Ahead Today
G3: Reserve Bank of Australia meeting
Asia: Singapore’s 2025 Budget
Market Highlights
Chinese President Xi Jinping met with prominent entrepreneurs, including Alibaba’s Jack Ma, signalling China’s support for the private sector. President Xi acknowledged that private companies face “difficulties and challenges” and promised to do more to make their lives better. This includes ensuring private companies have equal access to goods, markets and government projects, reducing financing costs for private enterprises, and resolving issues of overdue payments and excessive fines and inspections by local government officials. He also encouraged private entrepreneurs to embrace entrepreneurship and patriotism, and also actively fulfil social responsibilities. While it remains to be seen whether there will be any concrete measures to boost the private sector, the meeting is in the right direction to help signal and boost sentiment. The next key catalysts will be the Government Work Report together with the NPC Meeting moving into March, and on our end we forecast more stimulus measures to be announced to help support the Chinese economy.
Overall, global markets continued to price in a higher probability of increased defence spending by European countries on the back of fraying of transatlantic ties between US and Europe, while the Dollar was slightly weaker through the day. Looking ahead, the key event will be the Reserve Bank of Australia’s policy meeting, where markets and the consensus are looking for the RBA to cut rates by 25bps to 4.10%.
Regional FX
Asian currencies traded mixed on Monday with the US holidays and a relatively quiet trading session, with USD/CNH rising to 7.265. Indonesia is implementing a plan to require natural resource exporters to keep all foreign exchange earnings onshore for a year, from the previous requirement of 30% FX earnings for 3 months. These new rules will be effective in March and apply to exporters in mining, plantation, forestry and fisheries sectors, but exempt oil and gas exporters. Exporters will be allowed to use their FX earnings to pay dividends, taxes, loan payments and other obligations, as well as procure raw materials, capital goods and other materials not available locally. Meanwhile, Bank Indonesia will also provide instruments to provide attractive yields for these FX holdings together with deposit facilities for FX swaps for companies. The government and central bank estimates that up to US$80bn of FX earnings may be held onshore with these rules, and if this helps maintain rupiah stability moving forward, should provide policy space over time for BI to cut rates this year at some point.
Singapore will announce its 2025 Budget later today on 18 February. With the government having accumulated a good surplus of slightly under 1% of GDP through its term of government, expectations are that the government will roll out more fiscal support, cash handouts and a supportive budget this year. Prime Minister Lawrance Wong has talked about support for lower income, large families, the middle class, and also more broadly programmes to implement the longer-term vision in the Singapore Forward exercise. The broader context is that General Elections will have to be held this year, and with the Electoral Boundaries Review Committee formed, analysts are looking at around May or July for the next Singapore Elections to be held
