar day effect. Semiconductors exports should rebound marginally after a sudden drop in August, but automobile exports are likely to turn negative as suggested by a recent industry report. Import growth is also expected to decelerate as the drop in oil prices overwhelms the weak Korean won.   Taiwan will also release trade figures in the coming days. Both exports and imports should be softer than in August, as high inflation in the US and Europe has led to a fall in purchasing power and thus weaker demand for Taiwan's exports.  PMI readings from Indonesia, Philippines and Singapore Next week will feature the latest readings for PMI manufacturing. We can expect declines in PMI indices for both the Philippines and Singapore due to slower export demand although both indices are likely to remain in expansion. Indonesia on the other hand should see a modest improvement in activity tracking surging exports.   All about reserves The ongoing rout in currency markets has central banks dipping into reserves to slow the depreciation of their currencies. Reserve levels are likely to fall in the coming months and both the Philippines and Indonesia could see lower levels given depreciation pressure for their respective currencies.   Asia Economic Calendar Source: Refinitiv, ING TagsTaiwan Reserve Bank of Australia Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Headline inflation rises as Pertalite price increase kicks in Inflation in Indonesia has remained subdued 6.0% CPI year-on-year growth   As expected September inflation at 6% after fuel price hike Price pressures continue to build in Indonesia. September CPI inflation rose 6% year-on-year and 1.2% month-on-month after the government increased the price of subsidised fuel. As a result of the price increase for Pertalite, transport costs increased 8.9% for the month. Meanwhile, food inflation also accelerated to 7.9% while only clothing and financial services saw slower inflation from the previous month.    Core inflation settles at 3.2% The surprise today was the core inflation reading which increased to 3.2% YoY from 3.0%. The market consensus had core inflation rising to 3.5% as economic activity continued to improve.  Despite the downside surprise, we believe core inflation should continue to accelerate for the rest of the year as second-round effects from the recent fuel price hike begin to manifest. Furthermore, improved economic growth prospects suggest demand-side pressures are likely to build, putting pressure on core inflation to rise further. Headline inflation now at multi-year high Source: Badan Pusat Statistik and Bank Indonesia BI still likely to retain hawkish tone Bank Indonesia (BI) announced two successive surprises in the last three months; the first of which was an unexpected rate hike at the August meeting followed by a hefty 50bp rate increase when the market had priced in a more modest one.  With inflation now hitting multi-year highs, we expect BI to retain its hawkish tone with a rate hike at the October meeting still a possibility. The core inflation number however could mean that BI would be under less pressure to deliver another punchy (50bp) rate increase with the size of the hike likely dependent on the rupiah's performance for the month.      Core inflation expected to rise further as second-round effects manifest Source: Badan Pusat Statistik Read this article on THINK TagsIndonesian CPI IDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Economist at UOB Group Enrico Tanuwidjaja reviews the latest release of inflation figures in Indonesia. Key Takeaways “Sep’s headline inflation rose sharply, but not unexpected, by 1.2% m/m or 6% y/y (4.7% in Aug) while core inflation rose to 3.2% y/y (prior 3%).” “Inflation in Sep was mainly driven by the effects of fuel price hike on transport prices and on higher food prices.” “As we have alluded to in our latest quarterly publication, we keep our 2022 inflation forecast (average) at 4.9%. We also maintain our view for BI to hike rates to reach 5% by year-end.”

Indonesia’s trade surplus is still healthy despite a slight disappointment in export and import growth Source: Stenly Lam $5bn September trade balance   Higher than expected Trade balance at $5bn Indonesia’s exports and imports slipped below market expectations but still managed to post strong growth, up by 20.3% year-on-year and 22%, respectively.  Exports slipped below median expectations for a 28.6% increase which may have prompted the suspension of export tax for palm oil exports until the end of the month. Import growth was also below the market consensus which could reflect softer domestic demand given elevated prices. The overall trade balance however was still healthy, settling at $5bn compared to expectations for $4.8bn.  Trade surplus remains but may be less able to support the IDR Source: Badan Pusat Statistik Surplus helps but pressure on the IDR persists Indonesia’s string of trade surpluses has provided some support to the rupiah for the most part of 2022. Surging commodity prices have helped deliver outsized gains for exports, translating to a record-high trade surplus of $7.6bn in April. Indonesia will likely continue to post trade surpluses for the rest of the year but the support provided to the currency appears to be slipping.  The $5bn trade surplus should help limit some pressure on the IDR but sustained foreign selling in the bond market may still translate to depreciation pressure on the currency in the coming months.  Read this article on THINK TagsIndonesia IDR Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Bank Indonesia has hiked policy rates by 50bp to shore up the rupiah Indonesia's central bank governor Perry Warjiyo 4.75% 7-day Reverse Repurchase rate   As expected BI tightens by 50bp as expected Bank Indonesia (BI) hiked policy rates by 50bp as expected today. The central bank continued to tighten aggressively to shore up the currency which has faced renewed pressure of late (down 1.73% in October).  The Indonesian rupiah (IDR) had been relatively stable for the early part of the year, aided by hefty trade surpluses. But the heightened risk-off tone and accelerating inflation have the currency currently on the back foot.  BI ramps up rate hikes as inflation heats up Source: Badan Pusat Statistik Far from done BI was a relative latecomer to the central bank rate hike club and we believe that Governor Perry Warjiyo's work is far from over. Inflation will likely pick up further in the coming months which should ensure BI stays hawkish to close out the year. Additional BI rate hikes will also be needed to maintain FX stability, especially with markets pricing in aggressive rate hikes by the US Federal Reserve.  Read this article on THINK TagsIDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Indonesia’s recovery continues aided by robust exports and retail sales but headwinds loom Source: Stenly Lam 5.7% YoY growth   Higher than expected 3Q GDP up 5.7% Indonesia’s economy grew 5.7% year-on-year which was a shade better than the market consensus of 5.6%. Economic activity was underpinned by robust export performance with Indonesia recording substantial trade surpluses during the period. Also supporting growth for the quarter was still-solid household spending with retail sales up an average of 5.3% for 3Q.  Growth, however, is expected to face challenges as early as 4Q22 as both core and headline inflation accelerate, a development which could undercut domestic consumption. Meanwhile, expectations for a slowdown in global trade could also weigh on Indonesia’s export sector in the coming months.    Growth momentum could be challenged as early as 4Q Source: Badan Pusat Statistik Solid growth report suggests hawkish BI Bank Indonesia (BI) had been one of the more reluctant rate hikers in 2022. BI Governor Perry Warjiyo opted to delay his tightening cycle for as long as inflation allowed him to but the central bank has since hiked rates, with the first increase last July. The better-than-expected GDP report should give BI some space to tighten aggressively, especially with the recent slide in the rupiah.  We are pencilling in a 50bp rate hike by BI at the 17 November meeting.         Read this article on THINK TagsIndonesia GDP Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Presidents Xi and Biden strike unexpectedly constructive tone at G-20 summit in Bali Source: shutterstock Macro outlook Global Markets: Perhaps the most unexpected development yesterday, was a surprisingly positive meeting between President Xi and President Biden at the G-20 summit in Bali. The two talked about Taiwan, where Biden noted that the US position on Taiwan and the "One China – two systems" stance, had not changed. That was helpful. For his part, President Xi openly spoke out against the use of nuclear weapons by Russia. That was also helpful. The meeting will be followed up by a visit by Secretary of State, Blinken, to visit senior Chinese officials later in the year. This was far more progress than we, or indeed most commentators had expected, and dominates what may otherwise turn out to have been a fairly irrelevant G-20 summit. That said, the feel-good factor that had been driving markets following the softer-than-expected October CPI release in the US evaporated on Monday. Stocks had been trading higher after a slightly weaker open, but tailed off sharply in late trading, leaving the S&P500 and NASDAQ down about a per cent. There had been more optimism in Asian bourses yesterday following the announcement of measures to reduce the impact of zero-Covid and to prop up the property sector. However, the CSI 300 finished only slightly higher on the day, while the Hang Seng Index put in a more solid 1.7% gain. Equity futures point to a turnaround today with US futures markets suggesting a positive open, while Chinese markets may open lower. Currencies haven’t done a lot. EURUSD is at 1.0317, not much changed from this time yesterday, the same goes for the AUD, though both the GBP and JPY have lost some ground. Asian FX had a mixed day yesterday. The KRW and INR both dropped back about half a per cent, while there was better news for the TWD and CNY. US Treasury yields pushed higher again, and really don’t seem to know which way to go. The 2Y yield is 5.7bp higher, while the 10Y is 4.1bp higher at 3.854%. Lael Brainard got in on the act talking about the Fed soon beginning to moderate the pace of tightening, though noting that they still had work to do. At least she didn't say they had "...a ways to go" which despite being ungrammatical is becoming quite a cliché.   G-7 Macro: Second-tier releases dominate the  G-7 Macro calendar today. UK labour market figures, Germany’s ZEW business survey and US PPI indices are not likely to provide much for markets to base directional trades on.   China: at 10.00 SGT/HKT today we have China’s October data dump, including industrial production, retail sales, fixed asset investment, residential property investment and the surveyed jobless rate. On balance, we don’t think the numbers will be particularly uplifting, in spite of the Golden Week holidays, which ought to have provided some support to retail spending.    Japan: 3Q22 GDP fell 0.3%QoQ, weaker than expectations for a 0.3% QoQ increase. This marks a sharp slowdown from the 0.9% QoQ increase registered for 2Q22. Private consumption grew 0.3%QoQ, down from 1.2% in 2Q22. But the biggest drag on growth came from net exports, which subtracted 0.7pp from the total GDP growth figure, while inventories nicked off a further 0.1pp. Private business investment was a bit stronger, rising 1.5%QoQ and contributing 0.2pp to overall growth, and public investment also added a further 0.1pp to overall GDP growth. Today’s weaker data add downside risk to our 2022 and 2023 GDP forecasts of 1.6% and 1.1% respectively. Indonesia:  Trade data for October is due for release today.  We expect another month of strong gains for imports and exports with the trade balance still likely in surplus.  Export growth however has slowed, which should translate to a less sizable trade surplus.  Record high trade surpluses have supported the IDR for most of 2022 but the gradual decline of this buffer suggests that a key support for the currency may be fading going into 2023.  India: Indian inflation came in at 6.77%YoY for October, which was marginally higher than had been forecast by the consensus (6.7%) but still a decent pull back from the September reading of 7.41%. Inflation will remain at about this level in November, before spiking higher again on base effects in January and February before moving lower again. So the RBI’s job isn’t over yet, even if they can probably take a more laid-back approach to rate hikes from here on. What to look out for: China activity data and G-20 Japan GDP and industrial production (15 November) Australia RBA minutes (15 November) China activity data (15 November) Indonesia trade balance (15 November) US empire manufacturing and PPI inflation (15 November) Fed's Williams, Harker Cook and Barr speak (15 November)   Japan core machine orders (16 November) Australia Westpac leading index and wage price index (16 November) US retail sales (16 November) Japan trade balance (17 November) Australia labor data (17 November) Singapore NODX (17 November) Malaysia trade (17 November) Bank Indonesia policy meeting (17 November) Bangko Sentral ng Pilipinas policy meeting (17 November) US housing starts and initial jobless claims (17 November) Japan CPI inflation (18 November) US existing home sales (18 November) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Bank Indonesia hiked rates aggressively despite softer-than-expected inflation Indonesia's central bank governor Perry Warjiyo 5.25% BI policy rate   As expected BI hikes rates by 50bp Bank Indonesia hiked policy rates by 50bp, a move widely expected by market participants. The 50bp rate increase was dubbed as “pre-emptive” and “front-loaded” by BI Governor Perry Warjiyo as the central bank attempts to cap inflation pressures and shore up the currency.  BI expects growth to remain robust, retaining its 4.5-5.3% year-on-year growth forecast for the year. With growth momentum intact, Governor Warjiyo decided to continue on with aggressive tightening to help maintain a healthy differential with the Fed funds target rate. BI likely keeping hawkish tone amid IDR struggles and core inflation trends Source: Badan Pusat Statistik and Bank Indonesia Core inflation trends and IDR struggles to keep BI hawkish Indonesia’s core inflation has been steadily on the uptick (October at 3.3%) and should likely sustain this trend in the coming months. The price increase for subsidised fuel, recently implemented, will likely feed through to the rest of the CPI inflation basket to keep inflation elevated. Furthermore, the recent struggles of the Indonesian rupiah should keep BI hawkish going into 2023.  We expect BI to hike rates by 50bp at the December policy meeting, matching the likely increase by the Fed at the end of the year.  Read this article on THINK TagsBank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Asian markets rally on China re-opening hopes and dovish Powell speech. Indian 3Q22 GDP better-than-expected, but Korean trade data was very weak and further weakness is expected from China's Caixin indices  In this article Macro outlook What to look out for: Fed speakers and US jobs report   shutterstock Macro outlook Global Markets: It looks as if Fed Chair Powell didn’t get the memo to push back against pivot hopes and keep financial conditions tight before he went to give his speech at the Brookings Institution yesterday. It was at best a neutral speech, acknowledging that rate hikes might be reduced in magnitude as early as the December meeting, but on the other hand, noting that there was still work to be done. But it also threw in a couple of what can only be described as dovish remarks  - namely that the Fed didn’t want to overtighten (no, but don’t tell the market that!). And also that he thought the economy could achieve a “soft landing”. Yes, that would be nice, but wouldn’t it have been better not to cloud the message with growth aspirations that possibly undermine the Fed’s single-mindedness to bring down inflation? It is going to be very hard now for the Fed to push back at market pivot hopes. So let’s hope that inflation does keep on falling, or this may look like a missed opportunity. Equities rallied hard following Powell’s speech. That’s not the direction we would have expected from the speech we think the market needed to hear. The S&P500 rose 3.09% and the NASDAQ rose 4.41%. Chinese stocks yesterday were also strong as re-opening hopes continue to provide support. The key to the “success” or otherwise of Powell’s speech yesterday, though, probably lies more in the US Treasury response. 2Y US Treasury yields fell 16.3bp to only 4.31%. 10Y US Treasury yields fell 13.9bp to 3.605%. The May 2023 implied rate from Fed funds futures has dropped all the way back to 4.925%. A couple of days ago, it was almost 5.0%. It’s no surprise, given all of this, to see the EURUSD exchange rate back above 1.04. The AUD has surged almost all the way back to 0.68, Cable is back up to 1.2069 and the JPY is looking stronger than for some time at 137.83. Asian FX was pretty strong yesterday, led from the front by the CNY which is still betting on re-opening, and by the high beta currencies, KRW and THB. More of the same seems likely today. US financial conditions look well and truly eased. G-7 Macro: For those who like backwards-looking employment data, yesterday’s October JOLTS survey showed a further small decline in job openings, though the measure did not fall as much as had been expected, not that we think the markets would have paid much heed even if it had. More importantly, the ADP survey came in much weaker at 127,000, down from last month’s 239,000.  If we got a figure like that for tomorrow’s US non-farm payrolls (expected 200,000), then that really would be grounds for further declines in bond yields, dollar weakness and equity gains. Though we would caution that payrolls rarely move in lock step with its monthly indicators, and nothing is certain until the data is printed. Today, the main market risk comes from the PCE deflator figures for October. A lot of attention has been placed on whether the core PCE rate will decline or not, given the differences in the scope of PCE compared to CPI and their different weightings. The market is betting on a very small decline in the core PCE inflation rate to 5.0%YoY from 5.1%. And while we don’t disagree, the risk is probably skewed to a higher figure, and perhaps no change in the inflation rate. Maybe after the big market swings yesterday, that would be a better way to be positioned. The US manufacturing ISM index completes the data for today. China: The Caixin manufacturing PMI should indicate that the activity of smaller manufacturers contracted further in November compared to a month ago. Rising Covid cases, together with shrinking exports, added pressure on exporters. Local government officials will likely exercise Covid measures with an intent to reduce their impact on the economy even if there are no further imminent changes in the overall Covid rules. South Korea: Preliminary GDP rose 0.3%QoQ sa in the third quarter, the same as the advanced estimate. However, the details have changed slightly. By expenditure, private consumption (1.7% vs 1.9% advanced) and construction (-0.2% vs 0.4% advanced) were lowered, while facility investment was revised up to 7.9% (vs 5.0% advanced) as machinery and transportation investment increased. Meanwhile, exports continued to fall -14.0% YoY in November (vs -5.7% in October, -11.2% market consensus) for the second straight month. Imports continued to rise, but at a slower pace, only 2.7% in November (vs 9.9% in October, 0.5% market consensus), resulting in the trade deficit widening to -7.0bn USD (vs -6.7bn in October). Semiconductor exports (-29.8%) and exports to China (-25.5%) were particularly weak.  The nationwide truckers’ strike is adding more burden on manufacturing and exports. Considering the sluggish October IP outcomes from yesterday and sluggish exports this morning, the downside risk for the current quarter’s GDP forecast (-0.1% QoQ) has increased. Japan: 3Q capital spending rose 9.8% YoY (vs 4.6% in 2Q, 6.4% market consensus), which is not in line with 3QGDP results. And based on today’s stronger-than-expected capital spending, Japan’s revised 3QGDP is likely to improve from the advance figure which showed a 0.3% QoQ sa contraction. Indonesia:  November inflation will be reported today.  Market consensus points to a softening in headline inflation to 5.5%YoY (from 5.7%) but core inflation may pick up to 3.4%.  The steady rise in core inflation should be enough to keep Bank Indonesia hawkish with Governor Warjiyo likely following through with a rate hike to close out the year.   India: Yesterday evening, India published 3Q22 GDP data. Please read our short snap for more detail. The short version is that at 6.3%YoY, growth exceeded expectations and apart from an outsize drag from imports, there was nothing in the 3Q data to set off alarm bells for the 4Q figure. As such, it will only take a very moderate further growth to ensure that at least a 6% GDP growth rate is achieved for the calendar year 2022.  If so, that would be one of the fastest growth rates in Asia. Fiscal deficit figures yesterday were a little less encouraging, with a big year-over-year jump which if repeated next month, could threaten the government’s fiscal deficit target for FY 2022/23 of 6.4%. What to look out for: Fed speakers and US jobs report South Korea 3Q GDP and trade (1 December) Regional PMI (1 December) China Caixin PMI (1 December) Indonesia CPI inflation (1 December) US personal spending, PCE core deflator, initial jobless claims and ISM manufacturing (1 December) Fed’s Cook, Bowman, Logan, Barr and Powell speak (1 December) South Korea CPI inflation (2 December) Fed’s Evans speaks (2 December) US non-farm payrolls (2 December) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

