Beruflich Dokumente
Kultur Dokumente
Recalibrating the
UOB SGD NEER model
China focus I:
Deposit insurance
scheme on track
CONTENT
EXECUTIVE SUMMARY
03
10
SINGAPORE FOCUS I:
RECALIBRATING THE UOB SGD NEER MODEL
11
14
CHINA FOCUS I:
DEPOSIT INSURANCE SCHEME ON TRACK
16
18
21
INDONESIA
25
MALAYSIA
26
SINGAPORE
27
THAILAND
28
INDIA
29
CHINA
30
HONG KONG
31
JAPAN
32
SOUTH KOREA
33
TAIWAN
34
EUROZONE
35
AUSTRALIA
36
UNITED KINGDOM
37
38
FX TECHNICALS
39
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
EXECUTIVE SUMMARY
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
EXECUTIVE SUMMARY
back in power (according to latest Yougov electoral
calculus, 1 Dec 2014).
Happy holidays and have a good year in 2015!
SINGAPORE IN FOCUS I:
Recalibrating the UOB SGD NEER model
CHINA IN FOCUS I:
Deposit insurance scheme on track
Notwithstanding the soft macro backdrop domestically and diverging growth paths in developed economies, Chinas merchandise trade figures are again
showing some signs of unusual activities, with trade
balance hitting record highs in 3 months out of the
4 in the Jul to Oct period in 2014, underpinned by
strong performance in exports. A closer look at the
data show that exports over-invoicing appears to
be a repeat of the similar anomaly seen during in
2012 to 2013, before authorities clamped down on
such activities. Our calculations show that the extent of over invoicing comes to US$107.6bn, or
about 31% of Chinas trade balance of US$335.5bn
for the current period. In contrast, the previous
episode of exports over-invoicing totaled 48% of
Chinas trade surplus during that period. As such,
exports over-invoicing may be making a comeback,
albeit in a smaller scale compared to the one prior
to Jun 2013.
OIL IN FOCUS:
Losing sheen
Oil prices have tumbled more than 30% to a multiyear low with Brent <US$70/barrel (as of 03 Dec
2014). This marks a dramatic turnaround from the
spike earlier in the year to US$115/ barrel due to
geopolitical concerns in the Middle East.
On the supply side, surging global oil production
could outpace demand this year. Increased production from Libya and Angola alongside uninterrupted
supply from Iraq despite the ongoing war with ISIS
have pushed up OPECs total output to slightly under 31m barrels a day, 352,000 bpd higher compared to one year ago. Swelling US production on
the back of its Shale revolution has also fundamentally changed the global oil equation and resulted in more-than-ample global supply.
At the same time, demand has disappointed as
global growth sputters. The International Energy
Agency (IEA) estimated that the pace of expansion
in oil demand for 2014 & 2015 would be weaker
than expected. This year, it expects demand to rise
by 0.7m bpd to 92.4m bpd, 0.2m barrels less than
its previous forecast. Demand for next year is expected to come in at 93.5 mbd.
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
EXECUTIVE SUMMARY
The Dollar bull looks set to charge into 2015
NZD
AUD
GBP
KRW
INR
JPY
IDR
MYR
PHP
SGD
THB
CHF
TWD
EUR
HKD
VND
CNY
CNH
-3.00
-2.46
-2.48
-1.03
-1.00
Source: Bloomberg
2.40
2.33
1.80
1.66
1.62
1.38
0.21
0.15
0.05
1.00
3.97
3.80
3.46
3.43
3.00
5.86
5.00
CNY
THB
CNH
HKD
VND
TWD
SGD
MYR
PHP
GBP
KRW
IDR
INR
AUD
CHF
JPY
EUR
NZD
7.00
7.00
-9.00
-6.05
-6.27
-7.19
-7.36
-8.13
-7.00
-5.00
-0.16
-0.33
-1.34
-1.69
-2.06
-2.65
-3.23
-3.32
-4.20
-4.30
-3.00
-1.00
1.75
1.26
1.11
1.00
Source: Bloomberg
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
EXECUTIVE SUMMARY
Global FX
Asian FX
USD/CNY: Our views remain intact with the unit
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
EXECUTIVE SUMMARY
meeting will be on 17 December and we still expect the BoT to maintain the current policy rate of
2.0%, supported by the lower inflationary trajectory.
With Thai interest rates expected to remain low going into 2015, and the expected normalization of the
US interest rates starting in 2H 2015, we maintain
our view that there would be downward pressure on
the THB going forward. We expect the THB to move
lower against the USD towards 33.50/USD by end
2014 from around the 32.90 level currently.
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
EXECUTIVE SUMMARY
MAS: Singapores labour market continues to remain tight (3Q unemployment at a low of 1.9%) and
the risks of higher wage costs filtering into higher
core inflation remains a concern. Also, our view that
the US interest rate normalization starting in June
next year will see downward pressures on the SGD.
With that, we believe that the MAS will continue to
keep the current stance of a modest and gradual
appreciation of the SGD NEER unchanged. With
the SGD SIBOR positively correlated with the USD
LIBOR, our expectations that the US interest rate
normalization in June 2015 will see the SIBOR
moving on a higher trajectory in 2015. We expect
the 3M SGD SIBOR to move to 1.00% by end 2015.
