18
Asia FX Update: Negative pressure for Asian currencies ahead 23 April 2020 Treasury Research & Strategy Global Treasury Terence Wu (+65) 6530-4367 [email protected] 1
Asia FX Update: Negative pressure for Asian currencies ahead
23 April 2020
Treasury Research & Strategy
Global Treasury
Terence Wu
(+65) 6530-4367
1
Asian FX Key Themes
• This week, renewed turmoil in the oil market seemed to be succeeding where a string of weak data failed – to serve as
a catalyst for a turn in global risk sentiment (p. 10). Investors finally appear to be refocusing attention to the downward
macro trajectory (p. 3-5). Most economic indicators have not reflected the negative COVID-19 impact, much less sink to
2008/09 GFC levels. Thus, the balance is still tilted towards more downside surprises on the macro front (p. 7-8). Asian
central banks remains on track with further monetary easing, keeping govie yields depressed (p. 9). Meanwhile, the
heavy bleeding in portfolio flows have moderated, but we do not regard it as a positive for now (p. 15-16).
• Summary of research view: The appreciation in Asian currencies amid the risk recovery over the past 3-4 weeks may
have overrun its implied valuations (p. 11). This may result in a stronger bounce higher in USD-Asia if we see a bout of
sustained risk-off in the coming weeks. Further out, Even though this crisis is said to be worst than the GFC, the impact
have yet to be reflected in USD-Asia. The peak-to-trough moves Asian pairs so far are nowhere near the extent seen
during the 2008/09 GFC (p. 12). Thus, we remain negative on Asian currencies both in the tactical and structural
timeframes (p. 13). The SGD NEER risks falling out its recent range to the downside on the back of extended CB
restrictions. This should translate to inherent upside pressure for the USD-SGD (p. 17).
2
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
China ↔/↑
↓ March data in China was mixed, with industrial production above expectations (-1.1% yoy vs mkt
consensus: -6.2% yoy) but retail sales was weaker than expected (-15.8% yoy vs. mkt consensus: -10.0%
yoy). Exports also saw a less than expected decline of -6.6% yoy. 1Q GDP at -6.8% yoy vs. expected -
6.0% yoy. Overall, the sense is that the worst case is averted, but the recovery has barely started. Note
also increased policy impetus in China, with fiscal stimulus hinted, and RRR and interest rate cuts
explicitly mentioned. PBOC injected RMB10bn of medium term funding, cut 1-year MLF funding rate from
3.15% to 2.95%, and saw a 50 bps RRR cut take effect last week. 1y and 5y LPR cut by 20 and 10 bps
this week. This series of measures reinforce the idea of increased counter-cyclical easing by the PBOC.
Mar official and Caixin PMIs recovered from the sticker shock levels in Feb, but the next true test will be in
Apr. Year-to-date industrial profits out to Feb at -38.3% yoy. Feb CPI prints remain firm, but PPI moves
into deflationary territory. Expect the CFETS RMB Index to continue tracking the broad USD, with the
USD-CNH maintaining its 7.0500 to 7.1500 range.
S. Korea ↔ ↔ BOK held rates unchanged in its scheduled April meeting, saving bullets for potentially more stressed
needs later. BOK purchased KRW1.5tn of KTBs year-to-date, and continues to provide both KRW and
USD liquidity to banks. Local corporate bond market stirring back to life, suggesting further easing of
market stress. FY2020 growth may miss target, and a growth downgrade by the BOK is expected in May.
Man. PMI dipped for the third consecutive month in Mar to 44.2, from 48.7. Mar exports stall at -0.2% yoy.
Imports also contracted -0.3% yoy. Mar core and headline CPI came in at -0.2% yoy and 1.0% yoy. USD-
KRW may be on a downtrend, but downside may be limited by the rising 55-day MA and the 1200.00 level.