November inflation slipped to 5.4% year-on-year, slightly below market expectations Source: Stenly Lam 5.4% November headline inflation (year-on-year) Lower than expected Headline inflation dips to 5.4% November inflation edged lower to 5.4% year-on-year, down from the previous month’s reading of 5.7% and slightly slower than market expectations. Meanwhile, core inflation was steady at 3.3% when market participants expected a slight pickup to 3.4%. Slower inflation was noted for the heavyweight food and tobacco subsector, which was up 5.9% (6.8% previous), utilities 3.2% (3.3% previous), household equipment 5.0% (5.1% previous) and restaurants 4.6% (4.7% previous).  We had expected price pressures to experience a more pronounced acceleration due to second-round effects from the recent price hike for subsidised fuel but the dip in food prices was enough to weigh on the headline number.  Indonesia inflation slips below expectations but don't expect BI to pause just yet Source: Badan Pusat Statistik BI likely still hawkish to close out the year Bank Indonesia (BI) will still likely retain its hawkish leaning despite the lower-than-expected inflation reading for November. Core inflation was tagged as one of the main factors that would drive any BI policy adjustment and we will need to see this head much lower before BI considers reversing its current hawkish stance.  Read next: Hungary: GDP declines by 0.4% in the third quarter. What's behind the drop?| FXMAG.COM One other factor that could keep BI on the hiking path would be the Indonesian rupiah, which is still down 8.8% for the year and at the weakest level since 1Q 2020. We expect BI to follow through with a rate hike in December although we could see BI slow its pace of tightening as early as next year.       Read this article on THINK TagsIndonesian CPI IDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

For the last few years, countries around the world have been doing what they can to achieve net zero. The effects of the actions are also visible in Asia, and the development of, for example, solar panels may be even faster, especially in Indonesia. Changes also took place on banknotes in the UK after the death of Queen Elizabeth. Soon the image of King Charles will be officially visible on banknotes. In this article: Banknotes with a portrait of King Charles III Potential solar energy Brutal year for the cryptocurrency world UK’s new banknotes The tradition of putting monarchs on banknotes did not start until the 1960s. Coins have long featured images of the ruler. After the death of Queen Elizabeth II for 70 years, the Royal Mint began work on new banknotes with the image of the successor. The Bank of England published on Tuesday photos of the first banknotes with a portrait of King Charles III. The new £5, £10, £20 and £50 polymer notes feature the king's portrait on a transparent security panel. Other than that, they are unchanged from the designs currently in circulation. They will officially enter circulation in mid-2024. For now, coins and notes with the portrait of the late Queen will continue to be legal tender in the UK New British banknotes featuring portrait of King Charles III revealed @hannahswg https://t.co/6jW17l6SuI — Ted Kemp (@TedKempCNBC) December 21, 2022 Read next: Nike Saw Strong Demand And Raised Its Revenue Forecast| FXMAG.COM The potential of solar energy The solar PV industry in Indonesia hopes that better prospects are just around the corner as solar PV costs continue to fall and reforms improve the business case. Last year, Indonesia's energy ministry approved a new 10-year business plan that sees renewable projects account for more than half of planned new capacity, a 25 percent increase over the previous plan. Indonesian energy ministry introduced improved conditions for solar power on grid roofs, reducing permitting time and increasing export credit The regional government wants renewables, mostly solar, to drive 35 percent of the province's approximately 5 million electricity generation by 2025, and has committed to reducing emissions by 31.9 percent by 2030 as part of the plans. Which means that Indonesia is on the right track to increase the potential of solar energy. This is particularly important as the country is the world's largest exporter of thermal coal and the state-owned grid, Perusahaan Listrik Negara (PLN), relies on domestic supplies to power two-thirds of electricity production. Indonesia has more potential solar energy than all the world’s power plants combined, but the archipelago faces many challenges weaning itself off fossil fuels. Read F&D to learn why. https://t.co/6ugA46WPS3 pic.twitter.com/24andHqVuQ — IMF (@IMFNews) December 21, 2022 Brutal year for the cryptocurrency world This year has undoubtedly been brutal for the markets, including the cryptocurrency market. It was a brutal reality check for an industry that started 2022 with dreams of widespread mainstream institutional adoption, of even gold being replaced by bitcoin as a global hedge against inflation. Now time has shown that gold still has its strength in difficult times, and bitcoin turned out to be not as stable as it might seem at first. UBS strategist James Malcolm points to the growing correlation between cryptocurrencies and US small-cap stocks as evidence of how bitcoin and other tokens can survive marginally as niche, diverse assets in investment portfolios. WATCH: The year 2022 has been brutal for the cryptocurrency world. Crypto met with Fed hawkishness, the crash of stablecoin TerraUSD, and fund and broker bankruptcies. Then came the collapse of Sam Bankman-Fried's FTX exchange https://t.co/bEZ8SAKBWf pic.twitter.com/jEl4LAgRkd — Reuters Business (@ReutersBiz) December 21, 2022

Bank Indonesia hikes rates by 25bp, as expected.  BI set to continue tightening in early 2023. Indonesia's central bank governor Perry Warjiyo 5.5% 7-day Reverse Repurchase rate   As expected BI hikes again but downshifts to less aggressive tightening In a move widely anticipated by market participants, Bank Indonesia (BI) has hiked policy rates by 25bp to 5.5%.  Price pressures have abated somewhat, as evidenced by the recent slip in headline inflation and we believe that inflation in Indonesia may have peaked.  The softer inflation reading - combined with the general outlook for growth challenges in 2023 - convinced the central bank that a less forceful rate hike should be rolled out today.  A similar downshift in the pace of tightening from global central banks also allowed BI to implement the 25bp increase in policy rates today.    BI rolls out 25bp rate hike as inflation pressures ease Source: Badan Pusat Statistik Rate hikes set to continue in early 2023 Despite the pullback in the pace of tightening, we believe BI will continue with the current tightening cycle next year.  BI believes that the Fed will continue to hike rates in the first half of 2023 and we could see BI following suit with rate hikes of their own.  The IDR has come under some pressure to close out 2022 and we believe BI will need to match Fed rate hikes to help maintain FX stability.  With BI’s policy rate at 5.5%, IDR should move sideways to close out the year - with investors monitoring the fallout from the recent bond buyback announcement from the national government.  Read this article on THINK TagsIDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Indonesia will impose a ban on bauxite exports from June 2023 in a move aimed at boosting domestic processing of its mineral resources Large piles of bauxite ore Pushing for development of processed bauxite Indonesia is the world’s sixth-largest bauxite producer and holds the fifth-largest reserves, according to a US Geological Survey report this year. The country is the third-biggest supplier of the raw material to China, after Guinea and Australia. “Starting from June 2023, the government will impose a ban on exports of bauxite ore and push for development of processed bauxite in the country”, President Joko Widodo said in a briefing broadcast on YouTube. This means the “added value is enjoyed in the country for the progress and welfare of the people”. Indonesia has four bauxite processing facilities with 4.3 million tonnes of alumina output capacity, while more are under construction will have collective capacity of nearly 5 million tonnes, according to Indonesia’s chief economic minister Airlangga Hartarto. Indonesia’s bauxite reserves are enough for up to 100 years of production. Exports of bleached bauxite will also be banned while President Widodo also flagged that there are potentially more prohibitions on raw materials shipments coming in 2023. China less reliant on Indonesia's bauxite China, the leading importer of bauxite, was the biggest consumer of Indonesia’s bauxite until the country introduced a ban on the raw material in 2014. At the time, China was relying on Indonesia for about two-thirds of its overseas supply. Since then, Chinese smelters have heavily invested in diversifying their sources of bauxite, buying more of the raw material from other countries, including Guinea, or having built alumina refineries in Indonesia. Indonesia eventually lifted the ban in 2017. The 2014 ban pushed Chinese alumina producers, including China Hongqiao and Nanshan Group, to build refineries in Indonesia to process local raw material and ship alumina. Last month, only 12% of China’s bauxite imports came from Indonesia. This year, bauxite imports from Indonesia accounted for 16% of China’s total this year through October versus 68% in 2013. Meanwhile, shipments from Guinea increased from 1% in 2013 to 55%. Indonesia now accounts for only a small share of China bauxite imports and we don’t expect it to have a significant impact on China’s supply of the raw material. Replicating success in nickel Indonesia has already prohibited the export of nickel ore to attract foreign investors, encourage domestic processing and further downstream use of its raw materials. The Indonesian president said the bauxite ban is aimed at replicating Indonesia’s success in developing its nickel processing capacity after banning export of its raw form in January 2020. The ban has enticed foreign investors, mainly from China, to build local smelters and helped to boost the value of Indonesia’s exports. The move has triggered opposition from importing countries. The World Trade Organization ruled last month that Indonesia’s ban on nickel ore exports violated international trade rules following a complaint by the European Union. Indonesia is appealing the decision. Earlier this year, Indonesia banned briefly shipments of palm oil and coal, of which the country is the biggest exporter. "If we follow the footstep of the Western countries, we will always be left behind, we will never catch up. We will keep our economy open, but once again, we need to be able to design it in such a way that other countries are reliant on us." - Indonesian President Joko Widodo China's bauxite imports: 2013 Source: China Customs China's bauxite imports: 2022 January-October Source: China Customs Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Next week’s data calendar features China’s GDP numbers, jobs data from Australia, and a rate hike by Bank Indonesia Source: Shutterstock RBA looking to jobs report next week for direction After the disappointingly high November inflation numbers, the Reserve Bank of Australia (RBA) will want to see some evidence of slowing in the labour market if it is not going to have to raise rates more than the additional 50bp we are currently forecasting. The consensus is for around 64,000 new jobs, which would indeed be a strong figure, and unless there was an offsetting rise in the unemployment rate, would probably prompt us to review our peak rates forecast in favour of an increase. We expect total employment of roughly 45,000 fresh jobs of which only 20,000 would be full-time jobs. Lending rate and activity data out from China The People's Bank of China (PBoC) will decide whether to cut the 1Y Medium Lending Facility rate (MLF) on 16 January. We expect the PBoC to pause at 2.75% as the economy is recovering. Furthermore, the government has emphasised that the central bank's actions should be more focused, and a general rate cut would not be considered a focused monetary policy move. After the PBoC’s announcement of 1Y MLF, Chinese banks will announce 1Y and 5Y Loan Prime Rates (LPR) on 20 January. We expect no change in these interest rates as banks usually follow the move of MLF and banks’ interest margins have been thinner. But the government has urged banks to lend out more loans, which may imply banks could be under pressure to cut. Meanwhile, China will announce activity data and GDP data between 10 and 27 January. We expect retail sales to contract deeper on a yearly basis while industrial production could turn from positive growth to mild contraction in December. This leaves the economy mainly supported by fixed-asset investments. As a result, GDP growth for the fourth quarter should be in slight year-on-year contraction. BoJ to reiterate dovish stance while BI set to hike The Bank of Japan (BoJ) is expected to stand pat after delivering its unexpected decision in December to expand the yield curve band. Governor Haruhiko Kuroda’s future guidance will remain dovish, but apart from that, the market appears to be pricing in additional normalisation steps from the next BoJ governor. Considering that Tokyo CPI inflation hit 4% year-on-year earlier this week, national CPI inflation for December is likely to climb up to 4%. But, pipeline prices, such as import price and producer price, are expected to be lower than in the past month.  Meanwhile, Bank Indonesia (BI) meets to discuss policy next week and we expect Governor Perry Warjiyo to start the year with a rate hike to support the Indonesian rupiah (IDR). Softer inflation reported in the past few months and fading growth momentum suggest that BI will likely opt for a 25bp rate increase which would widen interest rate differentials to support the currency. Indonesia's trade report to show slowing export growth Indonesia also reports trade numbers next week. With commodity prices moderating, exports will likely manage to grow a modest 6.2% while imports could contract for a second straight month. The trade balance will likely remain in surplus but could slide to $3bn, lower than the previous month and less than half of the record $7.6bn recorded in April last year. With the trade surplus fading, we could see the IDR missing a key support in 2023, which could suggest some depreciation pressure on the currency this year. Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Indonesia benefited from the commodity boom in 2022 but may not be able to bank on this next year In this article Indonesia: At a glance 3 Calls for 2023 Slowing trade momentum to keep FX pressured Tinkering with central bank charter a positive or a negative? Jokowi’s last full year in office ahead of early 2024 election    Shutterstock Share Indonesia: At a glance Growth in 2022 will likely average 5.3% year-on-year but momentum is slowing as the commodity boom fades and inflation accelerates. Forecasts by Bank Indonesia (BI) indicate GDP growth should settle between 4.7-5.5% YoY next year. Household spending was one solid factor behind the growth engine due in part to relatively well-behaved domestic inflation in the first half of the year. Relatively less pronounced price pressures allowed BI the space to delay rate adjustments until the second half of 2022, which also supported growth. By the second half of the year, price pressures finally caught up with Indonesia as headline inflation breached the central bank’s upper bound target of 4%.  Indonesia’s trade sector has also seen momentum fade as commodity prices have normalised after surging due to the war in Ukraine. This development will also be worth watching in the coming months.  Growth and inflation outlook Badan Pusat Statistik and ING estimates 3 Calls for 2023 1Slowing trade momentum to keep FX pressured Indonesia was one of the few countries that benefited from the commodity price boom in 2022, translating to record trade surpluses. This resulted in the current account also reverting to positive territory, which in turn provided robust support to the Indonesian rupiah (IDR). The relative stability of the IDR helped limit price pressures early in 2022 which in turn allowed the central bank to postpone rate hikes to the latter half of 2022. With commodity prices moderating and expected to slide further, we could see Indonesia’s trade surplus diminish or even move into deficit territory in 2023. The loss of this previous support suggests that the IDR will likely remain pressured for much of next year, especially if financial outflows continue. A weaker IDR in 2023 could also translate to additional rate hikes by the central bank early next year.  2Tinkering with central bank charter a positive or a negative? The Covid-19 pandemic’s impact on fiscal balances led to some central banks resorting to quasi-budget financing in addition to quantitative easing. Bank Indonesia (BI) was one of the more active central banks in terms of providing support to fiscal counterparts with BI purchasing government bonds in the primary market. This temporary scheme was termed a “burden-sharing arrangement” and was permitted via Presidential decree. BI Governor Perry Warjiyo promised to wind down such operations after the pandemic, but Indonesia’s lawmakers passed fresh legislation to make the quasi-central bank financing a permanent fixture for BI.  The use of “burden sharing” during Covid-19 raised eyebrows when first implemented but was justified given the fallout from the pandemic. The passage into law could call into question central bank independence, which in turn could cause some anxiety in the bond markets and the currency. 3Jokowi’s last full year in office ahead of early 2024 election  President Joko Widodo enters his last full year in office next year as he is not eligible to take up a third term as President. Indonesia holds presidential elections in February 2024. Jokowi appears to have made a veiled endorsement for his successor by suggesting that Indonesians vote for a candidate with “white hair” and “wrinkles”. Opinion polls currently have three front runners: Central Java Governor Ganjar Pranowo, former Jakarta governor Anies Baswedan and former defence minister Prabowo Subianto.  It will be interesting to see how Jokowi spends the last 14 months of his term as he could still pass key legislation given his control over the house of representatives. Key legislative bills include the New Capital City (NCC) law and a new penal code. In particular, the NCC could positively impact growth potential as amendments could bring in a fresh round of investment given the capital-intensive requirements to move the capital from Jakarta to East Kalimantan.  Jokowi, on the other hand, may become more involved in the campaign by explicitly endorsing one of the three front runners - a move which could distract him from passing amendments to existing laws or drafting fresh legislation.        Indonesia summary forecast table Badan Pusat Statistik and ING estimates TagsIndonesia GDP IDR Bank Indonesia