BI: BI raised its policy rate by 25 bps to 7.75% at
an unscheduled monetary policy meeting on 18 November, a day after the government delivered on its
fuel subsidy cut, announcing Rp2,000 per litre or
31% hike in the fuel price. This was the first interest
rate increase in a year after the previous fuel price
hike in June 2013.
As a result of higher fuel prices, headline inflation
jumped to 6.2% y/y in November from 4.8% in October but core inflation only edged up slightly to 4.2%
y/y from 4.0% in October. We expect the headline
CPI to hit 8.0% in the middle of 2015 before easing
off by year-end to the top of BIs 3-5% target due
to base effect. As this will be close to the inflation
peak that we have seen in the previous fuel price
hike, it is unlikely to trigger an aggressive reaction
from the central bank, particularly as the positive
sentiment from the subsidy reform has driven Indonesian yields lower.
Monetary normalisation in the US could pressure
on the IDR in the coming months and with Indonesia expected to continue registering a current account deficit, we still see a possibility of another 25
bps hike in the BI rate in the short-term to prevent a
situation of negative real interest rates and to contain the capital outflow risks. The overnight deposit
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
EXECUTIVE SUMMARY
monetary policies in Japan and Europe have reduced the probability of a 25 bps rate hike in Malaysia next year. The key risk is the MYR as further
depreciation in the currency could pose greater inflation risk and would probably increase the chance
of a rate increase. All in all, we still see some chance
of a 25 bps hike in the Overnight Policy Rate (OPR)
to 3.50% in 1Q15 before the GST implementation.
The next meeting has been scheduled on 27-28
January 2015. Bank Negara has kept to a slightly
hawkish bias in its November monetary policy statement, maintaining its view that inflation will continue to be above its long-term average next year due
to domestic cost factors but expects some mitigating effect from the lack of external price pressures
and more moderate demand conditions.
ing will be held on 17 December and at this juncture, we still expect the BoT to maintain the current
policy rate of 2.0%, supported by the lower inflationary trajectory. Although we will likely see stronger
economic growth (our forecast: 4.0%) in 2015, that
would mainly be due to the low base this year. With
that, we think that a stronger confirmation of stronger consumption and investment demand needed to
be observed before any possibility of the BOT hiking the current policy rate in 2015.
Growth Trajectory
2012
2013
2014F
2015F
3Q14
4Q14F
1Q15F
2Q15F
3Q15F
4Q15F
China
y/y % change
7.7
7.7
7.4
7.2
7.3
7.5
7.1
7.2
7.3
7.3
Eurozone
-0.7
-0.4
0.8
1.1
0.8
0.6
0.7
0.9
1.2
1.4
Hong Kong
1.5
2.9
3.5
3.7
2.7
1.3
2.0
2.1
2.7
3.6
Indonesia
6.3
5.8
5.1
5.5
5.0
5.0
5.3
5.4
5.7
5.7
Japan
1.5
1.5
0.7
1.0
-1.2
1.4
-0.9
1.0
1.0
2.8
Malaysia
5.6
4.7
5.9
5.2
5.6
5.4
5.4
5.0
5.2
5.2
Philippines
6.8
7.2
6.0
6.5
5.3
6.2
6.8
6.5
6.4
6.3
India
4.8
4.7
5.4
5.8
5.3
5.8
5.7
5.9
6.2
5.3
Singapore
2.5
3.9
3.2
3.3
2.8
2.7
3.0
3.3
3.3
3.5
South Korea
2.3
3.0
3.4
3.9
3.2
3.2
3.3
3.8
4.0
4.2
Taiwan
2.1
2.2
3.6
3.5
3.6
3.0
3.3
3.0
3.3
3.2
Thailand
6.5
2.9
0.7
4.0
0.6
2.3
4.9
4.4
3.6
3.1
US (q/q SAAR)
2.3
2.2
2.7
3.2
3.9
3.2
2.7
4.2
3.2
-0.4
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
FX OUTLOOK
As of 05 Dec 14
End 1Q15F
End 2Q15F
End 3Q15F
End 4Q15F
USD/JPY
119.9
121.0
125.0
126.0
127.0
EUR/USD
1.24
1.19
1.17
1.17
1.16
GBP/USD
1.57
1.55
1.53
1.54
1.55
AUD/USD
0.84
0.81
0.80
0.78
0.78
NZD/USD
0.78
0.75
0.74
0.74
0.72
USD/SGD
1.31
1.33
1.34
1.35
1.33
USD/MYR
3.46
3.49
3.50
3.50
3.45
USD/IDR
12,300
12,400
12,500
12,500
12,400
USD/THB
32.86
34.1
33.7
33.5
33.4
USD/PHP
44.51
45.0
44.0
43.0
42.0
USD/INR
61.78
63.7
64.9
66.3
67.8
USD/TWD
31.07
31.6
31.8
31.9
31.8
USD/KRW
1,112
1,140
1,150
1,150
1,130
USD/HKD
7.75
7.75
7.75
7.75
7.75
USD/CNY
6.15
6.08
6.06
6.05
6.03
As of 05 Dec 14
End 1Q15F
End 2Q15F
End 3Q15F
End 4Q15F
0-0.25
0-0.25
0.50
1.00
1.25
0.05
0.05
0.05
0.05
0.05
0.50
0.50
0.50
0.50
0.75
2.50
2.50
2.50
2.50
2.50
NZD (OCR)
3.50
3.50
3.50
3.75
4.00
JPY (OCR)
0-0.10
0-0.10
0-0.10
0-0.10
0-0.10
0.43
0.39
0.40
0.60
1.00
7.75
8.00
8.00
8.00
8.00
3.25
3.50
3.50
3.50
3.50
2.00
2.00
2.00
2.00
2.00
4.00
4.00
4.00
4.00
4.00
8.00
8.00
8.00
8.00
8.00
1.88
1.88
1.88
1.88
1.88
2.00
2.00
2.00
2.00
2.25
0.50
0.50
1.00
1.50
1.75
5.60
5.35
5.10
5.10
5.10
10
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
SINGAPORE FOCUS I
In the most recent MAS monetary statement (14 Oct 2014), the MAS reported that the SGD NEER had
fluctuated within the upper half of the policy band over the past six months. However, the UOB SGD
NEER model was showing that the SGD NEER had fluctuated within the lower half of the policy band.
