Asia FX Update: Heavy in the mid-term
13 Mar 2020
Treasury Research & Strategy
Global Treasury
Terence Wu
(+65) 6530-4367
1
Asian FX Key Themes
• Asian asset markets face near term market panic (p. 11) and longer term growth concerns on one hand, and central
bank easing action on the other (p. 6). Central bank action may support the Asian govies (p. 9-10), but may have little
impact on FX (p. 12). Expect Asian FX to be more driven by portfolio outflows (p. 14) from the market panic, and growth
downgrades. It is not a stretch to expect the ongoing spread of COVID-19 (p. 6) to crimp global trade and raise
recession risks. Selected macro-economic indicators are already starting to exhibit weakness (p 3-5, 7). Thus, the
growth downgrade cycle is probably not ending yet.
• Summary of research view: Expect Asian FX to be under considerable pressure both in the short- and mid-term,
especially with the broad USD regaining its anti-cyclical properties. With the epicentre of the crisis no longer in China
and ample room for policy support, expect the RMB to outperform the rest of the Asian FX (p. 13). Near term, expect
the likes of IDR and INR to underperform on the back of excessive portfolio outflows (p. 14). Further out, currencies with
most exposure to the crisis, like the KRW, SGD (due to trade), and THB (due to tourism) may underperform peers. As
for the SGD NEER, we expect further downward pressure ahead, but we will not be panicking at current levels (p. 15).
2
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
China ↔/↑
↓ The COVID-19 situation now appears under control within China, with no signs of worsening after the
factories reopen. Attention shifting to other countries should support Chinese assets going forward. Expect
RMB complex to remain supported. The PBOC will keep the monetary taps loose, with further MLF and
LPR cuts still on the table. Negative economic outcomes for 1Q 2020 are already coming through, with
Feb official man./non-man. PMI coming in at an unprecedented 35.7 and 29.6 respectively. The Caixin
man./svcs PMIs also came in at an equally weak at 40.3 and 26.5 respectively. Year-to-date exports
slumped -17.2% yoy. Aggregate social financing and new yuan loans firmer than expected, although
monetary aggregates grew slower than expected. 4Q real GDP growth at 6.0% yoy, but nominal growth
reaccelerated to 9.63% yoy from 7.57% yoy. Feb CPI prints remain firm, but PPI moves into deflationary
territory.
S. Korea ↑ ↓ The USD-KRW fluctuates on either side of 1200.00, pending COVID-19 headlines. Nevertheless, expect
the KRW to underperform the RMB for now. The BOK surprised by remaining unchanged in February,
presumably to protect policy room. However, with the Fed rate cut, the BOK may be compelled to follow
suit. 4Q 2019 GDP came in at 2.3% yoy. Feb man. PMI dipped again to 48.7, from 49.8. Feb exports grew
4.5% yoy, against Jan’s 6.1% yoy decline. Imports also grew 1.4% yoy. Feb core and headline CPI came
in at 0.6% yoy and 1.1% yoy, softer than previous months on COVID-19 impact.
Taiwan ↔/↑
↓ TWD outperforming Asian peers amid better control over the country’s virus situation and firmer long term
prospects. However, ongoing equity outflows may weigh going forward. The CBC is static at 1.375% in
Dec, with minutes of the meeting showing optimism over growth. Despite the firmer macro footing in
Taiwan, some rumblings for CBC rate cut are also under way. 4Q GDP growth revised lower marginally to
3.31% yoy, from 3.38% yoy. Feb PMI dipped back into contractionary zone at 49.9, from 51.8 prior. Feb
exports shrank by -7.60% against an expected 1.00% yoy growth. Imports slumped -17.7% yoy, supporting
a larger-than-expected trade balance. Feb headline and core CPI contracted 0.21% and 0.38% yoy
respectively. 3
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
Singapore ↑ ↓ 4Q GDP revised higher to 1.00% yoy (from 0.80% yoy), and FY2019 growth at 0.7% yoy. Investors will
however focus more on the 2020 growth downgrade from 0.50-2.50% to -0.50%-1.5% yoy due to COVID-
19. With the attention of COVID-19 shifting out of Asia, expect the SGD NEER to firm from the depths
seen in the previous weeks, and probably settle south of the parity level. Not much impetus to push the
SGD NEER to the top half of the band when expectations of MAS easing in April swirls. Jan NODX
contracted by a less than expected -3.3% yoy (vs -3.7% consensus). Jan headline and core CPI printed
+0.8% yoy and +0.3% yoy respectively, both softer than expected. Big miss in the core print may highlight
weakness in the underlying economy. Jan IP grew 3.4% yoy, against estimates of -3.4% yoy.