Taiwan ↔
↓ FY2020 growth forecast cut to 1.3-1.8% yoy this week, a second revision lower after the first revision in
February. Nevertheless, the extent of the downgrade is still less than other Asian economies, keeping the
TWD relatively supported. Mar man. PMI bucked global trend to move back into expansionary zone at
50.4. Mar exports printed -0.60% yoy, less than the expected -2.2% yoy. Mar headline CPI flat, but the
core measure grew 0.34% yoy. 3
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
Singapore ↑ ↓ The SGD NEER risks breaking lower from the recent parity to +0.60% above parity range after the
extension of the CB restrictions. Nevertheless, SGD NEER downside is protected (to an extent) by the
MAS’ preference for stable exchange rate. Upside is limited by the still negative macro trajectory and the
ongoing virus spread. Advanced 1Q 2020 growth saw a -2.2% contraction. FY2020 GDP forecast
downgraded heavily to -4.0 to -1.0% yoy. Sizable fiscal rescue package in the form of the Unity, Resilience
and Solidarity Budgets, with fiscal policy expected to carry the weight of supporting the economy through
the COVID-19 crisis. Mar NODX surprised heavily on the upside, printing 17.6% yoy vs. mkt. expectation
of -8.0% yoy. We attribute this to a low base effect, and also the frontloading of pharmaceutical and
electronics exports. Feb headline and core CPI printed 0.3% yoy and -0.1% yoy respectively, both softer
than expected. Feb IP contracted -1.1% yoy, against estimates of -3.2% yoy.
Thailand ↔/↓
↔/↓ BOT said to be exploring unconventional policy measures like asset purchases and yield curve control.
This may suggest that the BOT may still be on an easing path, and may require more than what the
conventional policy room allows to stimulate the economy. Market chatter for additional fiscal stimulus as
well. Official growth forecast downgraded heavily to -5.3% yoy for FY2020. Mar man. PMI slumped to 46.7
from 49.5. Mar custom exports grew at 4.17% yoy, defying estimates of a -5.80% decline, perhaps
attributable to the weak THB. Imports also grew 7.25% yoy. Mar headline CPI at deflationary territory at -
0.54% yoy, core CPI at +0.54% yoy. The USD-THB has searched lower. Going forward, expect further
chatter for monetary and fiscal stimulus to build confidence and risk appetite for Thai assets in the near
term. That should, in term, bring downside pressure to the USD-THB for now.
Malaysia ↔/↑ ↓ Further softness in the crude oil complex adds pressure on the MYR and the fiscal situation, while
extended MCO regulations continue to weigh on the economy. Refreshed in-house growth forecast at -
2.5% to 1.5% yoy. BNM cut rates by 25 bps as expected in its Mar meeting. The door remains wide open
for further cuts, perhaps as early as the next meeting in May. Feb CPI stood at 1.3% yoy, marginally softer
than expectations. Mar man. PMI dipped further to 48.4, compared 48.5 prior. 4
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
India ↑ ↔/↓ The RBI cut policy rates in Mar by 75 bps to 4.40% in an emergency meeting on 27 Mar, and will remain
on an accommodative stance. Various steps taken to release liquidity into the market. Local banks are now
allowed to participate in offshore NDF market, deepening the market and perhaps giving the RBI more
control over that market segment. Bond market continued to rally on the back of RBI purchases in the
secondary market, and also suspected RBI participation in the primary market. Slump in crude prices may
benefit the INR, but likely overwhelmed by larger drivers at play. Expect the USD-INR to search higher in
line with USD-Asia. Mar man. PMI dipped lower to 51.8, from 54.5 prior. Mar exports contracted -34.6%
yoy, compared to 2.9% yoy.
Indonesia ↔/↓
↔/↓ Largest EM USD bond auction since the COVID-19 fallout saw good response, especially in the context of
outflow momentum. BI held rates unchanged at 4.50% on 14 April, but freed up more liquidity through an
RRR cut. Threshold for further cuts may now be higher, with the BI seemingly reluctant to risk USD-IDR
upside with a cut, especially after its hard-earned success in pulling back the USD-IDR from its recent
highs. Fiscal rule to maintain a budget deficit at 3.0% of GDP dropped until 2023, with the deficit expected
to be north of 5.0% of GDP this year after increases in fiscal stimulus. Official growth forecast downgraded
to 2.3%, with -0.4% as the worst case scenario. Mar headline and core CPI at 2.96% and 2.87% yoy
respectively, both marginally better than expected. Big slump in Mar man. PMI to 45.3 from 51.9. Marginal
decline in March exports, defying estimates of deeper declines.