As such, our assumption that the SGD NEER is appreciating at a 2.5% pa rate is on the bullish end.
We also took the opportunity to re-adjust the UOB SGD NEER bilateral currency weights by incorporating
Singapores latest trade data while using econometric methods to reduce the tracking error with the MASreleased SGD NEER. Our view on the current trading bandwidth remains the same at +/-2%.
Our updated model now assumes the SGD NEERs appreciation path at 2.0% pa, where the SGD NEER
is currently trading around 0.15% below the midpoint, rather than the 1.9% below midpoint in the older
model. We think that the 2.0% appreciation in the SGD NEER is justified by the lesser-than-expected
core inflationary pressures domestically, as well as the broad-base appreciation of the USD against Asian
currencies (including the SGD). With that, we see the USD/SGD moving towards a high of 1.35/USD by
3Q 2015, before coming lower to 1.33/USD by 4Q 2015.
UOB SGD NEER with 2.5% and 2.0% slope assumptions since April 2012
126
124
2.5% slope
122
120
118
116
Apr-12
2.0% slope
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Source: CEIC
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
11
SINGAPORE FOCUS I
2010
2011
2012
2013
2014
Source: CEIC
12
Performance evaluation
19.03 bps
26.12 bps
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
SINGAPORE FOCUS I
New and old UOB SGD NEER and MAS SGD NEER
126
124
122
120
118
116
114
112
110
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Source: CEIC
USD/SGD in 2015
1.35
USD/SGD (Actual)
Lower-End
Upper-End
Mid-Point (Implied)
1.30
1.25
1.20
1.15
Jan-12
Sep-12
May-13
Jan-14
Sep-14
Source: CEIC
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
13
SINGAPORE FOCUS II
120
40
80
30
40
20
10
-40
-80
-120
Nov 99
Nov 02
Nov 05
Nov 08
Nov 11
Nov 14
Source: Bloomberg
-10
Oct 14
Nov 14
Nov 14
Nov 14
Source: Bloomberg
SORF1M Index
SORF3M Index
SORF6M Index
0.6
1.315
0.65
1.305
0.55
0.4
1.295
0.45
0.3
1.285
0.35
0.2
1.275
0.25
0.5
0.1
Oct 14
Source: Bloomberg
14
Nov 14
Nov 14
Nov 14
1.265
Oct 14
Source: Bloomberg
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
Oct 14
Nov 14
Nov 14
Nov 14
0.15
SINGAPORE FOCUS II
in the USD/SGD.
SOR fixings have consequentially shifted higher
and look to remain so. After a prolonged period
of QE, positions and mindsets will need time to
grapple with the transition towards higher USD/SGD
and USD yields. This transition expected to keep
SOR supported on dips into 2015. We expected
the negative SOR-SIBOR basis to be whittled
away gradually by the combination of hedging
requirements and currency positioning with the latter
gaining dominance as the days roll on, when clarity
on the FED hike cycle improves. SOR repriced
aggressively higher in the last week of November,
realizing our call for normalization of the basis early.
Despite the early normalization, we do not expect
to revisit the discount seen in the last 4 years. We
continue to expect that the SOR-SIBOR basis up
to 6 months will fluctuate around 0 without any
systematic discount. Funding that has relied on the
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
15
CHINA FOCUS I
PBoC announced the draft regulations for a deposit insurance scheme, which is likely to be implemented
in 2015 along with further interest rate cuts
This announcement suggests that the government is on track to accelerate financial market reforms after
it removed lending rate controls in July 2013
The deposit insurance system should result in better reflection of the true financing costs and lowering
of systemic risks in the financial sector over the mid-to-long term.
16
Implications
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
CHINA FOCUS I
imminent implementation of a deposit insurance
scheme is a right direction for Chinas financial sector
in the mid to long term towards a healthier and more
resilient system, and the draft regulation suggests
that PBoC remains on track. As we expect the ceiling
for deposit interest rate to be removed at about the
same time of the implementation of the deposit
insurance, banks margins will be compressed further
as interest rates are fully liberalized and subject to
fiercer competition. This should help to reflect the
true funding costs for the system, thus allowing for
a more proper allocation of credit.