Souring US data raises thoughts of the Fed's endgame. Australian labour data and Bank Indonesia decision APAC highlights Source: shutterstock Macro outlook Global Markets:  Big Moves in bond markets overnight – the run of soft data in the US is being taken at face value by investors – bad news finally equals bad news. Stocks had a bad day, with the S&P500 and NASDAQ both losing between 1 and a quarter and one and a half per cent on the day, but it is the moves in US treasury yields that most catch the eye. 2Y US Treasury yields fell 12.2bp, to 4.082%,  while the 10Y bond saw yields down 17.8bp to 3.37%, which has helped drag bond yields elsewhere down too. The Australian 10Y now yields 3.43%, which is down more than 60bp from the start of the year. Japan’s 10Y JGB is now yielding only 0.402% after investors were chastened by Kuroda’s blunt rejection of further changes to the BoJ’s policy stance. It did look at one point as if these weaker yields would drive EURUSD to new year highs, and for a while they did, reaching up to 1.0887, but the rise was short-lived, and EURUSD is now back to just below 1.08. The AUD had a similar gain and then reversal, as did Cable, though it managed to hold on to more of its earlier gains to trade at 1.2345 currently. The JPY did almost the opposite, selling off up to 131.50 after the BoJ meeting, only to recover back to 128.43. Asian FX had a mostly positive day yesterday, led by the THB, INR, IDR and PHP. G-7 Macro: December US advance retail sales came in even weaker than expected, dropping 1.1% MoM, with downward revisions to previous months’ data. PPI inflation data also fell sharply from the previous month, and there was a nasty fall of 0.7% MoM from industrial production. James Knightley has written about this data plus what it may mean for the Fed. It’s well worth the read – it even questions whether the Fed will raise further after February.  The Fed’s Beige book also noted that the rate of price increases was moderating in many districts with contacts expecting further moderation in the year ahead. In spite of this, James Bullard and Loretta Mester kept up the hawkish commentary – not that it seems anyone in the markets is listening. Today, we get US housing starts and permits. Housing starts have been on the slide since April last year, though these winter readings need to be taken with a pinch of salt as they are prone to seasonal anomalies. UK RICS house price balance is also released for December today and is expected to show further declines. Australia: The December labour report contains a lot of interesting data. The headline figure of a 14,600 decline in total employment is the most eye-grabbing detail, though it was mainly a result of part-time job losses (-32,200), and full-time jobs still grew a respectable 17,600, though slower than in November. And there was a higher-than-expected unemployment rate of 3.5% up from 3.4%. Together, these data mean that we will stick to our 3.6% peak cash rate call, despite the inflation disappointment last month. More inflation data is released next week, which we hope will restart inflation's move lower.  Indonesia: Bank Indonesia meets to discuss policy today.  The central bank is widely expected to hike rates at today’s policy meeting to steady the IDR and to quell still-potent price pressures.  Inflation unexpectedly flared up last December with BI Governor Warjiyo warning that inflation could remain elevated this year. BI will continue to monitor inflation developments and the performance of the currency. However, we could see the central bank eventually pause after Governor Warjiyo voiced some concerns about the economy’s growth trajectory in 2023.     Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

Payrolls shock and balloon pop to dominate today's trading Source: shutterstock Macro outlook Global Markets: Once again, US non-farm payrolls caught markets off guard, with a surprisingly strong headline figure which drove up US bond yields and caused the USD to strengthen. 2Y US Treasury yields rose 18.4bp to 4.289%, while 10Y yields rose 13.2bp to 3.525%. EURUSD dropped back below 1.08, and the USD also rallied against other G-10 currencies. The AUD is back below 70 cents at 0.6925. Cable has fallen all the way back to 1.0250 and the JPY shot back above 132, though has since settled back to 131.67 this morning. Part of that JPY move may have been on speculation about BoJ Governor Kuroda's successor, as BoJ incumbent and continuity candidate, Masayoshi Amamiya was rumoured to have been approached for the job. Finance Minister, Shunichi Suzuki later said he hadn't heard anything about the nomination. Most Asian currencies have weakened against the USD. Many of them will fall sharply in early Asian trading as they take onboard the G-10 movements. USDCNH is back up to 6.8219 with the balloon incident not helping China's currency (see more below).  US stocks didn’t like the implications of a stronger labour market either, as it hurts the Fed pause/pivot story. The S&P500 dropped 1.04% on Friday, while the NASDAQ was down 1.59%. The Hang Seng and CSI 300 were also both down on Friday. G-7 Macro:  For the full gory details of the US labour report, please refer to James Knightley’s note. The headline numbers are a 517,000 rise in employment, a fall in the unemployment rate to 3.4% from 3.5%, but a moderation in hourly wage inflation to 4.4%YoY from 4.8%. James has gone on to dig deeper into the detail of the report, which reveals that almost all of the employment gains were part-time, and much may be attributable to warmer than usual weather in January, lifting outside work which would normally be very limited at that time of year. The weather has since turned very cold, which suggests that we may see some reversal of the apparent strength in the labour market next month. Though who really knows with this data? There is no data out of the US today. In the rest of the G-7, German factory orders data for December are the main release. A continuation of double-digit year-on-year declines is expected. China: The Chinese balloon shot down by the US has hardened President Xi's stance on relations with the US, which was inevitable as he needs to demonstrate strong foreign policy to China’s citizens. The implication is an intensified tech war. Both sides will likely impose more export bans on technology in different industries. This is a new threat to supply chain disruption, although the risk of logistical disruption from Covid restrictions has now disappeared. This new risk is more of a long-term risk than an imminent one. Nonetheless, the balloon event is bad for the yuan today. Indonesia:  4Q22 GDP is set for release today.  The market consensus points to a 4.9%YoY gain, good enough to take 2022 full-year growth to 5.3%.  Indonesia’s export and manufacturing sector managed to post solid growth in 2022 in large part due to the global commodity price surge.  This area of support faded towards the end of lat year and the economy will need to rely on other sectors like domestic consumption to carry growth momentum on into this year.        What to look out for: Fed speakers and China inflation Indonesia GDP (6 February) Thailand CPI inflation (6February) Australia RBA meeting and trade balance (7 February) Philippines CPI inflation (7 February) Taiwan trade balance (7February) US trade balance (7 February) South Korea BoPcurrent account (8 February) India RBI policy meeting (8 February) US mortgage MBA applications (8 February) Fed’s Powell, Williams, Cook and Barr speak (8 February) Taiwan CPI inflation (9 February) Japan machine tool orders (9 February) US initial jobless claims (9 February) Fed’s Kashkari and Waller speak (9 February) Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February)   Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

GDP growth in the fourth quarter of last year beat market expectations, but signs point to a slowdown in 2023 Jakarta, the capital of Indonesia 5%YoY 4Q 2022 GDP growth   Higher than expected Fourth quarter GDP growth beats consensus Economic activity rose 5% year-on-year in the fourth quarter of 2022, up 0.4% from the previous quarter and better than the market consensus of a 4.9%YoY gain. The better-than-expected growth performance takes full-year growth to 5.3%YoY. Solid household spending (4.5%YoY) offset a contraction in government spending (-4.8%YoY) as well as compensating for slower capital formation (3.3%YoY vs 6.5% previous) and a narrowing trade surplus. Indonesia’s export and manufacturing sectors benefited from rising commodity prices in early 2022 but this key support has now faded. Exports, mining/quarrying and manufacturing all managed to eke out gains in the fourth quarter but at a more measured pace compared to the previous quarter.  We can expect exports and the manufacturing sector to face headwinds in 2023 with the economy needing to rely more heavily on household consumption for growth. Household spending proved resilient in 2022 but stubbornly high inflation (January inflation at 5.3%YoY) could weigh on consumption at least in the first half of 2023. Fourth quarter GDP surprises on the upside but 2023 brings fresh challenges to growth outlook Source: Badan Pusat Statistik Bank Indonesia shifting its stance? Bank Indonesia (BI) has been busy over the past few months, lifting its policy rate from 3.5% to 5.75% to deal with above-target inflation. BI Governor Perry Warjiyo however recently hinted that the current policy rate hike cycle could be coming to an end soon. BI will likely consider reversing its current stance to dovish should inflation continue to soften amid slowing growth momentum.  If inflation continues to edge lower, we could see BI pause policy rates as early as the first quarter of the year to shift focus back to growth support amid the global economic slowdown.    Read this article on THINK TagsIndonesian CPI Indonesia GDP Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Cronos Labs opens applications for second cohort of the Cronos Accelerator Program. Indonesia’s Ministry of Trade to roll out a national crypto exchange. Ethereum launches test network, Zhejiang, for staked ETH withdrawal testing. Weekly Market Index Last week’s crypto market prices were flat at -0.97%. Volume dropped slightly by -1.79% and volatility increased by +50.83%.     Weekly Performance Bitcoin (BTC) and Ethereum (ETH) were down -3.2% and -0.5% in the past seven days, respectively. Shiba Inu (SHIB) was the top performer among selected top-cap tokens. The team behind Shiba Inu recently announced the upcoming beta release of Shibarium, a layer-2 network that will operate on top of Ethereum. Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM     News Highlights Blockchain startup accelerator Cronos Labs announced the opening of applications for its second cohort of the US$100 million-backed Cronos Accelerator Program. The program aims to provide selected projects with upfront seed funding of US$30,000 in addition to mentoring, masterclasses, and support from industry experts. The U.S. Federal Reserve raised target interest rates by 0.25% to the 4.50% to 4.75% range, in line with market expectations. Indonesia’s Ministry of Trade is reportedly aiming to roll out a national crypto exchange by June this year. This exchange would act as a clearing house and custodian in the local crypto market. Ethereum developers opened a new test network called “Zhejiang,” where users can start testing staked ether withdrawals, which will be included in the protocol’s upcoming “Shanghai” upgrade. Twitter has started applying for licenses in the United States to allow the social media giant to support digital payments. Currently, the main focus revolves around enabling fiat payments, although anticipation for crypto functionality is building. Recent Research Reports AI-Generated Content and Applications in Web3: Artificial Intelligence-Generated Content (AIGC) has taken the world by storm recently, with popular applications like ChatGPT and DALL-E. We analyse its potential applications in Web3. Crypto Market Sizing Report: Global crypto owners reached 425 million by the end of 2022. Bitcoin and Ethereum owners grew by 20% and 263%, respectively. 2022 Year Review & 2023 Year Ahead: 2022 has been a ride for the crypto industry. In this report, we curate the top ten crypto events and trends of 2022, followed by our outlook for 2023. Catalyst Calendar             Disclaimer: The information in this report is provided as general market commentary by Crypto.com and its affiliates, and does not constitute any financial, investment, legal, tax, or any other advice. This report is not intended to offer or recommend any access to products and/or services. While we endeavour to publish and maintain accurate information, we do not guarantee the accuracy, completeness, or usefulness of any information in this report nor do we adopt nor endorse, nor are we responsible for, the accuracy or reliability of any information submitted by other parties. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of, or located in a jurisdiction, where such distribution or use would be contrary to applicable law or that would subject Crypto.com and/or its affiliates to any registration or licensing requirement. The brands and the logos appearing in this report are registered trademarks of their respective owners. Author Research and Insights Team Get fresh market updates delivered straight to your inbox: Subscribe to newsletters   Be the first to hear about new insights: Follow us on Twitter Tags CRYPTO RESEARCH CRYPTOCURRENCIES MARKET Source: Crypto Market Pulse (06/02/2023)