Thailand ↔/↑
↔/↓ The THB is settling down into a range with 31.50 as a locus after underperformance at the start of the
year. However, the THB may still be on a negative bias on the tourism hit, which may take longer to
recover than the COVID-19 spread itself. 4Q GDP at 1.60% yoy, softer than expected, but FY2019 growth
in line with expectations at 2.40% yoy. Growth may be hit hard by COVID-19 this year due to its reliance
on the tourism sector, leading to the BOT to cut its policy rate to an unprecedented 1.00%. Developments
in the COVID-19 front to dictate near-term BOT decisions. Feb man. PMI dipped further to 49.5, compared
to 49.9 prior. Jan custom exports grew 3.35%, against an expectation of -2.90% yoy. Custom imports fell
by a less than expected -7.86% yoy, rather than the expected -16.45% yoy. Feb headline/core CPI at
0.74% yoy and 0.58% yoy respectively.
Malaysia ↑ ↑ Political intrigue will once again dominate investors’ minds, weighing on the MYR and MGS bonds in the
near term. 4Q GDP missed heavily at 3.60% yoy, against an expected 4.10% yoy. FY2019 also missed
expectations at 4.30% 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. Jan CPI stood at 1.6% yoy,
marginally softer than expectations. Jan man. PMI faded back into contraction zone at 48.8, from 50.0
prior. Jan exports contracted at -1.5% yoy (mkt: -1.6% yoy), while imports also shrunk -2.4% yoy.
4
Short term FX/bond market views and commentary
USD-Asia 10y govie (%) Commentary
India ↑ ↓ Relatively unscathed by the COVID-19 episode, but equity outflows have caught up with India on global
risk-off tone and domestic issues (Yes Bank failure). Nevertheless, excessive upside in the USD-INR is
curtailed by the weak USD and the slumping crude complex. The RBI held policy rates unchanged in
February, but easing is still achieved by depressing back-end govie yields through OMOs. Expect the INR
to be sideways for now. Price pressures continue to increase, with Jan headline CPI coming in at 7.59%
yoy, but the latest GDP growth slowed to 4.5% yoy in 3Q2019 – a classic case of stagflation. Dec
industrial production contracted a marginal -0.30% yoy. Jan man. PMI continued to push higher to 55.3,
from 52.7 prior. Dec trade deficit in line with expectations.
Indonesia ↔/↑
↔/↑ BI cut policy rate by 25 bps to 4.75% in its February meeting, and sounded confident of a weak V-shaped
recovery in the Indonesian economy. This confidence is probably all but shattered in the 2 weeks since.
Expect the BI to continue being in the easing mode. IDR currently weighed on by bond outflows amid risk
off sentiment, and is playing catch up to the declines seen by Asian counterparts. 4Q’19 GDP surprised on
the downside at 4.97% yoy, with exports and investment being the main drags. Jan exports contracted by -
3.71% yoy, weaker than expected. Jan trade deficit widened again, after an improvement in Dec. Feb
headline CPI at 2.98% yoy, marginally better than expected, but the core gauge continues to
underperform. Feb man. PMI firmed to 51.9 from 49.3 prior.
