Below 50 manuf. PMI for China in November

FX views: Most EM Asian currencies either strengthened moderately or delivered an about zero change against the dollar last week amid a net zero change of the DXY index. A muted 0.1%-0.5% appreciation was seen in Chinese yuan, Indian rupee, Taiwan dollar, Indonesia rupiah, Malaysian ringgit, and Singapore dollar last week, Thailand baht had a relative larger appreciation of 1.3% against the dollar last week after its 1.1% deprecation in prior week. South Korean won and Philippines peso remained unchanged on a net basis last week.

Week in review: China’s economic recovery was still uneven across sectors and regions, with both the NBS official manufacturing and non-manufacturing PMIs disappointing the market. The silvering lining was that SME manufacturing showed some recovery as suggested by the Caixin manufacturing PMIs. Exports out of Thailand, South Korea and Vietnam improved further, providing further evidence of a modest recovery in regional trade, while India’s GDP surprised on the upside due to strong investment spending.

Central bank monitor: Both the Bank of Thailand and the Bank of Korea kept rates on hold at 2.5% and 3.5% respectively. Thailand’s central bank maintained a neutral tone and said rates should stay at current levels for some time, while BOK’s tone was less hawkish, with fewer board members seeing need to hike rates further. This week, we expect the Reserve Bank of India to keep rates on hold at 6.5% while also maintaining a hawkish tone.

Week ahead: Key market movers this week include US non-farm payrolls, China’s exports, and Japan wages. Meanwhile, South Korea, the Philippines and Thailand are set to publish their CPI data. We expect inflation for regional economies to cool further with falling energy cost and food prices. In addition, we will have export data out of Taiwan.

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China’s equity markets saw small net foreign buying over the past week