Philippines ↔ NA BSP reduced its policy rate by 50 bps to 2.75% in an unscheduled rate cut on 16 April. Cumulative cuts in
policy rate and RRR reach 125 bps and 200 bps respectively. 4Q GDP in-line with expectations at 6.4%
yoy. Mar CPI firmer than expected at 2.5% yoy. Mar man. PMI saw the largest slump across Asia, sinking
to 39.7 from 52.3 prior. Feb exports grew by a softer than expected 2.8% yoy. Jan remittances grew by a
stronger than expected 6.6% yoy. USD-PHP largely range-bound between 50.500 and 51.500, but expect
the pair to drift higher towards the top-end of this range on further rate cut expectations. Immediate target
at the 200-day MA (51.170). 5
COVID-19 watch: Positives in US and Europe?
• Although the numbers are now huge –
more 2.5m confirmed cases globally –
the rate of new confirmed cases each
day have more or less flat-lined.
• The market is trying to put positivity
from successful vaccine tests and the
relaxation of restrictions in US/Europe.
However, doctors and epidemiologists
are often at hand to pour cold water
over these suggestions. Going
forward, the risk is a premature
reopening of the economy, leading to
further virus spread down the road.
• Charts drawn from the daily COVID-19
Monitor. Please refer to the publication
for further details.
6
Macro trajectory: how low will it go?
• The virus spread took a turn for the
worse in China in late Jan, in Asia
in February, and in US/Europe in
March. The FY2020 growth
downgrades in Asia have been
aggressive. However, only a small
number of economic indicators in
Asia has actually reflected to the
macro impact. Note that most
indicators have not reached the
depths of the 08/09 GFC period.
• There might still be significant
lack of clarity on the economic
impact for now. Further growth
downgrades cannot be ruled out
just yet.
7
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Z-score(3mma)
Asian aggregate (Exports)
CN Asia (ex-CN, JP)
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
OCBC Asia Macro Surprise Diffusion Index
3M MSI
+ve data surprises
-ve data surprises
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Jan-0
4
Jan-0
5
Jan-0
6
Jan-0
7
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
Jan-1
2
Jan-1
3
Jan-1
4
Jan-1
5
Jan-1
6
Jan-1
7
Jan-1
8
Jan-1
9
Jan-2
0
% yoyInflation: Asia vs. OECD
Asia (ex JP, CN) Asia (ex JP, CN) Core OECD
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Z-score(3mma)
Asian aggregate (Imports)
CN Asia (ex-CN, JP)
Macro trajectory: nowhere near GFC yet
• In US and Europe, the real impact of the virus spread is probably only 2-
3 weeks old. Aside from US initial jobless claims and non-farm payrolls,
we still see limited evidence of the economic impact in the data. The
Macro Surprises Indices (MSI) have yet to decline, much less move
towards the 08/09 GFC levels.
• Even more so than in Asia, the actual economic impact in US and
Europe is still unknown. In this context, we believe the risk-reward
balance is tilted towards expecting a deeper contraction in US and
Europe. Overall, we cannot rule out a global recession-type of scenario
in the coming months.
-100
-80
-60
-40
-20
0
20
40
60
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
OCBC US Macro Surprise Diffusion Index
3M MSI
+ve data surprises
-ve data surprises
-80
-60
-40
-20
0
20
40
60
80
Jan-0
8
Jul-0
8
Jan-0
9
Jul-0
9
Jan-1
0
Jul-1
0
Jan-1
1
Jul-1
1
Jan-1
2
Jul-1
2
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
OCBC EZ Macro Surprise Diffusion Index
3M MSI
+ve data surprises
-ve data surprises
8
0
10
20
30
40
50
60
70
80
90
100
-1000
0
1000
2000
3000
4000
5000
6000
Jan
-85
Jan
-87
Jan
-89
Jan
-91
Jan
-93
Jan
-95
Jan
-97
Jan
-99
Jan
-01
Jan
-03
Jan
-05
Jan
-07
Jan
-09
Jan
-11
Jan
-13
Jan
-15
Jan
-17
Jan
-19
Initial Jobless Claims
NBER defined recession US Initial Jobless Claims (6m change)
'000s
Asian 10y yields: Still biased lower
• Asian central banks remain on an easing bias, led by the PBOC, where interest rate and RRR cuts are now explicitly
signaled. The BOT has also started experimenting with non-conventional policy like yield curve control, while other
central banks have provided direct support to keep the yields low. Prefer to be long in the low-yielders.