Indonesia’s January trade balance settled at $3.9bn after exports beat expectations         Jakarta, the capital of Indonesia $3.9bn January trade balance smallest since May 2022 Higher than expected Exports rise 16.4% while imports up only modestly Indonesia’s export sector managed to outpace expectations with overall outbound shipments rising 16.4% year-on-year compared to the 12.5% YoY expectation.  Export gains were driven largely by robust oil & gas shipments although non-oil exports managed to expand by roughly 14% on robust exports to China (+49.4% YoY) and Japan (+24.9% YoY).  Meanwhile, imports managed to eke out gains, up by only 1.3% YoY.  Import growth was driven mainly by imported energy as oil & gas imports were up sharply by 30.4% YoY. This managed to offset the contraction reported in non-oil and gas imports.  The overall trade balance settled at $3.9bn, the lowest since May but slightly better than expectations. We expect that trade surpluses this year will be robust but nowhere close to the record high of $7.5bn in April of last year. Thus, we can assume that the Indonesian rupiah will see less and less support from the current account in 2023. Trade surpluses just not what they used to be... Source: Badan Pusat Statistik Exporters forced to keep earnings onshore? Today’s trade report comes on the heels of reports that Indonesia will soon be requiring certain exporters to keep a portion of export earnings onshore in a bid to help boost the domestic supply of foreign currency. And although details and timelines on the potential implementation of the measure have yet to be released, we are unsure if this would provide meaningful support to the IDR.  Uncertainty regarding the measure and the possibility of this regulation being pulled abruptly may result in episodes of volatility for the currency, especially if some market participants view this as a form of capital control.  The IDR may be facing diminished support from the trade and current account surpluses this year but the currency could be steadied by renewed foreign investor flows should sentiment towards emerging markets improve substantially in the coming months.     Read this article on THINK TagsIndonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The pandemic, Russia's attack on Ukraine will cause a series of difficulties, especially economic ones. Asian countries play an important role in the global economy, and their condition is particularly important. China, after covid restrictions, is back to recovery, including the real estate market. Indonesia is showing that despite external influence it is doing well.   In this article: Chinese households Indonesia is doing well The value of muni ETFs Chinese households There is no shortage of problems caused by the pandemic in the Chinese economy. The real estate market will definitely weaken. The number of families who choose not to invest in real estate has increased significantly. China's real estate sector, once a key driver of the world's second-largest economy, fell into a deep crisis in 2022, with real estate investment and sales plummeting, which took a toll on house prices. But there is an optimistic signal. More households were considering buying a home or investing in other assets in the coming three months, according to a survey by a research institute and think tank within the Ant Group and Southwestern University of Finance and Economics published Wednesday. The survey also shows that respondents' willingness to invest in domestic stocks, funds and foreign asset classes has also increased. Stabilizing the crisis-hit real estate sector will be a key challenge this year for policy makers as they attempt to kick-start economic recovery. Much depends on how quickly people start spending again after the government abruptly lifted strict COVID-19 restrictions in December. The number of Chinese households that decided against buying a home soared in the fourth quarter of 2022, a private survey showed, as COVID infections and lockdowns sapped sentiment, while property foreclosures soared as the economy slowed. More here: https://t.co/vo2GeVfK8u — Reuters Business (@ReutersBiz) February 23, 2023 Read next: Tesla Opens Its Global Engineering Headquarters In Palo Alto, California| FXMAG.COM Indonesia is doing well As the world's largest economy, what the US does has major implications around the world, including in Indonesia. Therefore, Indonesia is taking steps to make its economy more resilient so that it can withstand global shocks such as inflation, especially from the United States. Indonesia has coordinated its fiscal and monetary policy tools well to contain inflation and sustain growth. Unlike the US, where inflation remains stubbornly high, inflation in Indonesia fell in January. The headline consumer price index, the main indicator of inflation, fell to 5.28% yoy in January from 5.51% in December. The Indonesian minister said that despite the global slowdown, Indonesia's economic growth remains strong and domestic demand continues to improve. Indonesia says it's working to become more resilient to inflation shocks from the U.S. https://t.co/jdgiXla4Ka — CNBC (@CNBC) February 23, 2023 The value of muni ETFs In the past, ownership of municipal bonds was largely limited to very wealthy investors: it takes significant assets to build a diversified portfolio of municipal bonds, and investing in them requires a high level of expertise and management between brokers and clients. However, the introduction of exchange-traded funds (ETFs) holding an assortment of municipal bonds has created an attractive option for investors. Morgan Stanley Research expects the value of muni ETFs to double to $200 billion in assets under management by 2026, about a third of the time it takes for this asset class to reach $100 billion. Municipal exchange-traded fund assets are growing, which could improve market structure and give more households the potential to reap tax benefits. Learn more: https://t.co/WvxFskSqe5 #ETFs — Morgan Stanley (@MorganStanley) February 22, 2023

Slowing core inflation gives Bank Indonesia a reason to stay dovish Jakarta, the capital of Indonesia 5.5% YoY headline inflation   Higher than expected Headline inflation rises to 5.5% due to uptick in food Price pressures remain evident with February inflation moving past expectations to settle at 5.5% year-on-year and up 0.2% from the previous month. Food inflation was the main driver for today’s upside surprise, rising 7.2% compared to 5.8% in January and up 0.5% from the previous month. Other sectors that saw elevated inflation were transportation (13.6%), household equipment (4%) personal care & services (5.6%) and restaurants (4.1%). Elevated inflation for basic food items and personal services could challenge household spending in the coming months and weigh on growth prospects.  However, despite the uptick in headline inflation, core inflation edged lower to 3.1% from 3.3% as all sectors outside food inflation recorded slower inflation compared to the previous month.       Moderating core inflation gives BI some breathing room Source: Badan Pusat Statistik BI still likely dovish despite headline inflation miss Despite the upside in headline inflation, we expect Bank Indonesia (BI) to retain its relatively dovish stance given the decline in core inflation. BI Governor Warjiyo recently reiterated his stance that the central bank would not need to hike rates further this year and falling core inflation supports this view. However, given that overall headline inflation remains well above target and could stay elevated in the near term, we believe that BI will not have room to cut rates until the headline reading trends back towards target.  Thus we are looking at a possible protracted pause from BI with the performance of the Indonesian rupiah likely the only factor that could convince BI to adjust its current dovish stance.      Read this article on THINK TagsIndonesian rupiah Indonesian CPI Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