In the near term however, such a scheme is not
expected to have any significant effect on the broader
economy. We continue to maintain our projections
of 7.4% for 2014 (with 7.4% expansion already
achieved in the first three quarters of 2014) and
slowing slightly to 7.2% for 2015 as China continues
with its rebalancing and restructuring efforts. While
Type of system
Insured amount
(local currency)
USD equivalent
(current exchange rate)
Australia
1998
AUD $250,000
231,850
Brunei
2011
39,825
Chinese Taipei
1985
NTD3 million
99,438
HK
2006
64,488
India
1962
1,655
Indonesia
2004
IDR 2 billion
174,000
Japan
1971
97,440
Korea
1996
48,500
Malaysia
2005
76,717
Philippines
1963
11,245
Singapore
2006
39,824
Thailand
2008
1,550,550
Vietnam
1999
50 million VND
2,350
Jurisdiction
* The 50 million baht coverage will be implemented until 10 Aug 2015 before lowering to 25 million baht during 11 Aug 2015 to 10 Aug 2016. The 1 million baht
coverage as stipulated by the Act, will be implemented from 11 Aug 2016 onwards.
Source: International Association of Deposit Insurers (http://www.iadi.org/di.aspx?id=168), UOB Global Economics & Markets Research Estimates
http://www.pbc.gov.cn/publish/main/527/2014/20141130165955327719569/20141130165955327719569_.html
Rationale For Deposit Insurance (Draft)
http://www.pbc.gov.cn/publish/main/527/2014/20141130170627847426506/20141130170627847426506_.html
PBoCs Q&A on Deposit Insurance Scheme
http://www.pbc.gov.cn/publish/main/527/2014/20141130171434519357762/20141130171434519357762_.html
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
17
CHINA FOCUS II
Exports over-invoicing
making another comeback?
40.0
50
20.0
40
15.0
30
10.0
20
5.0
10
0.0
-5.0
-10.0
Jan 12
Sep 12
May 13
Jan 14
Sep 14
-10
30
25
USD bn
20
USD bn
15
3 Std Dev
10
30.0
2 Std Dev
1 Std Dev
20.0
-5
-10
10.0
-15
.0
Jan-93
Jan-00
Jan-07
18
25.0
50.0
Jan-14
-20
Jan-93
Jan-00
Jan-07
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
Jan-14
CHINA FOCUS II
4500
4000
Shanghai Caoheting
Shanghai Songjiang
Guangzhou
Shenzhen
30000
3500
25000
3000
20000
2500
15000
2000
1500
10000
1000
5000
500
0
Jan 08
Apr 09
Jul 10
Oct 11
Jan 13
0
Jan 98
Apr 14
Apr 01
Jul 04
Oct 07
Jan 11
Apr 14
Exports discrepancy*
(US$ mn)
As % of trade
(US$ mn)
(US$ mn)
balance
16
166,038.0
10,377.4
346,230.3
48.0%
12
104,575.5
8,714.6
335,470.6
31.2%
Period
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
19
CHINA FOCUS II
Difference between China's "Exports to Taiwan"
and Taiwan's "Imports from China"
1,200
10
USD mn
3 Std Dev
800
400
0
3 Std Dev
2 Std Dev
2 Std Dev
1 Std Dev
1 Std Dev
China's "Exports to Taiwan" less Taiwan's
"Imports from China" (Monthly)
-5
-400
-10
-800
-1,200
Jan 98
Jan 02
Jan 06
Jan 10
Jan 14
Exports over-invoicing
remains but at smaller scale
20
USD bn
-15
Jan 93
Jan 00
Jan 07
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
Jan 14
By Elaine Khoo & Wesley Chong From UOB Country & Credit Risk Management
Oil prices have tumbled more than 30% to a multiyear low with Brent <US$70/barrel (as of 03 Dec
2014). This marks a dramatic turnaround from the
spike earlier in the year to US$115/ barrel due to
geopolitical concerns in the Middle East. Brent has
averaged ~US$110/barrel over the past three years
following the large GFC-induced slump. This sharp
about-turn can be explained by both supply and
demand side factors, as well as the strength in USD.
On the supply side, surging global oil production could
outpace demand this year. Increased production from
Libya and Angola alongside uninterrupted supply
from Iraq despite the ongoing war with ISIS have
pushed up OPECs total output to slightly under 31m
barrels a day, the highest this year and 352,000 bpd
higher YoY. Swelling US production on the back of its
Shale revolution has also fundamentally changed
the global oil equation and resulted in more-thanample global supply.
At the same time, demand has disappointed as
global growth sputters. The International Energy
Agency (IEA) estimated that the pace of expansion
in oil demand for 2014 & 2015 would be weaker than
expected. This year, it expects demand to rise by
0.7m bpd to 92.4m bpd, 0.2m barrels less than its
previous forecast. Demand for next year is expected
to come in at 93.5 mbd.