2.40
2.60
2.80
3.00
3.20
3.40
3.60
3.80
4.00
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
% CN
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%SK
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
Jan
-18
Ma
r-1
8
May-…
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
May-…
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
% TW
2.60
2.90
3.20
3.50
3.80
4.10
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%MY
6.00
6.50
7.00
7.50
8.00
8.50
9.00
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%ID
0.60
1.10
1.60
2.10
2.60
3.10
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%TH
6.00
6.50
7.00
7.50
8.00
8.50
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%IN
0.901.101.301.501.701.902.102.302.502.70
Jan
-18
Ma
r-1
8
Ma
y-1
8
Jul-
18
Se
p-1
8
No
v-1
8
Jan
-19
Ma
r-1
9
Ma
y-1
9
Jul-
19
Se
p-1
9
No
v-1
9
Jan
-20
Ma
r-2
0
%SG
9
Improvement in risk sentiment – now for the turn?
• The FX Sentiment Index (FXSI)
has retraced more than 50%
from its Risk-Off extreme
touched on 19 March.
• Quick check on the sub-indices
of the FXSI reveals that most
of the easing of market stress
is in DM equities and FX
markets. EM bond and
interbank credit markets, and
Asian-related sub-indices have
retraced to a lesser extent.
• We had been suspicious of this
improvement in risk appetite. At
present, the renewed turmoil in
the oil market seemed to be
succeeding where a string of
weak data failed – to be a
catalyst for renewed risk-off.
-3.5
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
4.5
5.5
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Emerging Market Bond Index Plus
RISK OFF
RISK ON
Z-score
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
LIBOR-OIS Spread
RISK OFF
RISK ON
Z-score
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
FX Sentiment Index
RISK OFF
RISK ON
Peak at 19/3/20, more than 50% retracement
since then
10
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
VIX
RISK OFF
RISK ON
Asian FX may have strengthened beyond valuations
• A range of developments have been supportive of the Asian currencies over the past two weeks – the sideways-to-
soggy USD, recovery of risk sentiment and moderation of portfolio outflows. Compared with our in-house short term
implied valuation model, the deviation of the Asian Currency Index (ACI) and its implied value has widened
over the past 4 weeks, suggesting that the recent downside move in USD-Asia may have overextended.
• Going forward, aside from the portfolio outflows (details in p.15-16), the two other developments may be short-lived in
the face of the impending downward spiral in the macro trajectory. Thus, we prefer not to be chasing USD-Asia pairs
lower at this time, preferring to stay defensive. Any turn in USD-Asia may be aggressive given its current overvaluation.
106
108
110
112
114
116
118
120
122
124
Apr-
15
Aug
-15
Dec-1
5
Apr-
16
Aug
-16
Dec-1
6
Apr-
17
Aug
-17
Dec-1
7
Apr-
18
Aug
-18
Dec-1
8
Apr-
19
Aug
-19
Dec-1
9
Apr-
20
Asian Currency Index (ACI) implied valuation
Actual Predicted
WeakerAsian FX
StrongerAsian FX
11
-6.00
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7
Apr-
17
Jul-1
7
Oct-
17
Jan-1
8
Apr-
18
Jul-1
8
Oct-
18
Jan-1
9
Apr-
19
Jul-1
9
Oct-
19
Jan-2
0
Apr-
20
ACI % deviation from implied valuation
% deviation
Price movements not yet reflecting GFC-like recession
• Even though USD-Asia has corrected lower, we find little justification to reverse our structural long USD-Asia view. The
macro trajectory continues to be decidedly southbound. On numerous occasions, politicians and central bankers have
referred to this crisis as worse than 08/09 GFC. Yet, in terms of price movements in USD-Asia, the extent is still
around half (or less) compared to 08/09 GFC. Overall, we get a sense that the market have yet to fully impute
the macro downside into USD-Asia. Do not rule out further upside once market focus shifts to the macro trajectory.