Philippines ↔/↑
NA The BSP reduced its policy rate to 3.75% in its February meeting as expected, with the BSP said to be
readying the next round of cuts in relation to the surprise Fed rate cut. 4Q GDP in-line with expectations at
6.4% yoy. Feb CPI softer than expected at 2.6% yoy. Dec exports grew 21.4% yoy, significantly
outperforming expectations, while imports contract 7.6% yoy. Feb man. PMI bucked trend in Asia to
improve to 52.1, from 51.7 prior. Nov remittances grew 2.0% yoy, weaker than expected.
5
COVID-19 watch: Attention shifts to the global spread
• Within China, the situation is now
largely contained, with President Xi
feeling comfortable enough to visit
Wuhan. Makeshift hospitals are also
being progressively closed.
• However, the total confirmed cases
outside China has exceeded 45,000,
with a 3.2% fatality rate (6.6% in Italy).
Italy is basically on lockdown mode.
• COVID-19 now is no longer an Asian-
specific negative, but the
subsequent deterioration in global
risk sentiment may not do Asian
currencies any favours.
• For further insights, please refer to the
daily COVID-19 Monitor, now covering
the global spread.
6
Selected economic indicators starting to show the hit
• The sticker shock is the official and
Caixin PMIs in China. On both the
manufacturing and services
gauges, the outcome has slumped
to rarely seen levels. PMIs in the
rest of Asia remain largely resilient,
but we expect the hit to come in
their March numbers.
• Majority of data-prints are still not
fully showing the impact of COVID-
19. Over the coming 4-6 weeks,
expect indicators to start
reflecting the weakness, leading
to some structural negatives for
the Asian currencies.
44.0
46.0
48.0
50.0
52.0
54.0
56.0
Aug
-11
Fe
b-1
2
Aug
-12
Fe
b-1
3
Aug
-13
Fe
b-1
4
Aug
-14
Fe
b-1
5
Aug
-15
Fe
b-1
6
Aug
-16
Fe
b-1
7
Aug
-17
Fe
b-1
8
Aug
-18
Fe
b-1
9
Aug
-19
Fe
b-2
0
6mmaAsian PMIs
EM PMI CN SK TW SG
46.0
48.0
50.0
52.0
54.0
56.0
58.0
Aug
-11
Fe
b-1
2
Aug
-12
Fe
b-1
3
Aug
-13
Fe
b-1
4
Aug
-14
Fe
b-1
5
Aug
-15
Fe
b-1
6
Aug
-16
Fe
b-1
7
Aug
-17
Fe
b-1
8
Aug
-18
Fe
b-1
9
Aug
-19
Fe
b-2
0
6mmaAsian PMIs
IN TH MY PH ID
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-JPN, CN) Asia (ex JP, CN) Core OECD
-3.0
-1.5
0.0
1.5
3.0
4.5
6.0
7.5
9.0
Jan
-01
No
v-0
1
Sep
-02
Jul-
03
Ma
y-0
4
Ma
r-05
Jan
-06
No
v-0
6
Sep
-07
Jul-
08
Ma
y-0
9
Ma
r-10
Jan
-11
No
v-1
1
Sep
-12
Jul-
13
Ma
y-1
4
Ma
r-15
Jan
-16
No
v-1
6
Sep
-17
Jul-
18
Ma
y-1
9
China inflation
Headline CPI Core CPI 7
Macro outcomes take a back seat for now…
• …with the focus now on market panic and the slew of central bank and
government support actions. The Fed, BOE, BOC and RBA have all cut
policy rates, and injected liquidity into the stressed system. The BOJ and
ECB are the hold-outs in terms of rate cuts. Fiscal stimulus packages
have also be announced across the way. A question worth keeping in
mind for now, is whether these actions will be sufficient to arrest the risk-
off sentiment, and if not, what else will.