Rest of NonOPEC
22%
US$/bbl
140
Brent
WTI
160
Saudi Arabia
11%
Iraq
4%
Iran
4%
120
100
80
Mexico
3%
Canada
5%
60
40
20
0
Jul 05
UAE
3%
Brazil
3%
China
5%
Jan 07
Jul 08
Jan 10
Jul 11
Jan 13
Jul 14
Kuwait
3%
Rest of OPEC
12%
Russia
12%
US
13%
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
21
22
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
Arctic Region
Ultra-Deepwater
80
70
60
Ultra-Deepwater (US Gulf) Medium (N.Sea)
50
Ultra-Deepwater (Brazil Pre-Salt)
40
30
Shallow-Medium Water (Caspian Sea)
20
Source: Various sources, UOB
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
23
24
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
INDONESIA
BI Rate (%)
FASBI Rate (%)
Headline CPI (y/y %)
FDI (US$bn)
Consumer Confidence Index
7.0
8.0
US$bn
120
6.0
7.0
5.0
6.0
4.0
115
110
105
3.0
5.0
4.0
3.0
Jan 10
125
8.0
9.0
Dec 10
Nov 11
Oct 12
Sep 13
Aug 14
2.0
100
1.0
95
0.0
Jan 10
Dec 10
Nov 11
Oct 12
Sep 13
Aug 14
90
to weigh on export.
The budget for 2015 will be reviewed following
the fuel price hike. Fiscal improvement and the
orientation of the new government towards higher
spending on infrastructure, healthcare and education are positive for the IDR. Nonetheless, we still
see upside risk to USD/IDR in line with broad USD
strength. We expect USD/IDR to rise to 12,400 in
1Q15.
2013
2014F
2015F
GDP
6.3
5.8
5.1
5.5
4.0
6.4
6.3
7.4
6.1
6.3
6.2
6.1
-2.8
-3.4
-3.0
-2.4
-1.9
-2.3
-2.4
-2.1
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
25
MALAYSIA
Decline in global oil and commodity prices
pressure on current account position
25
4000
1400
20
3500
1200
15
3000
1000
10
2500
800
2000
600
0
Mar 05
Jul 07
Nov 09
Mar 12
Jul 14
26
1500
Jan 12
Sep 12
May 13
Jan 14
Sep 14
2012
2013
2014F
2015F
GDP
5.6
4.7
5.9
5.2
1.7
2.1
3.3
4.3
3.3
3.3
3.0
3.1
5.8
4.0
4.6
3.6
-4.5
-3.9
-3.5
-3.0
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
400
SINGAPORE
Manufacturing is the only sector with faster year-to-date growth compared to 2013 growth
12
2014 YTD
2013
10.8
% y/y
10
8
7.2
6.1
4.2
Finance &
Insurance
2013 Share
of GDP
11%
6.1
3.0
1.7
2
0
4.1
4.3
2.5
2.5
3.2
4.5
4.3
2.4
1.1
Manufacturing
Construction
Business
Services
Wholesale &
Retail Trade
Transport &
Storage
Infocomms
20%
5%
13%
18%
8%
4%
Accomodation
& Food
Services
2%
Source: CEIC
2012
2013
2014F
2015F
GDP
2.5
3.9
3.2
3.3
4.6
2.4
0.9
0.9
1.9
1.9
2.0
2.1
17.5
18.3
19.0
18.5
2.0
1.3
1.3
1.4
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
27
THAILAND
14
10
6
2014 YTD
2013
12.2
10.1
5.8
8.0
3.9
2.4 1.4
1.9 0.9
0.1
-2
Finance
Share of
5%
2013 GDP
Tpt, Storage,
Comms
Agriculture
Utilities
10%
8%
4%
1.0
0.1
-0.7
-6
-10
4.5
3.2
-1.7
-4.1
-5.8
13%
4%
38%
5%
2%
Source: CEIC
28
2012
2013
2014F
GDP
6.5
2.9
0.7
4.0
3.0
2.2
2.0
2.1
0.7
0.7
0.9
1.0
-0.4
-0.5
1.8
1.4
-4.9
-2.6
-2.6
-2.5
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
2015F
INDIA
Slow manufacturing growth in quarter ending
September puts drag on GDP
GDP share
(2013)
2014 YTD
2013
Utilities
13%
Community/Social
14%
26%
Agri
Trade/Hotels/Tpt/Comms
8%
Construction
2%
15%
Mining
Mfg
10.8%
12.6%
8.7%
4.4%
7.2%
5.4%
4.6%
3.5%
3.5%
3.3%
3.3%
2.1%
1.1%
0.6%
0.5%
% y/y
-2.6%
-10%
0%
10%
20%
80
60
-4,000
40
-8,000
20
-12,000
-16,000
-20
-20,000
-40
1991
2002
2013
-24,000
Source: CEIC
Source: CEIC
Indias GDP grew at a slower pace of 5.3% y/y (previous: 5.7% y/y) in the three months ended September 2014, as the manufacturing sector saw almost no growth (+0.1% y/y), compared to a 3.5%
y/y growth in 2Q. Nevertheless, both 2Q and 3Q
GDP averaged 5.5% growth that bucked the trend
that saw eight consecutive quarters of sub-5%
growth before this.
Although there was a pick-up in project clearances
over the past six months, the corporate sector did
not manage to pull up GDP growth as investments
contribution to GDP growth was flat (compared
to 2.3% pts in previous quarter). There was also
plenty of spare capacity in the manufacturing sector
as capacity utilization fell to around 70% in 2Q this
year, compared with almost 85% just three years
ago.