12
08/09 GFC* COVID-19**
USD-KRW +73.88% +12.16%
USD-TWD +17.69% +2.02%
USD-SGD +15.84% +8.86%
USD-IDR +43.55% +22.40%
USD-MYR +19.37% +9.61%
USD-THB +19.16% +9.27%
USD-INR +32.69% +8.00%
*peak-to-trough change in 2008 and 2009 ** peak-to-trough change between 22 Jan 2020 and 17 Apr 2020
Risk-reward favours higher USD-Asia ahead
• Both in the short term (USD turning, USD-Asia overshoot on the downside) and long term (macro trajectory), we think
that the environment is turning negative for Asian currencies. In particular, the close tracking of the CFETS RMB
Index with the DXY index may be fading. Thus, the shelter from the RMB complex for the other Asian currencies may
wane in the coming weeks. Overall, we expect further downside in USD-Asia to be limited, with the risk-reward
favouring it to extend higher in the coming sessions.
• Going forward, the USD-MYR may be most exposed to upside pressure, especially with the crude oil complex seeing
further weakness. Do not rule out another test of the recent high at 4.4500. USD-IDR stability is hard-won, but
valuations are also no longer cheap. However, the USD-IDR may underperform if the BI remains on a close watch.
We are perhaps most bullish on the USD-KRW, which should be most responsive to macro headwinds and also
suspected negative political headlines from North Korea.
Asian FX Short-term Heat Map
USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR
USD 1 1 1 1 1 1 1 1 2 1
JPY 1 9 1 1 1 2 1 9 2 1
CNH 1 9 2 2 1 1 1 1 2 1
SGD 1 1 2 2 9 2 9 2 2 1
MYR 1 1 2 2 1 2 1 2 2 1
KRW 1 1 1 9 1 1 9 1 1 1
TWD 1 2 1 2 2 1 1 2 2 1
THB 1 1 1 9 1 9 1 2 2 1
PHP 1 9 1 2 2 1 2 2 2 1
INR 2 2 2 2 2 1 2 2 2 1
IDR 1 1 1 1 1 1 1 1 1 1
Asian FX Short-term Heat Map
USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR
USD 1 1 1 1 1 1 1 1 2 1
JPY 1 9 1 1 1 2 1 9 2 1
CNH 1 9 2 2 1 1 1 1 2 1
SGD 1 1 2 2 9 2 9 2 2 1
MYR 1 1 2 2 1 2 1 2 2 1
KRW 1 1 1 9 1 1 9 1 1 1
TWD 1 2 1 2 2 1 1 2 2 1
THB 1 1 1 9 1 9 1 2 2 1
PHP 1 9 1 2 2 1 2 2 2 1
INR 2 2 2 2 2 1 2 2 2 1
13
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
EM FX 1M implied volsZ-score
RISK OFF
RISK ON
NEERs: RMB still best of the lot
• The TWD and RMB remains the most resilient on an NEER basis. Going forward, TWD may stay ahead, with the
economic fallout from the virus likely least severe in Asia. RMB may falter in the coming weeks if its correlation with the
broad USD breaks down. The IDR recovered somewhat, but THB and INR NEER still looking very depressed.