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Aug
-12
Fe
b-1
3
Aug
-13
Fe
b-1
4
Aug
-14
Fe
b-1
5
Aug
-15
Fe
b-1
6
Aug
-16
Fe
b-1
7
Aug
-17
Fe
b-1
8
Aug
-18
Fe
b-1
9
Aug
-19
Fe
b-2
0
OCBC Asia Macro Surprise Diffusion Index
3M MSI
+ve data surprises
-ve data surprises
-60
-40
-20
0
20
40
60
Aug
-12
Fe
b-1
3
Aug
-13
Fe
b-1
4
Aug
-14
Fe
b-1
5
Aug
-15
Fe
b-1
6
Aug
-16
Fe
b-1
7
Aug
-17
Fe
b-1
8
Aug
-18
Fe
b-1
9
Aug
-19
Fe
b-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
Aug
-12
Fe
b-1
3
Aug
-13
Fe
b-1
4
Aug
-14
Fe
b-1
5
Aug
-15
Fe
b-1
6
Aug
-16
Fe
b-1
7
Aug
-17
Fe
b-1
8
Aug
-18
Fe
b-1
9
Aug
-19
Fe
b-2
0
OCBC EZ Macro Surprise Diffusion Index
3M MSI
+ve data surprises
-ve data surprises
8
Asian 10y yields: Focus on central bank action
• Near-term panic aside, Asian yields should focus on central bank action. The Fed is likely on the path to zero lower
bound again. Even for Asian central banks with less policy room (BOK, BOT), expect them to at least track the Fed to
the zero bound. Meanwhile, the central banks with more policy room may be expected to outdo the Fed.
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
Ap
r-1
8
Jul-
18
Oct
-18
Jan
-19
Ap
r-1
9
Jul-
19
Oct
-19
Jan
-20
%SG
9
Asian 10y yields: Still more downside room
• Despite Asian govie yields being already low, the coordinated monetary easing across global central banks should
continue to pressure Asian 10y yields southwards. If history is any guide, the period prior to the Fed going to the zero
bound is characterized by the decline in back-end Asian yields. It will not come as a surprise if the low-yielders see the
most decline, on the back of the rush-to-quality dynamic. Furthermore, the capitulating real UST yields also points to
further downside for Asian yields.
10
Risk-Off sentiment off the charts
• Despite the containment of the
COVID-19 within China, the
global spread of the COVID-
19, coupled with an earlier
than expected Fed rate cut
set off the fear in global asset
markets, with UST yields and
equity markets leading the rout.
• The FX Sentiment Index (FXSI)
is now effectively off the charts.
However, this bout of risk-off
has translated to USD
weakness amid de-risking
and capitulating rate
differential advantage, instead
of the more typical USD
strength. This has given the
Asian currencies a get-out-of-
jail free card.
-3.5
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
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
Emerging Market Bond Index Plus
RISK OFF
RISK ON
Z-score
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
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
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
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
MSCI Asia Pacific ex JP Index
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
11
No more “get out of jail free” free card
• Asian FX enjoyed a breather when the broad USD was held back
within the G-10 space by the EUR and JPY. However, the dynamic
has been flipped over the past 72 hours, when the broad USD has
re-engaged its anti-cyclical properties. USD-Asia has promptly
reacted higher. Market panic should keep USD-Asia buoyant for
now. Meanwhile, further cyclical growth downgrades caused by the
COVID-19 episode will keep Asian currencies on the tenterhooks in
the medium term.
• In terms of the North-South divide, South Asian currencies are most
exposed due to portfolio outflows. In these economies, the portfolio
outflow momentum are at historically stretched levels, or fast
approaching that level (see p. 14 for details). The USD-North,
however, should be relatively anchored by the RMB complex. With
the COVID-19 situation under control in China, and the
PBOC/government having ample firepower to stimulate, we expect
the RMB complex to outperform the likes of KRW and SGD going
forward.