Weaker-than-expected
manufacturing
growth
caused doubts to plans by the Modi-led government
to boost the output of millions of factories and raising the share of manufacturing to GDP from 15% to
25%. Although the government had gone all out to
attract foreign investors with a list of initiatives such
as Make in India to turn India into a manufacturing
powerhouse, bureaucratic issues were still a common hindrance to investment confidence. Another
hindrance to investment demand is the high borrowing costs facing firms. This had led to slower
credit growth registering a 13-year low in Sep 2014.
2012
2013
2014F
2015F
GDP
4.8
4.7
5.4
5.8
9.3
10.9
7.5
6.8
9.9
8.8
8.6
8.4
-5.4
-2.8
-1.7
-2.1
-5.9
-5.9
-4.8
-4.5
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
29
CHINA
Despite China's better than expected 3Q14 headline GDP growth of 7.3%y/y (data released in Oct),
there is a discernible slowdown from the 7.4-7.5%
pace seen in 1H14. Of note also is that on a q/q basis, activities expanded by 1.9%q/q seasonally adjusted in 3Q14, vs. average pace of 1.97% during
2011-2013. While this difference looks negligible, it
is magnified once the figures are annualized. This is
translated to an annualized pace of 7.8% for 3Q14,
compared to the annualized rate of 8.1% based the
average in 2011-2013.
By mid-December, there will be further confirmation
that China is shifting into a new normal growth environment when the annual Economic Work Conference gets underway to set the economic policy tone
for 2015 (reportedly to begin on 9 Dec). It is widely
expected to lower the countrys growth target to 7%
for 2015 from 7.5% currently.
The speed of recent measures such as RMB internationalization (for instance, the number of offshore
RMB centers appointed this year has far exceeded the number between 2010 to 2013) and financial market reforms (impending implementation of
deposit insurance, Shanghai-HK Stock Connect
scheme, among others) suggest that the current
government is committed and determined to the rebalancing and restructuring of the Chinese economy. Keeping these factors in mind, we are trimming
slightly our 2015 GDP forecast to 7.2% (from 7.5%
previously), while maintaining our projection for
2014 at 7.4%, implying a 4Q14 growth of 7.5%y/y,
which is still achievable with PBoC taking increasingly proactive approach in its interest rate policy.
30
12%
%y/y
Forecast
10%
7.30%
7.50%
7.10%
7.20%
7.30%
8%
6%
4%
2%
0%
1Q10
1Q11
1Q12
1Q13
1Q14
1Q15
5.60
5.35
5.10
5.10
5.10
2.75
2.50
2.25
2.25
2.25
As for the RMB, our views remain intact with the unit
firming marginally to 6.03/USD by end-2015. Even
if it hit our target of 6.10/USD for end-2014 (spot:
6.1501 on 4 Dec), that would still be a full year decline of 0.8%, which would be the first annual decline since 2009. What is more important than the
currency level is that as RMB internationalization
accelerates, 2-way moves for the currency would
also be the new normal as it behaves more like a
global currency that is subject to both external and
domestic factors. This means that there could be
repeat of the bouts of depreciation seen during the
Jan-Apr period 2014. For 2015, our expectations
for Fed interest rate normalization could see USD
strength pressuring the RMB as well. Having said
that, the risks of prolonged depreciation are low, as
the currency may need to maintain a largely stable
value at this early stage of internationalization.
2012
2013
2014F
GDP
7.7
7.7
7.4
7.2
2.7
2.6
2.0
2.1
4.1
4.1
4.1
4.1
2.6
1.9
2.0
1.6
-1.7
-1.9
-2.0
-2.2
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
2015F
HONG KONG
Retail sales
3M USD LIBOR
3M HKD HIBOR
25
20
15
10
-5
-10
0
Jan 99
Jan 02
Jan 05
Jan 08
Jan 11
Jan 14
%y/y change
-15
Jan 12
Sep 12
May 13
Jan 14
Sep 14
Against the backdrop of US Feds tapering and expectation for US rate hike cycle ahead, the HKD
interbank rates continue to be steady at the 0.360.38% level for 3-month. We do not expect domestic interest rates to move higher until early 2015
when the US rate hike cycle becomes more visible.
We look for the 3-month HIBOR to edge up marginally to 0.4% by end-2014, vs. 0.375% currently,
and to 0.65% by end-2015, assuming the US Fed
begins to tighten by mid-2015.
As for the HKD, we do not anticipate any change to
the peg to USD any time soon. The commencement
of the much-delayed Shanghai-HK Stock Connect
or Through Train on 17 Nov ushered in another
new step for China to continue on its market reforms/RMB internationalization path, which should
help enhance competitiveness for HK financial markets, as the RMB20,000 daily currency-conversion
cap for Hong Kongs permanent residents was also
abolished along with Through Train.