1000
1050
1100
1150
1200
1250
130071.00
73.00
75.00
77.00
79.00
81.00
83.00
85.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
South Korea
KRW NEER 5y Average USD-KRW (RHS)
Index: Jan 94 = 100 29.00
29.50
30.00
30.50
31.00
31.50
32.00
32.50
33.00
33.50
34.0079.00
81.00
83.00
85.00
87.00
89.00
91.00
93.00
95.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Taiwan
TWD NEER 5y Average USD-TWD (RHS)
Index: Jan 94 = 100
9000
10000
11000
12000
13000
14000
15000
16000
1700014.00
15.00
16.00
17.00
18.00
19.00
20.00
21.00
22.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Indonesia
IDR NEER 5y Average USD-IDR (RHS)
Index: Jan 94 = 100
28.00
29.00
30.00
31.00
32.00
33.00
34.00
35.00
36.00
37.0078.00
80.00
82.00
84.00
86.00
88.00
90.00
92.00
94.00
96.00
98.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Thailand
THB NEER 5y Average USD-THB (RHS)
Index: Jan 94 = 100
53.00
56.00
59.00
62.00
65.00
68.00
71.00
74.00
77.00
80.0043.00
45.00
47.00
49.00
51.00
53.00
55.00
57.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
India
INR NEER 5y Average USD-INR (RHS)
Index: Jan 94 = 100 2.80
3.00
3.20
3.40
3.60
3.80
4.00
4.20
4.40
4.6070.00
75.00
80.00
85.00
90.00
95.00
100.00
Jan-1
3
Jul-1
3
Jan-1
4
Jul-1
4
Jan-1
5
Jul-1
5
Jan-1
6
Jul-1
6
Jan-1
7
Jul-1
7
Jan-1
8
Jul-1
8
Jan-1
9
Jul-1
9
Jan-2
0
Malaysia
MYR NEER 5y Average USD-MYR (RHS)
Index:: Jan 94 = 100
0
10
20
30
40
50
60
70
80
90
100
80828486889092949698
100102104106108110112114116118
De
c-16
Ma
r-17
Jun
-17
Sep
-17
De
c-17
Ma
r-18
Jun
-18
Sep
-18
De
c-18
Ma
r-19
Jun
-19
Sep
-19
De
c-19
Ma
r-20
Asian NEERs
THB PHP IDR MYR SGD
TWD KRW CNY INR
Index:30 Dec 2016 = 100 2019 2020
-7.32
-5.41-4.98
-2.73 -2.56
-1.52
1.482.08
3.11
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
IDR THB INR KRW MYR SGD PHP TWD CNY
Asian year-to-date NEER performance
22/04/2020
%
14
1045
1095
1145
1195
1245
1295
1345-9000
-7000
-5000
-3000
-1000
1000
3000
5000
7000
9000
11000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Mar
-20
South Korea
NFB: Bond & Eq 20D RS USD-KRW
Moderating outflows, but not really a positive sign
29.0
29.5
30.0
30.5
31.0
31.5
-16000
-11000
-6000
-1000
4000
Dec
-17
Mar
-18
Jun
-18
Sep
-18
Dec
-18
Mar
-19
Jun
-19
Sep
-19
Dec
-19
Mar
-20
Taiwan
NFB: 20d RS USD-TWD
62.00
64.00
66.00
68.00
70.00
72.00
74.00
76.00
78.00-20000
-15000
-10000
-5000
0
5000
10000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Mar
-20
India
NFB: Bond & Eq RS 20D USD-INR
13000
13500
14000
14500
15000
15500
16000
16500
17000-25000
-20000
-15000
-10000
-5000
0
5000
10000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Mar
-20
Indonesia
Bond & Equity: 20D RS USD-IDR
30.0
30.5
31.0
31.5
32.0
32.5
33.0
33.5-3000
-2000
-1000
0
1000
2000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Mar
-20
Thailand
Net bond & equity WTD RS20 USD-THB
3.85
3.95
4.05
4.15
4.25
4.35
4.45-1800
-1500
-1200
-900
-600
-300
0
300
600
900
Jan-
18
Ap
r-18
Jul-1
8
Oct
-18
Jan-
19
Ap
r-19
Jul-1
9
Oct
-19
Jan-
20
Ap
r-20
Malaysia
Equity 20D RS USD-MYR
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
De
c-16
Feb
-17
Ap
r-1
7
Jun
-17
Au
g-1
7
Oct
-17
De
c-17
Feb
-18
Ap
r-1
8
Jun
-18
Au
g-1
8
Oct
-18
De
c-18
Feb
-19
Ap
r-1
9
Jun
-19
Au
g-1
9
Oct
-19
De
c-19
Feb
-20
Total Portfolio Flows (20D RS) ACI (RHS)
z-score4wk MA
1m%
Stronger Asia FX
Weaker Asia FX
-40000
-35000
-30000
-25000
-20000
-15000
-10000
-5000
0
5000
10000
15000
20000
De
c-16
Ma
r-17
Jun
-17
Sep
-17
De
c-17
Ma
r-18
Jun
-18
Sep
-18
De
c-18
Ma
r-19
Jun
-19
Sep
-19
De
c-19
Ma
r-20
Asian aggregate portfolio flows (20D Rollsum)
Equity Bond
• Portfolio outflows had previously deepened to an extent worse than the 2008/09 GFC, but over the past 2 weeks, we
have since a rapid moderation of outflow momentum. However, we see this as a technical response to foreigner holdings
that have compressed significantly since the start of the year (details next slide). Not a significant net positive for Asian
currencies at this stage.