A more challenging global landscape means Indonesia will look to domestic consumption to bolster growth aspirations in 2023 Jakarta, the capital of Indonesia   Indonesia’s economy grew by 5.3% in 2022, which was the fastest pace of expansion in almost a decade. Economic growth was underpinned by robust household spending as well as a healthy dose of manufacturing and exports. Domestic consumption was brisk with Covid-19 restrictions fully eased and headline inflation staying relatively well-behaved in the first half of the year. Meanwhile, Indonesia’s export sector benefited from the commodity price rise in 2022 as demand for energy and oil increased due to the fallout from the Ukraine war. Surging exports in turn helped support domestic manufacturing, which boosted growth further.       Economic growth Indonesia is expected to churn out another solid growth performance in 2023, however challenges to the outlook have surfaced. The Bank of Indonesia (BI) expects growth to settle at the upper end of the forecast range of 4.5-5.3%, banking on private consumption, investments and exports to match last year’s growth. Given our expectation of a sustained moderation in commodity prices, we believe Indonesia will need to rely more heavily on household consumption and investment outlays to do the heavy-lifting as the boost from exports fades. Exports and the external balance: fading commodity boom The glow from the 2022 commodity boom had faded by the fourth quarter of 2022 and this development will likely impact Indonesia’s external position while also having a negative impact on manufacturing activity. Global prices for coal and palm oil, two of the major exports in Indonesia, have fallen sharply from their 2022 highs which would translate to more modest export growth and trade surpluses. Indonesia’s record trade surplus coincided with sharp price increases for these commodities which also helped deliver the highest current account % of GDP ratio (1.05%) since 2010.  On top of its impact on the external balance, fading export flows may also impact economic growth by way of weaker mining and manufacturing activity. Mining and related industrial activity (oil and gas refinery) accounts for 9.1% of total GDP and softer demand for exports could also weigh on economic activities related to the mining and refining of these export products.   Mineral fuels and oils account for 37% of total exports Source: Badan Pusat Statistik Commodity boom not likely in 2023 Source: ICE-Futures Europe commodities and MDE-Bursa Malaysia Consumption here to save the day? Depends on inflation With the boon from the export sector fading this year, Indonesia will be looking to domestic consumption to deliver the bulk of growth. The outlook for domestic consumption does have some upside after inflation appears to have peaked in late 2022. Headline inflation slowed to 5.5% year-on-year as of February (vs the 6% peak) while core inflation moved closer to target at 3.1%YoY.  Despite inflation coming down from its peak, however, price pressures remain evident with inflation still quite high for major items such as food (7.2%YoY), transport (13.6%) and utilities (3.4%). If headline inflation does eventually slow, this development could be supportive of household spending (53% of economic activity last year) and growth momentum overall.   One economic variable we will be watching carefully to approximate domestic consumption is retail sales. Retail sales, which had been relatively healthy in the first half of 2022, showed signs of slowing when faced with the sharp uptick in prices. If inflation does continue to slide this year, retail sales could potentially recover and provide some lift to overall growth. If inflation fails to slow, however, we could see only modest gains in retail sales with household spending only partially able to compensate for softer export receipts and weaker mining and manufacturing activity. Inflation moderates somewhat, dips from peak of 6% Source: Badan Pusat Statistik Improvement in retail sales dependent on inflation trajectory Source: Badan Pusat Statistik and Bank Indonesia BI now in the mood to support growth, but does it have the space? Faced with accelerating inflation in late 2022, BI had little choice but to join fellow regional central banks in hiking rates aggressively. The central bank rattled off a string of aggressive tightening in the second half of last year, lifting policy rates by a total of 225bps to steady the Indonesian rupiah (IDR) and combat inflationary pressures.  However, after seeing inflation moderate, BI Governor Perry Warjiyo declared victory over inflation and left policy rates untouched at the 16 February meeting. Warjiyo went so far as to indicate that he need not hike rates for the rest of the year suggesting that the current policy rate of 5.75% will be the peak for this tightening cycle. Dovish commentary from Warjiyo clearly shows that BI is now shifting its focus to bolstering growth to help offset the challenging global landscape.  Industry trends show that bank lending growth remained healthy despite the aggressive 225bps worth of tightening from BI and investment outlays could very well be a source of growth this year. Lending activity may have been supported by BI’s “macroprudential policies” such as the 0% downpayment for automotive loans, and looser loan-to-value ratios for property lending among others.  Furthermore, at least so far, growth in bank lending appears to have come without any detrimental impact on quality as the latest non-performing loan ratio slipped to 2.4%, the lowest since the start of the pandemic. Sustained economic expansion and the end of BI’s rate hike cycle bode well for bank lending, but with BI likely prevented from cutting policy rates further, the upside for capital formation may face some constraints. Loan growth not at the expense of quality. Can it be sustained? Source: Bank Indonesia Policy uncertainty as attention shifts to 2024 election This could prove to be a pivotal year as this will be the last full year of President Jokowi with the presidential election fast approaching in February 2024. Indonesia’s elections will go ahead as planned despite a recent court ruling postponing the polls for two years.  Current polls show no clear-cut favourites with three names surfacing as potential successors to Jokowi. General Subianto (Gerindra party) who lost to Jokowi in 2014, Java Governor Ganjar (PDI-P) and forever Java Governor Anies (independent) are all still very much in the race. Very recently, Anies was nominated by three major parties with the incumbent PDI-P still yet to nominate their candidate. We believe attention will shift to the presidential elections with not much reform or legislation likely to take place between now and February 2024.    Market outlook: IDR pressured, rates on hold and growth likely to slow from last year Indonesia is set to post another year of decent growth in 2023 although challenges, especially on the external front, suggest that the pace of expansion could slow from last year.  The economy will be missing the boost coming from the export sector as global demand fades, impacting both net exports and the mining sector's contribution to overall GDP growth.  Slower export receipts suggest a weaker external balance with the current account possibly slipping back into negative territory. A current account in deficit means that the IDR will face pressure throughout the year and the currency will likely lag any regional rally.  Meanwhile, fresh from declaring victory over inflation, we believe BI will be hard-pressed to cut rates at least in the near term as inflation will likely stay elevated. The projected long pause by BI means that the upside to capital formation and investment outlays could be capped despite some promising growth seen in bank lending.  Overall, the challenging external headwinds mean that Indonesia will be relying on domestic consumption and capital formation to drive growth momentum. And although we expect both household spending and investment activity to improve this year, the challenges posed by stubbornly high inflation and the inability on BI’s end to cut rates further point to an economic expansion that could very well fall short of last year’s growth mark.       Source: ING Estimates Read this article on THINK TagsIndonesian CPI Indonesia GDP Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Here we go again...Massive declines in front-end bond yields as market angst over banks spikes ahead of the ECB policy decision. Bank Indonesia is also meeting today   Source: shutterstock Global Macro and Markets Global Markets:  Without a doubt, the main talking point from markets overnight has to be the 36.3bp decline in 2Y US Treasury yields, which now yield 3.887%. A 23.4bp decline in yields on 10Y US Treasuries means the 2s10s curve remains inverted, but at 3.455% on the 10Y, the curve is a lot flatter than it has been recently. A little over a week ago, the 2Y Treasury note was yielding more than 5%.  All this seems still to be related to banking angst, with concern about Credit Suisse yesterday adding to the SVB drama of the previous week. OFR financial stress indicators have been spiking higher, though they are down a bit overnight, possibly due to the Swiss National Bank appearing to step in to provide liquidity. But it all adds unwanted excitement ahead of next week’s FOMC and today's ECB meetings. The bond yield swings also reflect yet more reductions in the implied Fed funds rate, which now does not even fully price in a 25bp hike next week (see more below). This feels like an overdone move to this author, but it would only take another piece of bad market data – another struggling financial institution for example – or a bad reaction to today's ECB decision, and it might not look so implausible. Despite this massive drop in bond yields, especially at the front end, the USD seems to be benefiting from its safe-haven status, and EURUSD is now back down to 1.0586 from a high of 1.0760 yesterday. The AUD is also down to 0.662 ahead of today’s labour data. Cable has dropped to 1.2070, though the JPY has appreciated, moving to 133.13, which again fits the safe haven story…In Asia, the KRW also joined the JPY in making gains, though there were losses at the other end of the spectrum, with the CNY down 0.47% to 6.90. US equity moves have been mild in contrast. The S&P 500 has dropped 0.7%, but finished the session on an up note, while the NASDAQ actually managed to eke out a tiny gain on the day. It was not so rosy in Europe, where many of the major bourses were down more than 4%, with declines across the board, but led by financials. US equity futures look a bit brighter today, though it is still a sea of red in Europe and Asia also looks challenged. G-7 Macro:  After the recent robust US data, yesterday’s data run was noticeably weaker. Pipeline price measures, as measured by the PPI index, fell back in February. The final demand index dropped 0.1% MoM to take PPI inflation down to 4.6% YoY from 5.7%. There were big drops in the core index also.  Retail sales also fell, though were in line with expectations, delivering a 0.4% MoM decline in February after the outsize and upwards revised 3.2% gain in January. The so-called “control group” of core items was, however, still pretty robust rising 0.5%MoM.  See this note by James Knightley, which also sets out his thoughts on what all this and other news means for the Fed. The ECB is the main event today, and they are expected to hike by 50bp, though as JK points out, if this goes down badly with markets, it could affect the Fed’s decision next week. Here is a link to a cheat sheet on the ECB decision. Japan: Today’s trade and core machinery orders suggest that the recovery in Japan continues this quarter, driven mainly by the service sector. The trade deficit in February narrowed more than expected and core machinery orders in January rose more than expected. Exports rose 6.5 % YoY in February (vs 3.5% in January, 7.0% market consensus). By country, exports to the US (14.9%) and EU (18.6%) rose sharply. Exports to China dropped again (-10.9%) but improved from January’s 17.1% fall as lunar new year effects dissipated. Meanwhile, import growth slowed quite sharply to 8.3% in February (17.8% in January, 12.4% market consensus) mainly due to declines in commodity imports. The trade deficit in February narrowed to -897 billion yen from its record shortfall of 3,496 billion yen in January. Separately, data showed core machinery orders, a highly volatile data set (regarded as a forward-looking investment indicator), rose 9.5% in January (vs 0.3% revised in December, 1.4% market consensus). Non-manufacturing orders rose 19.3% while manufacturing orders dropped -2.6%, showing the resilience of domestic demand for services. We believe that the continued signal of a domestic economic recovery will give the new governor of the Bank of Japan a greater chance to seek policy normalization in the second half of the year. Read next: US pipeline price pressures ease, giving another excuse for a Fed pause| FXMAG.COM Australia: After two months of employment losses, the February figures staged a large turnaround. Total employment gained by 64,600, driven by a 74,900 increase in full-time jobs. And the unemployment rate fell back to 3.5% from 3.7%. With Australia’s labour market clearly still very hot, we find it hard to accept that there is only one more rate hike left for the RBA before peak cash rates are reached – despite the hints from the most recent RBA statement. The minutes of the last meeting are released next week, which may help to settle what they really intend – though more likely not.   Indonesia:  Bank Indonesia (BI) meets today to discuss policy.  With all that's happened in the past few days, BI will likely keep rates unchanged at 5.75%.  Inflation remains high but core inflation edged lower, and this gives BI enough reason to sit tight.  Governor Warjiwo should tie any future decision on rates to the inflation outlook, but he will also likely attempt to calm jitters about Indonesia's own banking sector.  What to look out for: BI policy meeting, ECB meeting and US initial jobless claims Bank Indonesia policy (16 March) Hong Kong unemployment (16 March) US initial jobless claims and housing starts (16 March) ECB policy meeting (16 March) Singapore NODX (17 March) Malaysia trade balance (17 March) US industrial production and Univ of Michigan sentiment (17 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Indonesia managed to post a trade surplus in March, but it was much lower than the previous month's Jakarta, the capital of Indonesia $2.9bn March trade balance   Lower than expected Trade surplus narrows Indonesia posted yet another month of trade surplus in March, although a drop in exports meant it was smaller than expected. Exports fell 11.3%, slightly better than expected but weighed down by contractions in exports of mining products (-4.6% year-on-year), oil and gas (-4.8%YoY) and manufacturing (-13.7%YoY).  Imports also contracted but only by 6.3%YoY, better than expectations of a 13.5%YoY drop. Imports were weighed down by sliding inbound shipments of raw materials (-11.7%YoY) and consumption goods (-2.9%YoY) however capital goods posted a sizable gain in capital imports (18.5%YoY) which bodes well for Indonesia’s productive capacity down the line.  As a result, the overall trade balance stayed in surplus but narrowed considerably from $5.5bn to $2.9bn.  Trade surplus dips to $2.9bn Source: Badan Pusat Statistik Fading trade surplus Indonesia banked on sizeable trade surpluses last year to support the Indonesian rupiah (IDR). Fading global commodity prices will likely mean that we can expect a substantial narrowing of trade surpluses this year. Despite the fading of this key support to the currency, the IDR has managed to stabilise on the back of renewed financial market flows as domestic inflation moderates.  Read next: US: Fed set to hike in May, but it is likely to mark the peak| FXMAG.COM With the currency enjoying a spell of stability and occasional strength, the Bank of Indonesia (BI) has had less incentive to push interest rates higher and we could see the central bank on hold in the near term. Furthermore, should inflation slow further and the IDR remain stable, we could see BI consider a potential shift in stance to help support the ongoing economic recovery.     Read this article on THINK TagsIndonesia Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Price pressures continue to fade in Indonesia. Could Bank Indonesia (BI) be considering a pivot soon? Indonesia's central bank governor Perry Warjiyo 4.3% YoY April CPI inflation   Lower than expected Headline inflation slowed to 4.3% Price pressures continue to fade in Indonesia with the latest headline inflation reading sliding to 4.3% year-on-year, down from the 5.0%YoY reading in the previous month.  Almost all subsectors reported slowing inflation in April with only clothing and footwear registering a slight uptick in inflation to 1.8%YoY from 1.2% in March. The all-important food subsector saw inflation dip to 4.6%YoY, falling from 6.1% in March.  Read next: China: Manufacturing PMI contracts in April| FXMAG.COM Meanwhile, core inflation also edged lower from 2.9%YoY to 2.8%YoY, slipping below the midpoint of the central bank’s inflation target for a second month now. With price pressures fading, we could see inflation remain well-behaved in the coming months. Headline inflation inches back toward BI's inflation target band Source: Badan Pusat Statistik Do inflation trends point to eventual central bank move? Bank Indonesia paused earlier in the year after both core and headline inflation eased from their respective peaks and has kept the policy rate at 5.75% since. With price pressures moderating further, and with headline inflation inching closer to the central bank’s target, we believe BI will be considering a shift to a more accommodative stance in the coming months.  Fading inflation and a relatively well-behaved currency could be enough to convince the BI to bring forward the start of its easing cycle to the third quarter.     Read this article on THINK

Indonesia's economy managed to grow by 5% year-on-year in the first quarter of the year, fueled by robust household spending Jakarta, the capital of Indonesia 5.0% YoY GDP growth   As expected First quarter GDP steady at 5% Indonesia’s economy managed to expand by 5.0% year-on-year in the first quarter of 2023, steady from the previous quarter and in line with expectations. However, the economy slipped by 0.92% on a quarter-on-quarter basis, but this was slightly better than market expectations of a 1% fall.  Growth was broad-based with household spending, government expenditure and investment outlays all registering decent growth. The main driver for growth was household spending which managed to grow by 4.5%YoY and 0.25% more than the previous quarter.  Spending continued despite relatively elevated price pressures with both headline and core inflation peaking or close to their recent peak. Meanwhile, government spending grew by 4%YoY while investments gained 2.1% as capital formation slipped in response to aggressive tightening from the central bank.  Indonesia's economy motors along to post 5% YoY gain Source: Badan Pusat Statistik Challenges up ahead, but growth prospects look relatively upbeat Challenges to the growth outlook remain, with slowing global trade and brewing anxiety over financial market stability lingering. Softer global trade will likely cap expected gains on the trade front with export growth moderating from the outsized gains enjoyed in 2022.     Nonetheless, Indonesia's growth prospects look relatively upbeat as inflation edges closer to the central bank's 2-4% target. Easing price pressures could bolster household spending further while also allowing Bank Indonesia (BI) to eventually cut policy rates by the third quarter. A pivot for BI to rate cuts could reinvigorate bank lending and capital formation, which would give growth momentum another reason to accelerate. Given our outlook for slowing inflation, a stable currency and potential central bank easing, we may consider adjusting our full-year growth forecast of 4.6%YoY upwards.  Read this article on THINK TagsIndonesia GDP Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Indonesia: Inflation back within target but BI likely on hold until end of year. Headline inflation finally reverted to target in May, with headline inflation slipping to 4.0% year-on-year   Headline inflation back to target after a year Headline inflation slipped below expectations to 4.0% YoY, roughly 0.1% higher compared to the previous month. Inflation is back within Bank Indonesia's (BI) 2-4% target after 12 months and will likely stay within target for the rest of the year. Headline inflation enjoyed a much more pronounced moderation this year, sliding back within target even ahead of BI's expectations. Lower energy and food prices from a year ago level helped push headline inflation lower or unchanged across all items in the CPI basket. Meanwhile, core inflation was also down, dipping to 2.7% YoY and also lower than market expectations (2.8%).       Price stability objective reached but BI likely on hold to steady the IDR Bank Indonesia was one of the first central banks in the region to pause its tightening cycle earlier this year. BI Governor Perry Warjiyo who had expected inflation to slow gradually and revert to target by 3Q, has kept rates at 5.75% since the 16 February policy meeting. Despite the quick reversion to target for inflation, we believe BI will carry out an extended pause to shore up support for the Indonesian rupiah, which was down roughly 2.15% for the month of May. Thus we expect BI to retain policy rates at 5.75% until the end of the year and only consider cutting policy rates should global central banks opt to ease monetary policy.

Unemployment could edge higher in Australia The Australian labour market data for May may show a further increase in the unemployment rate from 3.7% to 3.8%, though this remains very low by historical standards and won’t provide the Reserve Bank of Australia with too much comfort. Employment growth may register a small increase, with last month’s fall in full-time employment and rise in part-time employment likely to swap signs this month.   The Australian labour market may not be powering ahead as it recently did, but it hasn’t yet delivered a clear sign of weakening either, and we aren’t expecting the picture to change this month.   Inflation comfortably within target in India CPI data for May will show inflation remaining comfortably within the Reserve Bank of India's 2-6% target range. We are expecting inflation to come in at 4.3% YoY after a 0.5% MoM increase. Helpful base effects are keeping inflation within the target range for now, but we need to see the MoM trend to move below 0.5% in the coming months to keep it there.     Indonesia's trade balance to remain in healthy surplus Indonesia reports trade numbers next week. We expect both exports and imports to remain in contraction although the drop off may be less pronounced than the previous month. Imports are likely to dip roughly 12.2% YoY while exports may fall by 2.1% YoY, resulting in a sizable trade surplus of $4.7bn. A trade surplus of this magnitude should help keep the current account balance in surplus and could act as one counterbalance to investment related outflows, which would help provide some support to the rupiah.  