2012
2013
2014F
2015F
GDP
1.5
2.9
2.1
2.6
4.1
4.3
4.4
3.6
3.2
3.2
3.3
3.3
1.6
1.9
1.8
2.5
2.7
2.7
0.5
0.7
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
31
JAPAN
Little reprieve, if any, in 2015
After expanding its quantitative and qualitative easing (QQE) program in October 2014, the Bank of
Japan (BOJ) kept its monetary stance unchanged
in Nov and we believe the BOJ is unlikely to do
32
2012
2013
2014F
2015F
GDP
1.5
1.5
0.7
1.0
0.0
0.4
3.2
1.0
4.3
4.0
3.6
4.0
1.0
0.7
0.2
0.1
-9.5
-10.0
-7.5
-7.0
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
SOUTH KOREA
59
57
55
53
51
49
47
45
Mar-10
Sep-11
Mar-13
JPY/KRW (lhs)
USD/KRW
40
35
30
25
20
15
10
5
0
-5
-10
Sep-14
12.5
1,180
12.0
1,160
1,140
11.5
1,120
11.0
1,100
10.5
1,080
1,060
10.0
1,040
9.5
1,020
9.0
Jan 13
Jun 13
Nov 13
Apr 14
Sep 14
1,000
Source: Bloomberg
South Koreas GDP growth momentum strengthened to 0.9% q/q in 3Q14 from 0.5% in 2Q14,
led by improvements in private consumption and
construction fixed investment. However, downward pressure was seen coming from facilities investments and exports which contracted from the
second quarter. Weaker demand from China and
strong KRW were the key factors behind the slowdown in exports during the quarter. China is South
Koreas largest export market accounting for 26%
of its exports, which means that a structural slowdown in China could continue to weigh on South
Koreas outlook. On a y/y basis, growth has moderated to 3.2% y/y in 3Q14 from 3.5% in 2Q14. The
economy grew 3.5% in the first three quarters of the
year, on track for BoKs revised growth forecast of
3.5% for this year. In October, the central bank also
revised lower its 2015 growth to 3.9% from 4.0%.
2013
2014F
2015F
GDP
2.3
3.0
3.4
3.9
2.2
1.3
1.3
1.6
3.0
3.0
3.2
3.1
4.2
6.1
6.0
5.5
-1.1
-1.8
-1.7
-2.1
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
33
TAIWAN
A minor set back by food scandals in 3Q14
34
3
2
1
0
-1
-2
Jan 09
Jun 10
Nov 11
Apr 13
Sep 14
2012
2013
2014F
2015F
GDP
1.5
2.1
3.5
3.2
1.9
0.8
1.3
1.5
4.2
4.1
3.9
3.9
10.4
11.8
13.1
10.6
-1.5
-1.2
-1.4
-1.1
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
EUROZONE
0
-5
1998
%
10
2000
2002
2004
2006
2008
2010
2012
2008
2010
2012
Eurozone
United Kingdom
5
0
-5
1998
2000
2002
2004
2006
And the reason for QE is simple. The threat of deflation and recession combined with stubbornly high
unemployment across the 18-country Eurozone
looms large. And consumer prices are expected
to soften further after the sharp drop in oil prices.
Responding to low inflation damped by oil prices is
complicated for the ECB. Although the lower costs
depress inflation further below the banks target,
they may also help the economy by freeing up disposable income for households and businesses to
spend and invest. However, the risk is that European households and businesses may not see falling
energy prices as a temporary windfall but rather the
continuation of an ultra-weak price trend that will
persist far into the future. This could prompt com-
GDP
-0.7
-0.4
0.8
1.1
2.5
1.3
0.5
0.8
11.3
12.0
11.7
11.4
1.4
2.0
2.4
2.5
-3.6
-2.9
-2.6
-2.3
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
35
AUSTRALIA
Economy faces challenges ahead
36
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
2.75-3.75
2.75-3.75
2.50
2-3
2.5-3.5
Headline CPI
1.75
1.5-2.5
2.5-3.5
2.5-3.5
2.25-3.25
Underlying inflation
2.25
2-3
2.25-3.25
2.25-3.25
2.25-3.25
2.5-3.5
2.75-3.75
2.75-3.75
2.50
2-3
Headline CPI
2.00
1.75-2.75
2.5-3.5
2.5-3.5
2.25-3.25
Underlying inflation
2.25
1.75-2.75
2.25-3.25
2-3
2-3
2012
2013
2014F
2015F
GDP
3.6
2.3
3.0
2.8
1.8
2.5
2.6
2.4
5.2
5.7
6.1
5.9
-4.4
-3.3
-2.9
-2.5
-3.0
-1.4
-3.0
-1.8
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
UNITED KINGDOM
Recovery unbalanced
UKs GDP grew 0.7% during the third quarter, unchanged from the preliminary estimate. That was
down from 0.9% in the second quarter, the joint
highest quarterly rate in four years. Year-on-year,
GDP grew 3.0%, confirming Britain is one of the
world's fastest-growing rich economies this year.
That said, business investment fell by 0.7% for
the quarter, its first drop in more than a year and
a sharp slowdown from the second quarter's 3.3%.
By contrast, consumer spending once again the key
contributing factor to the UKs steady growth rate,
expanded by 0.8% on the quarter. Whilst growth
generally remains on track, we remain cautious on
the recovery. After all, trade is still proving to be a
drag on the economy, especially with slowing global
growth emanating from Japan and particularly the
Eurozone.
2012
2013
2014F
2015F
GDP
0.7
1.7
3.0
2.6
2.8
2.6
1.5
1.6
8.0
7.6
6.3
5.6
-3.8
-4.2
-4.1
-3.5
-7.5
-5.9
-5.2
-4.0
MPC members have noted concern over diminishing slack in the economy and said low productivity could be a source for potential wage pressures,
which might see inflation overshoot the 2% target.
