Ahead Today
G3: US Dallas Fed Manufacturing Activity
Asia: China press briefing on employment and growth policies, Singapore unemployment rate, India industrial production
Market Highlights
China’s Politburo last Friday pledged to “fully prepare” emergency plans to defend against external shocks, and to set up new monetary policy tools and policy financing instruments to boost technology, consumption and trade. In addition, the Politburo said that China must keep improving the policy toolbox to stabilize employment and the economy and launch measures already planned at an earlier date, while carefully “pick the timing” for rate cuts. These stimulus announcements are no doubt a step in the right direction, with more details likely to come out of a press briefing held later today at 10am China time. Nonetheless, the tone from China’s top leadership seemed somewhat calmer than the markets are perhaps expecting, suggesting the focus for China remains on executing the existing stimulus plans with a focus also on medium and long-term reform plans.
Whether this sufficiently addresses the growth hit from the current trade war remains to be seen. Latest forward-looking indicators suggest that container bookings from China to the US have fallen sharply since the introduction of the 145% tariffs. The Port of Los Angeles for instance expects scheduled arrivals in the week starting May 4 to be a third lower than a year before, while bookings for standard containers from China to US were 45% lower than a year earlier by mid-April according to container tracking service Vizion. Hapag-Lloyd, one of the world’s largest container shipping lines said Chinese customers had cancelled roughly 30% of its bookings out of China. Of course, this is an incomplete picture, with some anecdotal evidence of a surge in front-loading of activity from Southeast Asia in part to get ahead of the reciprocal tariff 90-day pause, with intra-Asia trade activity still quite robust at least so far.
Regional FX
Overall, the US Dollar staged some recovery, with Asian currencies also trading somewhat mixed. KRW (-0.6%), THB (-0.4%), SGD (-0.25%) and TWD (-0.1%) were key underperformers, while PHP (+0.5%), MYR (+0.3%) and IDR (+0.2%) outperformed. China’s government is reportedly considering suspending its 125% tariff on some US imports, including goods such as medical equipment, industrial chemicals such as ethane and tariff of plane leases. In addition, Chinese business magazine Caijing reported that China has waived its retaliatory 125% tariff on certain semiconductor imports from the US, citing industry sources. For the rest of Asia, Singapore released its industrial production estimate for March, which came in weaker than expected at -3.6%mom sa and 5.8%yoy. The weakness was driven by slower chemicals, precision engineering and general manufacturing activity, while electronics and biomedical production increase provided some offset. Moving forward, we expect some slowdown in Asia’s export activity through the next 2 quarters, notwithstanding front-loading of exports to get ahead of the reciprocal tariff pause. We will get some initial indication of the impact on export orders in upcoming Asia PMIs.