Asia Morning Bites China activity data are due shortly - expectations are low. After the Fed yesterday, today we have the ECB, and more tightening is expected. Australian employment data and US retail sales complete the data excitement for the day.     Global Macro and Markets Global markets: Stocks had little trouble digesting the FOMC “skip", which did almost exactly what was expected of it – perhaps the dot plot 2 additional hikes was one more hike than had been expected. Anyway, the result was a virtually flat S&P 500 and a modest 0.39% gain from the NASDAQ. It certainly could have been worse. US Treasury yields were mixed. 2Y yields rose 2bp to 4.688%, while those on the 10Y UST actually dropped 2.7bp to 3.786%. EURUSD rose to 1.0842, and other G-10 currencies also made gains against the USD – with the notable exception of the JPY which remains at about 140. Have we reached a turning point for the USD and bond yields….? Other Asian FX was quite mixed. The KRW gave back some of its gains from the previous day. The THB and IDR were also softer, while the INR pushed stronger to 82.106. Other than that, not too much change.   G-7 macro: An almost playbook FOMC last night. A hawkish “skip” but a slightly higher-than-expected dot plot. James Knightley provides all the detail in this linked note. The ECB also meets today. That could be a somewhat different meeting with a hike fully expected, and few reasons for the ECB to be able to sound a more dovish note. Here is a link to a cheat sheet from our FX colleagues. We also get US retail sales, which are not expected to look very good (consensus looks for a -0.2%MoM headline result). China: A busy morning with the 1Y MLF likely also showing a 10bp cut, and then a little later (10:00 SGT) the data dump, which we feel could come in softer than the initial consensus numbers posted on newswires. There is a lot of speculation about further stimulus measures being announced, which might follow today’s data release, though far from certain.   Australia: The monthly data report today is as hard to call as usual. A small increase in overall employment is the consensus view. But the devil will be in the detail with the split between full-time and part-time jobs being very important, as well as the unemployment rate.   Japan: This morning’s data release is upbeat and supports our view that the economy is still recovering. Exports rose 0.6% year-on-year in May (2.6% in April, market consensus -1.2%). Exports to the U.S. and the EU rose 9.4% and 16.6% respectively, but this is partly due to the low base comparison last year. Exports to Asia and China continued to weaken, falling -8.1% and -3.4%, respectively. By export items, strong auto exports led the growth but declines in exports of chip-making machinery and semiconductor parts dragged down exports. Export growth has slowed down recently, but Japan’s performance is relatively good compared to other Asian countries, where exports have recorded a series of deep contractions. Also, core machinery orders, a forward-looking indicator for investment, rebounded 5.5% MoM (sa) in April, more than offsetting the decline in March (-3.9%), thus 3-month sequential comparison increased for three months in a row. Consequently, we think that the growth momentum is still alive in Japan. Regarding the recent speculation on the early election in Japan, we think it would have a limited impact on the BoJ’s policymaking because the election won’t have any immediate influence on inflation.   Indonesia: Indonesia reports trade figures today. We expect both exports and imports to stay in negative territory with the trade surplus set to narrow further to roughly $3bn. The progressive narrowing of the trade surplus over the past few months points to fading support for the IDR, which has faced some pressure of late. With exports not likely to replicate last year’s strong performance, we expect the trade surplus to normalize at these levels over the coming months. Meanwhile, Indonesia’s constitutional courts are set to rule on a petition to amend the country’s voting system today. The said petition would bring back closed ballot list system voting and inevitably delay next year’s election. Expect a revival of anxiety if the courts rule in favour of the change given its implications for the February 2024 election.     What to look out for: China activity data New Zealand GDP (15 June) Japan core machine orders (15 June) Australia unemployment (15 June) China industrial production and retail sales (15 June) Indonesia trade (15 June) India trade (15 June) Taiwan policy meeting (15 June) ECB policy meeting (15 June) US retail sales and initial jobless claims (15 June) Singapore NODX (16 June) BoJ policy meeting (16 June) US University of Michigan sentiment (16 June)

Korea trade and inflation data set for release Exports in Korea are expected to contract again in June. But due to strong auto and vessels exports, the contraction (-6.4%) should be quite a bit lower than the previous month of -15.2% YoY. We think vessel exports should be strong this year due to the imminent delivery of pre-order ships, considering that the shipbuilding period is at least two-to-three years. But since this does not reflect the current global demand cycle, it is necessary to focus more on exports excluding ship data to understand global demand conditions better. Meanwhile, we expect consumer inflation to decelerate quite sharply in June and reach the 2% range mainly due to the high base last year. The gains from utility fees should be partially offset by the decline in gasoline, fuel and rent prices.   Japan's Tankan survey to show economic recovery Business survey data will be released in Japan next week. Both Tankan and PMI surveys will show that the country’s economy is on the path to recovery, led by solid service activity in particular.   Inflation to moderate further in Indonesia and the Philippines Headline inflation is set to moderate further for both Indonesia and the Philippines. Inflation should remain within target in Indonesia, settling at 3.8%YoY, while core inflation could be flat at 2.7%YoY. Meanwhile, Philippine inflation should sustain its downtrend, with May inflation possibly slipping to 5.5%YoY from 6.1% previously. Slowing inflation should give both Bank Indonesia and the Bangko Sentral ng Pilipinas space to keep rates untouched in the near term.    Key events in Asia this week

Inflation slips in Indonesia, but central bank expected to keep rates on hold Inflation in Indonesia fell to 3.5% year-on-year in June, from 4% in May, which was slightly below market expectations.   Headline inflation slipped to 3.5% year-on-year in June, down from 4.0%YoY in the previous month. The June reading was slightly below market consensus for a 3.6%YoY rise with prices up only 0.14% from May. Meanwhile, core inflation dipped to 2.6%, down from 2.7% in May.  A favourable base, in addition to moderating commodity prices, has helped steer prices back within target. We expect inflation to remain subdued in the near term, barring substantial supply-side shocks.   Inflation comfortably back within target     Bank Indonesia likely to extend pause Bank Indonesia (BI) hiked aggressively in late 2022 to help bring inflation back within target. However, despite price pressures abating, we do not expect the central bank to resort to rate cuts as it hopes to ensure continued support for the Indonesian rupiah.  Foreign exchange stability will likely determine any BI rate adjustment, and we expect Governor Perry Warjiyo to extend his pause until IDR stabilises.

Stalling imports widen Indonesia’s trade surplus Indonesia’s trade surplus has widened, but at the expense of important consumer and raw materials imports.   Exports and imports fall sharply in June Indonesia’s exports and imports contracted sharply in June, with imports suffering a much more pronounced drop of 18.4% year-on-year.  Exports were expected to slip 17.8% but fell 21.2% YoY due to the slide in global commodity prices. Meanwhile, inbound shipments were forecast to edge lower by 4.2% YoY, only to plunge by 18.4% with both consumer and raw materials imports falling by 6.6% YoY and 23.8% YoY respectively. One key factor for Indonesia’s export sector has been China’s recent performance, which appears to be impacting trade between the two economies. Non-oil exports to China fell 9.9% YoY, while imports from mainland China dropped 20.6% YoY for the same period.    With the performance of exports and imports in June, the overall trade balance widened to $3.5bn, recovering from $0.44bn in the previous month. The trade surplus had been a key support for the IDR in 2022 after the balance hit a high of $7.6bn in April of last year. Since then, the trade surplus has narrowed to more normal levels and will likely be a key contributor to the stability of the IDR in the coming months   Trade surplus widens but remains much lower than 2022 peak   Import trends could point to slowing growth momentum The widening of the trade surplus back to more comfortable levels may have been a welcome development, but the improvement could have come at the expense of growth momentum. The stark drop in imports was driven largely by slower inbound shipments of consumer goods and raw materials. The 6.6% YoY fall in consumer imports could signal waning household spending even after inflation slipped back within target. The substantial slowdown in raw materials imports may point to slower growth momentum in the coming months as well. We are retaining our 4.7% YoY full-year growth for Indonesia for now, but we may need to revisit this outlook should consumer spending show more signs of moderating.  

Asia Morning Bites Politburo pledges support for China's economy - we await detailed plans.   Global Macro and Markets Global markets:  US equity markets made small gains yesterday, though the price action was far from conclusive. The S&P settled 0.4% higher than the previous day while the NASDAQ rose just 0.19%. Chinese stocks fell. The Hang Seng was down 2.13% and the CSI 300 fell 0.44%. That might change today after a Chinese Politburo meeting yesterday vowed to provide more aid for the property sector as well as boost consumption and tackle local government debt issues. Equity futures are positive, but we will reserve judgement until we hear some details. We have had plenty of vague promises already, which don’t amount to a great deal so far. US Treasury yields seem to have decided that this week’s FOMC meeting will be hawkish, and 2Y yields jumped up 8.2bp to 4.919% yesterday. The yield on 10Y bonds rose just 3.8bp to 3.872%. EURUSD fell again yesterday, dropping to 1.1063. The AUD was flat at 0.6734, Cable dipped to 1.2816, and the JPY remained stable at 141.59. Asian FX didn’t move much yesterday. The TWD fell 0.39% after industrial production fell slightly more than expected. At the other end of the spectrum, the KRW made gains of 0.28%. The CNY was unchanged. G-7 macro:  PMI data yesterday was weaker across much of the Eurozone, and the aggregate composite PMI dropped a full point to 48.9, with very weak manufacturing (42.7 from 43.4) and a slowdown in service sector growth (51.5 from 53.7). The equivalent US series showed a smaller manufacturing contraction (49.0) but also showed service sector growth slowing (52.4 from 54.4). Today, Germany’s Ifo survey will add more detail on the German situation. The US releases house price data (S&P CoreLogic numbers as well as FHFA data). And the US Conference Board releases its July confidence data. South Korea: Korea’s real GDP rose 0.6% QoQ sa in 2Q23 (vs 0.3% in 1Q23, 0.5% market consensus). 2QGDP was up from the previous quarter and slightly higher than the market consensus, but the details were quite disappointing. Net exports contributed to the growth (+1.3pt) but it was mainly because the contraction of imports (-4.2%) was deeper than that of exports (-1.8%). Looking ahead, we think that GDP in 2H23 will slow down again, as forward-looking data for domestic demand indicates a further deterioration. Please see our 2H23 outlook details here.  We think today’s data should be a concern for the Bank of Korea as exports remain sluggish amid expectations of a further worsening of domestic growth. Also, this year’s fiscal support is likely to remain weak, considering the tax revenue deficit and normalization of covid related fiscal spending. Thus, the BoK’s policy focus will gradually shift from inflation to growth over the next few months as we expect inflation to stay in the 2% range most of the time in 2H23. Indonesia:  Bank Indonesia meets today to decide on policy.  BI is widely expected to keep rates untouched at 5.75% to help shore up the IDR and ensure FX stability.  Previous dovish comments from BI Governor Warjiyo suggesting rate cuts could be considered have been set aside for now and we could see an extended pause from BI with any rate cut only considered later on.     What to look out for: Central bank decisions Bank Indonesia policy meeting (25 July) Hong Kong trade (25 July) US Conference board consumer confidence (25 July) Australia CPI (26 July) Singapore industrial production (26 July) US new home sales (26 July) US FOMC decision (27 July) China industrial profits (27 July) ECB policy decision (27 July) US personal consumption, durable goods orders initial jobless claims (27 July) South Korea industrial production (28 July) Japan Tokyo CPI and BoJ policy (28 July) Australia PPI (28 July) US personal spending, core PCE, University of Michigan sentiment (28 July)

Korea: 2Q23 GDP improved but with disappointing details South Korea’s real GDP accelerated to 0.6% QoQ (sa) in 2Q23 from 0.3% in 1Q23, which was slightly higher than the market consensus of 0.5%. However, the details were quite disappointing with exports, consumption, and investment all shrinking. We expect growth to slow in 2H23.   Net exports contributed positively to overall growth The upside surprise mainly came from a positive contribution from net exports (+1.3pt). However, we do not interpret this in a positive light, because it was not driven by an improvement in exports, but rather by a contraction of imports (-4.2%), which was deeper than that of exports (-1.8%). By major item, exports of vehicles and semiconductors rose as global supply conditions improved and global demand remained solid. But, exports of petroleum/chemicals and shipping services declined further with unfavourable price effects weighing. Falling commodity prices have had a positive impact on Korea's overall terms of trade, having a greater impact on imports, but "processed" exports such as petroleum/chemicals and shipping took more of a hit.   Net exports led growth but due to sharper decline of imports than exports   Meanwhile, domestic demand dragged down overall growth by -0.6pt As monthly activity and sentiment data already suggested, private consumption was down -0.1% with declining service consumption, while investment – both construction (-0.3%) and facilities (-0.2%) – contracted. Also, government expenditure dropped quite sharply (-1.9%) as spending on social security declined. We believe that the reopening boost effects on consumption have finally faded away, while tight credit conditions have also dampened investment. R&D investment (0.4%) was an exception, rising for the second consecutive quarter on the back of continued investment in new technologies.   GDP in 2H23 will likely decelerate again Forward-looking data on domestic demand indicates a further deterioration in domestic growth. Construction orders, permits, and starts have been declining for several months, while capital goods imports and machinery orders have also trended down recently. With continued market noise surrounding project financing and growing uncertainty over global demand conditions, business sentiment for new investment is very weak. This year’s fiscal spending will also not support the economy meaningfully, considering the tax revenue deficit and normalization of covid related spending. However, we think trade will take the lead in a modest recovery. We believe that exports will rebound by the end of the third quarter with support from improved vehicle demand, semiconductors, and machinery (despite the global headwinds). Please see our 2H23 outlook details here.   Korea's GDP is expected to slow down in 2H23     Although 2Q23 GDP was higher than expected, the details suggest a weaker-than-expected recovery in 2H23, together with weak forward-looking data, thus we keep our current annual GDP forecast for 2023 unchanged at 0.9% YoY.   The Bank of Korea watch We think today’s data should be a concern for the Bank of Korea (BoK). The BoK forecast growth to accelerate in 2H23 on the back of better exports. We agree that export conditions will improve, but we don't think they will be strong enough to dominate weak domestic growth, and today’s data also suggests that growth will slow down in the near future. Thus, the BoK’s policy focus will probably gradually shift from inflation to growth in 4Q23. In 3Q23, we believe that the BoK will continue to keep its hawkish stance while keeping a close eye on other major central banks’ monetary policies. Also, inflation may fluctuate a bit over the Summer season due to soaring fresh food prices amid continued severe weather conditions. However, if inflation stays in the 2% range for most of 2H23, then the BoK’s tone should shift to neutral and eventually revert to an easing cycle.