Besides, in the current environment where weakness in the Eurozone prevails and factoring in lower
commodity prices, the risk for inflation overshooting
the 2% target would seem less pronounced than
that of an overshoot. We believe that the BoE will
hold fire on rates and have thus pushed back our
rate hike expectations to 4Q15.
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
37
38
2012
2013
2014F
2015F
GDP
2.3
2.2
2.7
3.2
2.1
1.5
1.7
2.3
7.9
6.7
5.7
5.2
-2.7
-2.3
-1.5
-1.3
-7.0
-4.1
-2.8
-1.8
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
FX TECHNICALS
EUR/USD: 1.2470
GBP/USD: 1.5735
AUD/USD: 0.8400
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
39
FX TECHNICALS
NZD/USD: 0.7780
USD/JPY: 118.80
USD/SGD: 1.3060
40
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
FX TECHNICALS
USD/MYR: 3.4150
The explosive rally in the first of December 2014 signals that this pair could be
in the early stages of a trending phase
which could last for several weeks. Unless there is a move back below the
previous break-out point at 3.3460, USD
may extend towards the top of the rising
channel near 3.5100 by end of 1Q2015.
EUR/SGD: 1.6250
GBP/SGD: 2.0505
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
41
FX TECHNICALS
AUD/SGD: 1.1010
JPY/SGD: 1.1095
42
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
Canada
UOB Vancouver Branch
Suite 2400, 650 West Georgia Street
Vancouver, British Columbia
Canada V6B 4N9
Phone: (1)(604) 662 7055
Fax: (1)(604) 662 3356
SWIFT: UOVBCA8V
Email: UOB.Vancouver@UOBGroup.com
Japan
UOB Tokyo Branch
Sanno Park Tower, 13F
2-11-1 Nagatacho, Chiyoda-Ku
Tokyo 100-6113, Japan
Phone: (81)(3) 3596 7200
Fax: (81)(3) 3596 7201
SWIFT: UOVBJPJT
Email: UOB.Tokyo@UOBGroup.com
Malaysia
United Overseas Bank Limited,
Labuan Branch
Level 6A, Main Office Tower
Financial Park Labuan Complex
Jalan Merdeka
87000 Labuan F.T., Malaysia
Phone: (60)(87) 424 388
Fax: (60)(87) 424 389
Swift: UOVBMY2L
Email: my2icom@UOBGroup.com
United Overseas Bank (Malaysia) Bhd
(a subsidiary)
Menara UOB
Jalan Raja Laut
P.O. Box 11212
50738 Kuala Lumpur, Malaysia
Phone: (60)(3) 2692 7722
Fax: (60)(3) 2691 0281
SWIFT: UOVBMYKL
Email: UOB.customerservice@uob.com.my
Website: www.UOB.com.my
United Overseas Bank (Malaysia) Bhd has
45 branches in Malaysia.
Myanmar
UOB Yangon Representative Office
Unit #01-L-1
Park Royal Hotel
Yaw Min Gyi Street, Dagon Township
Yangon, Myanmar
Phone: (95)(1) 250388 Ext: 8180
Fax: (95)(1) 253318
Philippines
United Overseas Bank Philippines
(a Thrift Bank) (a subsidiary)
Pacific Star Building, 17th Floor
Sen. Gil Puyat Avenue corner
Makati Avenue
1200 Makati City
Phone: (63)(2) 548 6400
Fax: (63)(2) 811 6196
SWIFT: UOVBPHMM
Email: info@UOB.com.ph
South Korea
UOB Seoul Branch
3(A)F, Seoul Finance Centre
136, Sejong-daero
Jung-Gu, Seoul 100-768
Phone: (82)(2) 739 3916/739 3919
Fax: (82)(2) 730 9570
SWIFT: UOVBKRSE
Email: UOB.Seoul@UOBGroup.com
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
43
44
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
Taiwan
UOB Investment Advisor (Taiwan) Ltd
(a subsidiary)
Union Enterprise Plaza, 16th Floor
109 Minsheng East Road, Section 3
Taipei 10544
Phone: (886)(2) 2719 7005
Fax: (886)(2) 2545 6591
Email: UOBAM.TW@UOBGroup.com
Thailand
UOB Asset Management (Thailand)
Company Limited
(a subsidiary)
Asia Centre Building, 23A, 25th Floor
173/27-30, 32-33 South Sathon Road
Thungmahamek
Sathon, Bangkok 10120
Phone: (66)(2) 786 2000
Fax: (66)(2) 786 2370-74
Website: www.UOBAM.co.th
Disclaimer
This analysis is based on information available to the public. Although the information contained herein is believed to be reliable,
UOB Group makes no representation as to the accuracy or completeness. Also, opinions and predictions contained herein reflect
our opinion as of date of the analysis and area subject to change without notice. UOB Group may have positions in, and may effect
transactions in, currencies and financial products mentioned herein. Prior to entering into any proposed transaction, without reliance
upon UOB Group or its affiliates, the reader should determine, the economic risks and merits, as well as the legal, tax and accounting characterizations and consequences, of the transaction and that the reader is able to assume these risks. This document and its
contents are proprietary information and products of UOB Group and may not be reproduced or otherwise.
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
45
46
Quarterly Global Outlook 1Q2015 UOB Global Economics & Markets Research
47