15
Foreigner holding of local assets reduced considerably
• Foreign holdings of local assets have been drawn down significantly this year. As a portion of GDP, foreign ownership of
equities have moved to 08/09 GFC levels. This should limit further outflow momentum on technical grounds.
16
-10,000.00
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Korea - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-25,000.00
-20,000.00
-15,000.00
-10,000.00
-5,000.00
0.00
5,000.00
10,000.00
15,000.00
20,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Taiwan - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-30,000.00
-20,000.00
-10,000.00
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
India - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-25,000.00
-20,000.00
-15,000.00
-10,000.00
-5,000.00
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Indonesia - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-15,000.00
-10,000.00
-5,000.00
0.00
5,000.00
10,000.00
15,000.00
20,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Thailand - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
-6,000.00
-4,000.00
-2,000.00
0.00
2,000.00
4,000.00
6,000.00
8,000.00
De
c
Jan
Feb
Feb
Ma
r
Ap
r
Ma
y
Ma
y
Jun
Jul
Jul
Au
g
Sep
Sep
Oct
No
v
No
v
De
c
Malaysia - Yearly cumulative flows
2013 2014 2015 2016
2017 2018 2019 2020
SGD NEER: Southbound to a new lower range?
• The SGD NEER has largely populated the parity to +0.60% above parity range since the April MPS. However, the
extension of the CB restrictions seemed to have surprised some quarters of the market, and the SGD NEER was taken
to sub-parity levels. It remains to be seen if the bottom end of the recent range in the SGD NEER would be breached.
• Longer term, expect the economy to take a larger hit. We do not rule out further growth downgrades. Domestic
imperatives, coupled with renewed demand for the USD, should keep the USD-SGD buoyant. Expect USD-SGD
upside to be more forthcoming, especially if the SGD NEER moves sustainably south of parity.
116
117
118
119
120
121
122
123
124
125
126
127
128
129
Oct-
13
Jan-1
4
Apr-
14
Jul-1
4
Oct-
14
Jan-1
5
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
Jul-1
6
Oct-
16
Jan-1
7
Apr-
17
Jul-1
7
Oct-
17
Jan-1
8
Apr-
18
Jul-1
8
Oct-
18
Jan-1
9
Apr-
19
Jul-1
9
Oct-
19
Jan-2
0
Apr-
20
Jul-2
0
Oct-
20
2.0%pa+/-2.0% band
flatten slope
neutral slope
1.0%pa+/-2.0% band
flatten slope
0.5%pa+/-2.0%
band
0.0%pa+/-2.0% band
0.5%pa+/-2.0%
band
steepen slope
1.0%pa+/-2.0% band
steepen slope
0.5%pa+/-2.0%
band
flatten slope
neutral slope, re-centre lower
0.0%pa+/-2.0%
band
17
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Co.Reg.no.:193200032W
Treasury Research & Strategy
Macro Research Selena Ling
Head of Research & Strategy
Tommy Xie Dongming
Head of Greater China Research
Wellian Wiranto
Malaysia & Indonesia
Terence Wu
FX Strategist
Howie Lee
Thailand, Korea & Commodities
Carie Li
Hong Kong & Macau
Dick Yu
Hong Kong & Macau
Credit Research
Andrew Wong
Credit Research Analyst
Ezien Hoo
Credit Research Analyst
Wong Hong Wei
Credit Research Analyst
Seow Zhi Qi
Credit Research Analyst
18