Asia Morning Bites A finely balanced RBA decision as well as China's Caixin manufacturing PMI data are today's main events.   Global Macro and Markets Global markets: US stocks made feeble gains on Monday to close out July, but that still leaves stocks strongly up over the month, and indeed the prior month too. The S&P 500 is up 19.52% ytd, and the NASDAQ is up 37.07%.  Chinese stocks made firmer gains, helped by a further set of policies to help boost consumption. Once again though, the measures stopped short of direct stimulus, and instead, we have further "signals of support" and supply-side measures. The Hang Seng index rose 0.82%, while the CSI 300 rose 0.55%. US Treasury yields were almost unchanged on the day. 10Y JGBs were a little higher at 0.599%. EURUSD moved lower to 1.0998, though the AUD gained ahead of today’s RBA meeting, rising to 0.6718. The JPY was a little weaker at 142.379 while Cable was steady at 1.2835. There wasn’t much direction for most of the Asian FX pack yesterday, though the MYR gained more than a per cent against the USD moving to 4.507. The THB was softer ahead of tomorrow's BoT meeting. G-7 macro: Eurozone inflation data for July showed a small fall to 5.3% YoY from 5.5% for the headline index. But there was no decline in the core inflation rate, which remained at 5.5%YoY. Today is fairly quiet for macro releases, though we do get the US Manufacturing ISM for July, together with backwards-looking labour data for June from the JOLTS survey. Australia: A small majority of forecasters are expecting the Reserve Bank of Australia (RBA) to hike rates by 25bp today. We aren’t among them, believing that the need to hike will be more readily apparent in later months. With the RBA keen not to overdo the tightening, it seems unnecessary to hike today when in all likelihood the macro signals for hiking will look much stronger at the September meeting. India: The June fiscal deficit came in a lot higher than the initially reported INR1.48tr deficit for June 2022, coming in at INR2.41tr. There were some upward revisions to last year’s data, so relative to the revised figures of INR2.11tr the increase is not as startling. These numbers do need watching. Next month’s comparison is with a small surplus in 2022, so if the deficit numbers for July do not dip sharply, then the government’s 5.9% deficit target may be at risk. South Korea: The export contraction deepened again in July. Exports fell by 16.5% YoY (vs -6.0% in June, -15% market consensus). By export item, Semiconductor exports fell 34%, petroleum fell 42%, and chemicals also fell 25%. Unfavourable price effects dragged down the export performance of these items. Meanwhile, vehicle exports rose a robust 15% YoY.   Imports also fell sharply (-25.4% vs -11.7% in June, -25.0 market consensus) mainly due to falling global commodity prices (crude oil -46%, gas -61%, coal -46%). With a larger decline in imports than exports, the trade balance recorded a surplus for the second month. We believe that the trade balance will stay in surplus for most of the second half of the year, but exports will likely stay in the contraction zone for the current quarter. Korea's July manufacturing PMI rose to 49.4 from 47.8 in June, the highest reading since July 2022, but remains in the contraction zone where it has languished for thirteen consecutive months. With new orders and output rising, we believe that a modest recovery in manufacturing and exports can continue. We expect exports to turn positive in 4Q. Japan: Japan’s labour market remains tight, and this is an optimistic sign that sustainable wage growth may continue for some time. The unemployment rate edged down to 2.5% in June (vs 2.6% in May and market consensus), and labour participation also rose to 63.1% from 62.9% in May.  Although labour demand conditions weakened recently as the Job-to-application ratio continued to decline to 1.30 in June from the recent peak of 1.36 in December, we still think that the current level of labour demand is quite healthy. By industry, job offers for hospitality services such as hotels and restaurants rose, but those for manufacturing declined. We believe that Japan’s recovery will continue, mostly driven by the service sector. Indonesia:  July inflation is set for release today.  The market consensus points to a further moderation in headline inflation. July inflation is pegged to slip to 3.1%YoY from 3.5% as favourable base effects kick in.  Likewise, core inflation is set to cool further to 2.5%YoY from 2.6% in the previous month.  Despite slowing inflation, Bank Indonesia will likely remain on hold in the near term to help provide stability to the IDR which has been under pressure lately.      What to look out for: RBA decision and regional PMI New Zealand building permits (1 August) Japan labour market figures (1 August) South Korea trade balance (1 August) Indonesia CPI inflation (1 August) PMI regional reports (1 August) China Caixin PMI (1 August) Australia RBA (1 August) Hong Kong retail sales (1 August) US ISM manufacturing and JOLTS report (1 August) South Korea CPI inflation (2 August) Thailand BoT policy (2 August) US ADP jobs report (2 August) Japan Jibun PMI (3 August) Australia trade balance (3 August) China Caixin PMI services (3 August) UK BoE policy meeting (3 August) US initial jobless claims, factory orders, durable goods orders, ISM services (3 August) Philippines CPI inflation (4 August) Singapore retail sales (4 August) US non-farm payrolls (4 August)

Asia week ahead: China inflation and trade data China's producer and consumer price updates next week may continue to fuel concern about deflation in the world's second-biggest economy. Elsewhere, look for second-quarter GDP releases from Indonesia and the Philippines.   China and Taiwan to release trade data and CPI We expect China’s July CPI to be almost unchanged as recently adopted measures by the government have yet to take full effect. While the Politburo reiterated support for the economy, we await further details on the said measures. Meanwhile, we expect PPI inflation to remain in negative territory. Despite the recent increase in oil prices, mining and manufacturing prices are likely to drop further as evidenced by data releases this week (Caixin and property prices).   For Taiwan, July CPI inflation is expected to rise only slightly as the price of household amenities remains high amid robust demand, with consumer confidence up for a third consecutive month. The consumer confidence index rose 1.73 points from June to 68.39 points in July, the highest level since April last year.   RBI to extend pause Food prices are still climbing in India despite government efforts to keep price increases under control. Tomato prices in July recently spiked due to seasonal factors compounded by the early arrival of monsoon rains. The government announced an export ban on non-basmati rice, resulting in a further tightening of global supply for grain. Given the lagged impact of the ban, headline inflation could still exceed the Reserve Bank of India's target range of 2-6%. This development, however, is unlikely to prompt a rate hike from the RBI as food inflation is expected to recede in the coming months.   Indonesia and Philippines to experience moderate growth in 2Q Next week features 2Q GDP reports from Indonesia and the Philippines. Growth is expected to slow slightly in 2Q for both economies as base effects fade and higher inflation caps purchasing power. Meanwhile, tight financial market conditions are also expected to have weighed on investment activities as bank lending slowed. Despite the slowdown, Indonesia and the Philippines are expected to post respectable year-over-year expansion with Indonesia set to grow by 4.7% YoY while the Philippine economy likely growing by 5.6% YoY.   Trade data to show exports in the region struggling amid weak global demand Several regional economies will be reporting trade data in the coming week. China and Taiwan will release trade figures that will likely show another period of contraction for both exports and imports. Soft electronic exports due to weak global demand should continue to weigh on exports, which in turn would cap the outlook for the manufacturing sectors of both China and Taiwan. For the Philippines, June data will show both exports and imports likely in contraction given slowing global trade. Exports, which posted a surprise expansion in May, might revert to a contraction as demand for the mainstay export item, electronics, remains soft. Meanwhile, imports will continue to contract as global commodity prices normalise from the peaks experienced in 2022. All in all, the overall trade balance will likely stay in deficit with the shortfall pegged at roughly $4.5bn for the month. 

Asia Morning Bites Asian Markets have yet to fully respond to Friday's mixed payrolls report. Indonesian 2Q23 GDP today.   Global Macro and Markets Global markets:  US equities dipped slightly on Friday after a mixed labour report that contained some hints that the US economy was slowing. The S&P 500 declined 0.53% and the NASDAQ fell 0.36%. Chinese stocks had a better end to the week. The Hang Seng rose 0.61% and the CSI 300 rose 0.39%. US Treasury yields retreated sharply on Friday. The 2Y yield dropped 11.7bp, and 10Y Treasury yields fell 14.1bp to 4.034%. The USD also softened against the EUR. EURUSD rose sharply to 1.104 intraday, before settling back to just over 1.10.  The AUD took a look above 0.66 but has also settled back to 0.6572. Cable rose to 1.2747, and the JPY dropped to 141.91. Asian FX was mostly weak against the USD on Friday but will likely recover lost ground in early trading today. The KRW and THB were the two weakest currencies on Friday. The KRW is now 1309.70. G-7 Macro: Friday’s labour report was very mixed, with the headline payroll numbers coming in a bit lower than expectations, but wages growth rising and the unemployment rate falling. James Knightley thinks this should keep the FOMC on hold at their September meeting.  Fed speakers last week gave conflicting messages. Bostic suggested that as the labour market was now slowing, the Fed did not need to hike any more  - a view that is in line with our house forecast. Bowman said that more hikes were likely. There is nothing of any note from the G-7 today. Later this week, we get July CPI inflation from the US, which could move slightly higher again from June’s 3.0% reading.  Core inflation is forecast to stay at 4.8%YoY. Indonesia:  2Q23 GDP is set for release today.  The market consensus points to a 5.0%YoY expansion for 2Q with consumption getting a lift from fading inflation.  Meanwhile, softer export growth, partly due to moderating global commodity prices likely capped growth momentum amidst slower global trade.  This would match the expansion reported in 1Q with growth on track to meet government expectations.  Bank Indonesia recently retained its growth outlook for 2023 at 4.5-5.3%YoY.   What to look out for: Fed speakers Thailand CPI inflation (7 August) Indonesia 2Q GDP (7 August) Fed’s Bowman and Bostic speak (7 August) South Korea BoP current account balance (8 August) Japan trade balance (8 August) Australia Westpac consumer confidence (8 August) China trade (8 August) Philippines trade (8 August) Taiwan trade (8 August) US trade balance (8 August) South Korea unemployment (9 August) China CPI inflation (9 August) Taiwan CPI inflation (9 August) US MBA mortgage application (9 August) Japan PPI inflation (10 August) Philippines GDP (10 August) RBI policy meeting (10 August) US initial jobless claims and CPI inflation (10 August) Singapore CPI inflation (11 August) Hong Kong GDP (11 August) US PPI inflation, University of Michigan sentiment (11 August)

Indonesia: Trade surplus narrows further Indonesia’s July trade report showed both exports and imports in contraction.   Trade surplus down to $1.3bn Indonesia’s July trade report showed both exports and imports down for another month. The market consensus expected a 19.2% year-on-year fall in exports and a 15.3% YoY decline in imports with the trade surplus projected to slip to $2.6bn. Exports fell almost in line with expectations, down by 18% YoY but imports declined at a less pronounced pace of 8.3% YoY. This resulted in the trade surplus narrowing further to $1.3bn, down from the $3.5bn projection and also lower than the June level.  The decline in exports was likely driven by the 46.1% decline in coal exports and the 19.3% YoY drop in palm oil. Imports saw a less pronounced decline for both oil & gas (-29.7% YoY) and non-oil, which was down 2.7% YoY compared to last month’s drop of 13.9% YoY.   Trade surplus continues to narrow   Narrowing trade surplus means less support for currency The continued narrowing of the trade surplus for Indonesia points to a fading key support for the rupiah, which enjoyed a boost in 2022 when the trade surplus hit a record high of $7.5bn. This development could be telling for the IDR, which has been under pressure of late and down roughly 1.5% for the month of August. Indonesia recently asked exporters to retain a portion of export receipts onshore to help improve dollar liquidity, a potential counter to the narrowing trade surplus.  Meanwhile, Bank Indonesia (BI) has held off on adjusting rates after a long pause. However, with interest rate differentials extremely tight (25bp) we could see a potential rate hike from BI if the Federal Reserve does indeed hike again given BI's thrust to ensure FX stability. 

Asia Morning Bites BoK and BI meet today to discuss policy. G-7 PMI data undermine the higher-for-longer narrative.   Global Macro and Markets Global markets:  US stocks moved higher on Wednesday despite the backdrop of a thin macro calendar and anxiety ahead of the Jackson Hole symposium. The main catalyst for the move seems to have been some capitulation by bond bears, as bond yields tumbled. Yields were down in Europe after some weaker-than-anticipated PMI figures and were matched by falls in US yields as US PMI data also undershot expectations. The 2Y Treasury yield fell 7.9bp to 4.967%, and the 10 Treasury yield fell 13.2bp to 4.192%. So far, with bond yields down across the board, it hasn’t done too much to FX relativities. EURUSD remains roughly unchanged at 1.0863, though the AUD has caught some support from the drop in US yields, and is up to 0.6479 now. Cable dropped sharply in late trading yesterday before recovering most of the ground lost taking it back to 1.2718, and the JPY is looking stronger today at 144.67.  Asian  FX was mixed. The gainers included the CNY, where the PBoC seems to be winning the war of attrition with markets for the moment, and taking the CNY to 7.2786. After their earlier spike, CNH tomorrow next forward points have dropped back, suggesting the short squeeze from higher funding costs has done its work for now. The CNY’s gains have helped lift currencies across the region, including the SGD and VND. Propping up the bottom of the pack, the PHP and THB both weakened against the USD yesterday.   G-7 macro:  Big drops in Europe’s service sector PMI for August yesterday started the ball rolling for markets. The headline service sector index dropped from 50.9 to 48.3, a contractionary reading, offsetting the slightly higher but still recessionary manufacturing gain from 42.7 to 43.7. The US PMIs released later showed a similar pattern, though the drop in the US service sector PMI to 51.0 from 52.3 still leaves it in weak expansion territory, not recession. There was no respite for the US  manufacturing PMI though, which dropped further from 49.0 to 47.0. If soft survey data like this is backed up shortly by "hard" activity data and labour market figures, then the market's higher-for-longer belief will come under substantial pressure, with negative implications for both bond yields and the USD. That’s still a big if, but the probability has been nudged a little following these numbers. It is also going to make it harder for Jerome Powell to get the nuance right in his Friday speech. If he talks up the data-dependency of policy, then these recent softer releases must play into a less hawkish outlook…? Today’s data isn’t terribly exciting. Jobless claims and durable goods are the main US releases.   South Korea:  The Bank of Korea will meet this morning. We are in line with the market view expecting another “hawkish pause”. At today’s meeting, we think that the BoK will likely strengthen its hawkish stance because inflation will likely reaccelerate in the coming months.  This will be reinforced by the fact that the KRW has also been quite volatile and because household debt is increasing again. The updated economic outlook will be released after the announcement of the policy rate decision. We expect a small downward revision to the GDP forecast mainly due to rising concern over China’s slowdown and the sluggish export recovery. The inflation forecast is likely to remain unchanged, which will support the Bank of Korea’s hawkish stance on monetary policy.   Indonesia:  Bank Indonesia (BI) meets today to discuss policy.  Market expectations point to BI keeping rates unchanged at 5.75% today despite moderating inflation.  Pressure on the IDR is one reason why the central bank could opt for a pause.  But we would not rule out a surprise hike from Governor Warjiyo since the trade surplus, a key source of support for the IDR, has narrowed significantly this year.  A rate hike from BI could help steady IDR now that interest rate differentials have collapsed to a mere 25bps.      What to look out for: BoK and BI meetings, Jackson Hole conference on Friday South Korea PPI inflation and BoK policy meeting (24 August) Indonesia BI policy meeting (24 August) Hong Kong trade balance (24 August) US initial jobless claims and durable goods orders (24 August) Japan Tokyo CPI inflation (25 August) Malaysia CPI inflation (25 August) Singapore industrial production (25 August) US Univ of Michigan Sentiment (25 August)

Food prices Food inflation has started to ease sharply across the developed world, but this is another potential source of risk over the coming decade. Last year showed the cross-dependency of food prices on energy costs, and the ongoing risks associated with the Ukraine war and grain exports. But climate change is also creating increasingly volatile harvests, and the risk is that this results in more protectionism as producing nations seek to protect domestic supply. India’s recent bans on rice exports, and occasional threats of palm oil bans from Indonesia, highlight the risks here. This is a bigger threat to emerging markets, where food can exceed 50% of inflation baskets.    

Next week is rather quiet, with only a few countries in the region releasing major data reports. China will be in the spotlight with several data releases, followed by India’s inflation number, Australia’s employment survey and Indonesia’s trade data. China data dump: M2, industrial production, retail sales, aggregate financing China will release a huge batch of data next week, the highlights of which will be industrial production and retail sales figures for August. Taking cues from the PMIs released recently, we could see a moderate improvement in industrial production at 4.8% year-on-year (from 3.7% in July). For retail sales, as it is approaching the end of the summer holiday season, we could see slower growth of 2.8% (from 2.5% in July).   India: CPI inflation India’s inflation is likely to come down as prices of tomatoes have fallen by more than 50% month-on-month. However, the price of another crucial food staple – onions – shot up by more than 20% MoM. The net result of this is that the CPI inflation rate for August should slow to 6.7% year-on-year (from 7.44% in July) – still above the top of the RBI’s upper inflation target.     Australia: employment change, unemployment rate Australia will release its labour report for August next week. We expect a partial reversal of the full-time job losses recorded last month, and some decline in the part-time jobs reading, resulting in a 15K increase in total employment. A similar partial reversal of last month’s unemployment surge, coupled with ongoing increases in the labour force, could see the unemployment rate dip back down to 3.6% after last month’s 3.7% print.   Indonesia: trade data Exports and imports will remain in contraction for Indonesia while the overall trade surplus should improve slightly for August. Exports could fall by 17.3%YoY while imports could fall by 12.8%YoY. Resurgent global energy prices could impact both exports and imports with the overall trade balance registering at $3.6bn. The trade balance could provide some support for the Indonesian rupiah which has been under pressure of late.   Key events next week

Asia week ahead: Key regional central banks to decide on policy Central banks in Indonesia, Japan, the Philippines, and Taiwan will hold their respective policy meetings next week. China will also be announcing its 1-year and 5-year LPR rates.   China's 1-year and 5-year LPR rates likely to remain unchanged China will decide on one and five-year loan prime (LPR) rates next week. Given the current challenges, with the People's Bank of China helping to support the Chinese yuan, it is unlikely the central bank will announce any further rate cuts. We are expecting rates to remain unchanged.   Regional central banks to stand pat The Central Bank of the Republic of China (CBC), Bank Indonesia (BI) and Bangko Sentral ng Pilipinas (BSP) are all expected to retain current policy settings in line with the US Federal Reserve. For Taiwan, as inflation turned up recently and with the New Taiwan dollar being quite soft, we are expecting it to hold the rate steady. Similarly, BI will likely hold rates steady to support the Indonesian rupiah, which is down 0.78% for the month.  Lastly, the BSP will also likely stand pat as inflation pressures flare up, with the latest inflation reading surging to 5.3% year-on-year.   Inflation and trade figures for Japan next week We expect headline consumer inflation to slow to 3.1% YoY in August (vs 3.3% in July) with the ongoing energy subsidy programme, however, core inflation excluding fresh food and energy will likely edge up slightly to 4.4% (vs 4.3% in July), which will be a major concern for the Bank of Japan (BoJ). For the trade report, we expect exports in August to rebound from the recent dip, with strong auto shipments while imports could decline more sharply to -18% YoY compared to the previous month as base effects dominate the rise in commodity prices and weak Japanese yen. Meanwhile, the BoJ is likely to stay pat next week. The central bank could however probably send a subtle hawkish message to the market after higher-than-expected inflation and a weak JPY, combined with rising global oil prices, pushed inflation up further.   Key events in Asia next week

Asia Morning Bites China's data deluge draws near. ECB hikes rates while US retail sales surprise on the upside.   Global Macro and Markets Global markets:  We will start today with FX, given the ECB meeting yesterday, and the response of the market to what our Head of Global Macro is describing as a dovish hike. EURUSD has dropped sharply to 1.0640, and this has taken the GBP lower too, now trading at just over 1.24. The BoE meets next week and is also expected to hike  - also perhaps its last. The AUD has not been much impacted by this move, though despite the stronger-than-expected labour data yesterday, markets seem relaxed and are expecting no further tightening. We are not so relaxed. The JPY was also a little softer, rising to 147.50 . Other Asian FX was fairly quiet yesterday. The CNY is still hovering below 7.28 ahead of today’s big data release. European bond yields dropped after the ECB decision. The yield on the 10Y bond fell 5.8bp to 2.588%. US Treasury yields were not affected by the European news and had to contend with another stronger-than-expected macro release in the form of retail sales. The US 10Y Treasury yield rose 3.8bp to 4.286%, while yields on 2Y USTs rose 4.2bp to 5.011%. Equity markets seemed to like the sense that rates aren’t going any higher (if you believe the central bankers, and it's not like they have a great track record!). The S&P 500 rose 0.84% while the NASDAQ rose 0.81%. The NASDAQ is up 33.05% year-to-date, just in case you’d lost track. Triple witching today, so it may be volatile. Chinese stocks didn’t do a lot yesterday. The Hang Seng rose 0.21%, while the CSI 300 fell 0.08%. Volumes were fairly low.   G-7 macro:  The US economy is still refusing to roll over. August retail sales rose 0.6% MoM, much higher than the 0.1% expected. The control group growth rate was slower at 0.1%, but this was still more than had been expected. Markets are still not even 50% expecting another Fed rate hike. But you have to wonder how long they can keep this up after the recent upside inflation miss. US August PPI data also came in above expectations. It’s a quieter day today, except for US existing home sales and the University of Michigan consumer confidence figures.   China:  The data deluge kicks off at 09:20 this morning (HKT/SGT) with the 1Y medium-term lending facility rate, which given the PBoC’s struggles to support the CNY, and yesterday's RRR cut, seems likely to be left unchanged at 2.5%. New home prices come out at 09:30, and will likely show further month-on-month decline. Other property-related data today is unlikely to offer much sign of life. But at 10:00, the activity data emerges, and here, we think there may be some slightly less negative news. Recent export data and new CNY loan figures could indicate that production and retail sales numbers may increase slightly in year-on-year terms from last month. To be sure, we aren’t expecting them to look strong, but a positive direction of travel could provide some support for markets. We will know soon enough.     India:  August trade figures come out later this afternoon. The slide in exports has been fairly consistent, but we are now reaching a point where year-on-year declines may start to shrink from double digits to low single digits. That is also likely on the import side, and the trade deficit is likely to remain close to last month’s -USD20.67bn.   Indonesia:  Indonesia reports trade numbers today.  The market consensus suggests that we'll have another month of contraction for both exports and imports as global trade remains subdued.  The trade balance is forecast to settle in surplus but at a less substantial level of roughly $1.5bn.  Fading support from the trade surplus could be one reason for the IDR's struggles recently, and we could see the currency stay under pressure until we see this trend reversed.     What to look out for: China data deluge China medium term lending rate (15 September) Indonesia trade balance (15 September) China retail sales, industrial production (15 September) US University of Michigan sentiment and existing home sales (15 September)

Central banks in Indonesia, Japan, the Philippines, and Taiwan will hold their respective policy meetings next week. China will also be announcing its 1-year and 5-year LPR rates. China's 1-year and 5-year LPR rates likely to remain unchanged China will decide on one and five-year loan prime (LPR) rates next week. Given the current challenges, with the People's Bank of China helping to support the Chinese yuan, it is unlikely the central bank will announce any further rate cuts. We are expecting rates to remain unchanged.   Regional central banks to stand pat The Central Bank of the Republic of China (CBC), Bank Indonesia (BI) and Bangko Sentral ng Pilipinas (BSP) are all expected to retain current policy settings in line with the US Federal Reserve. For Taiwan, as inflation turned up recently and with the New Taiwan dollar being quite soft, we are expecting it to hold the rate steady. Similarly, BI will likely hold rates steady to support the Indonesian rupiah, which is down 0.78% for the month. Lastly, the BSP will also likely stand pat as inflation pressures flare up, with the latest inflation reading surging to 5.3% year-on-year.   Inflation and trade figures for Japan next week We expect headline consumer inflation to slow to 3.1% YoY in August (vs 3.3% in July) with the ongoing energy subsidy programme, however, core inflation excluding fresh food and energy will likely edge up slightly to 4.4% (vs 4.3% in July), which will be a major concern for the Bank of Japan (BoJ). For the trade report, we expect exports in August to rebound from the recent dip, with strong auto shipments while imports could decline more sharply to -18% YoY compared to the previous month as base effects dominate the rise in commodity prices and weak Japanese yen. Meanwhile, the BoJ is likely to stay pat next week. The central bank could however probably send a subtle hawkish message to the market after higher-than-expected inflation and a weak JPY, combined with rising global oil prices, pushed inflation up further.   Key events in Asia next week

Indonesia’s exports fall less than expected Exports and imports fell less than expected leading to a bettter-than-expected trade surplus.   Trade surplus beats expectations Indonesia's exports and imports fell as expected in October although both slipped at a less pronounced pace. Exports fell 10.4% year-on-year compared to the drop of 16.2% YoY in September. Lower global prices for mainstay exports of coal, nickel and palm oil contributed to the lower export performance. Meanwhile, imports were down a modest 2.4% YoY compared to -12.5% YoY reported in the previous month.  This resulted in the trade balance staying largely unchanged from the previous month at roughly $3.5bn, much lower than the record high in 2022 but better than the lows of less than a billion recorded earlier in this year.      Another decent trade surplus to help support the IDR   Better than expected trade surplus supports a BI pause next week November's better-than-expected trade surplus indicates that there will be less pressure on Bank Indonesia (BI) to hike rates next week. BI increased policy rates at its most recent meeting in a bid to steady the rupiah, which was under significant pressure prior to the hike last 19 October. With the trade surplus beating market expectations of a $3.0bn level, we believe the improved external balance should be enough to stabilise the IDR with BI likely keeping rates untouched at the 23 November meeting.

Asia Morning Bites Asian highlights today include Singapore's October inflation and the Bank of Indonesia (BI) policy meeting. Markets may well be quiet with the US out for Thanksgiving.   Global macro and markets Global markets:  It was another quiet day in markets ahead of what will be an even quieter one today thanks to the US Thanksgiving holidays. This may well stretch to the weekend as Turkey-stuffed US traders may extend their time off to Friday too. Treasury yields rose slightly on Wednesday. The 2Y yield went up 2.7bp to 4.95%, while the 10Y yield barely rose, going up just 1.2bp to 4.404%. EURUSD retraced some of its recent rises, dropping back to 1.0887. The AUD was also slightly softer, at 0.6542, and Cable had a sharp dip in late trading, before partially recovering to 1.2493. The JPY crept higher and is back up to 149.49 now. Other Asian FX pairs were also mostly weaker against the USD. The KRW, IDR and TWD were between -0.49% and -0.87% softer. USDCNY was 0.33% weaker, and moved back up to 7.1648. US stock markets had a modestly positive day, with both the S&P 500 and NASDAQ rising a bit more than 0.4%. Chinese stocks were flat to down. The Hang Seng was unchanged on the day. The CSI 300 fell 1.02% and is down 8.45% year-to-date. G-7 macro:  It was not a particularly exciting day for Macro on Wednesday. The US Durable goods orders numbers came in softer than had been expected. But there was some better news from the University of Michigan consumer sentiment survey, although the inflation expectations surveys it contains were a bit higher than had been expected. US jobless claims also dropped, following their recent jump, which now looks as if it was just noise. The UK Chancellor, Jeremy Hunt, delivered a GBP21bn stimulus to the UK economy in his Autumn Statement yesterday, estimated to deliver a 0.3pp boost to GDP growth over the coming 5 years. The boost was more than had been expected and has raised concern that the Bank of England may not ease next year as soon or as fast as had previously been imagined. Today we get some preliminary PMI data out of the Eurozone. Singapore: October inflation is set for release today.  Inflation is expected to pick up to 4.5%YoY (from 4.1% previous) for headline while core inflation could move higher to 3.1%YoY (from 3.0% previous).  Although price pressures have moderated over the past few months, core inflation remains above the MAS' inflation target which suggests they could extend their current policy stance well into 2024.      Indonesia:  Bank Indonesia (BI) meets to discuss policy today.  Although BI is tipped to keep rates unchanged, IDR slipped by roughly 0.9% yesterday, which could provoke a surprise rate hike from BI.  BI was also expected to pause at their October meeting but substantial pressure on the IDR the day ahead forced Governor Warjiyo to hike rates to 6%. We would not rule out a rate hike if pressure on IDR persists today.  What to look out for: Bank Indonesia policy meeting and Singapore inflation Singapore CPI inflation (23 November) Bank Indonesia policy (23 November) Japan CPI inflation (24 November) Singapore industrial production (24 November)

Unexpected dip in Indonesia imports results in wider trade surplus Indonesia's December trade report saw exports fall 5.8% YoY while imports fell unexpectedly.   Trade surplus widens after imports surprise on the downside December trade data showed exports falling although imports unexpectedly fell.  Exports were tipped to edge lower by 8.4%YoY but managed to fall by 5.8%YoY.  However, imports contracted by 3.8%YoY compared to forecasts for a 0.2% gain.   Exports were softer accross most sectors, with coal exports down 19.1%YoY. Palm oil shipments dropped 31.9%YoY.  Imports fell, with capital goods down 9.9% YoY although consumer imports rose 13.5% YoY, reflecting robust domestic consumption. The overall trade balance settled at $3.3bn, up sharply compared to expectations at $1.9bn. Despite the better-than-expected trade surplus, the gap remains well below the record high posted in 2022 and suggests waning support for the IDR.  With global trade likely to stay subdued in 2024, we can expect this trend to continue this year.   Trade gap widens, could suggest support for IDR   BI decision up next The wider than expected trade gap suggests that the IDR should still benefit from a current account surplus. Although the trade surplus was better than expected, it remains well-below the recent record high recorded in 2022.  With modest depreciation pressure on the IDR expected to persist in the near term, we believe BI will be inclined to keep policy rates untouched at 6% later this week.  Until we gain more certainty regarding the much-awaited Fed pivot, we could see BI retaining its current restrictive stance for most of the first half of the year to help support the currency, while also wary of a potential flare-up in food inflation due to the ongoing El Nino weather phenomenon.