105
107
109
111
113
115
117
119
Ma
r-1
5
Jul-1
5
Nov-1
5
Ma
r-1
6
Jul-1
6
Nov-1
6
Ma
r-1
7
Jul-1
7
Nov-1
7
Ma
r-1
8
Jul-1
8
Nov-1
8
Ma
r-1
9
Jul-1
9
Nov-1
9
Ma
r-2
0
Asian Currency Index (ACI) implied valuation
Actual Predicted
WeakerAsian FX
StrongerAsian FX
Asian FX Short-term Heat Map
USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR
USD 1 1 1 2 9 1 1 1 2 2
JPY 1 1 2 2 1 1 2 2 2 2
CNH 1 1 9 1 2 2 2 2 2 2
SGD 1 2 9 2 2 2 2 2 2 2
MYR 2 2 1 2 1 1 1 1 2 2
KRW 9 1 2 2 1 9 9 1 1 2
TWD 1 1 2 2 1 9 9 9 2 2
THB 1 2 2 2 1 9 9 2 2 2
PHP 1 2 2 2 1 1 9 2 2 2
INR 2 2 2 2 2 1 2 2 2 2
IDR 2 2 2 2 2 2 2 2 2 2
Asian FX Short-term Heat Map
USD JPY CNH SGD MYR KRW TWD THB PHP INR IDR
USD 2 2 2 2 2 2 2 9 2 2
JPY 2 9 2 2 2 9 2 1 1 2
CNH 2 9 1 1 2 9 2 1 1 9
SGD 2 2 1 9 9 1 1 1 1 1
MYR 2 2 1 9 1 1 1 1 1 1
KRW 2 2 2 9 1 2 2 2 2 1
TWD 2 9 9 1 1 2 2 1 1 2
THB 2 2 2 1 1 2 2 1 1 9
PHP 9 1 1 1 1 2 1 1 2 2
INR 2 1 1 1 1 2 1 1 2 2
12
NEERs: Despite all that has happened, RMB still leads
• The relative stability in the RMB complex against the USD has allowed the RMB to outperform the rest of the Asian
currencies year-to-date. The THB has continued to normalize on NEER terms, but the KRW is starting to look
undervalued. TWD extending higher on NEER terms, looking overvalued.
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
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
1600014.00
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
74.0043.00
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
8486889092949698
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
Asian NEERs
THB PHP IDR MYR SGD
TWD KRW CNY INR
Index:30 Dec 2016 = 100 2019 2020
-4.56
-3.00
-2.55
-1.77-1.36
-0.66
-0.11
0.31
1.46
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
THB INR KRW IDR SGD MYR PHP TWD CNY
Asian year-to-date NEER performance
09/03/2020
%
13
1045
1095
1145
1195
1245-6000
-4000
-2000
0
2000
4000
6000
8000
10000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
South Korea
NFB: Bond & Eq 20D RS USD-KRW
Deluge of portfolio outflows from Asia now actualizing
29.0
29.5
30.0
30.5
31.0
31.5
-10000
-8000
-6000
-4000
-2000
0
2000
4000
6000
Dec
-17
Mar
-18
Jun
-18
Sep
-18
Dec
-18
Mar
-19
Jun
-19
Sep
-19
Dec
-19
Taiwan
NFB: 20d RS USD-TWD
62.00
64.00
66.00
68.00
70.00
72.00
74.00
76.00-6000
-4000
-2000
0
2000
4000
6000
8000
10000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
India
NFB: Bond & Eq RS 20D USD-INR
13000
13300
13600
13900
14200
14500
14800
15100
-10000
-8000
-6000
-4000
-2000
0
2000
4000
6000
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Indonesia
Bond & Equity: 20D RS USD-IDR
30.0
30.5
31.0
31.5
32.0
32.5
33.0
33.5-2000
-1500
-1000
-500
0
500
1000
1500
2000
2500
Dec
-17
Mar
-18
Jun-
18
Sep
-18
Dec
-18
Mar
-19
Jun-
19
Sep
-19
Dec
-19
Thailand
Net bond & equity WTD RS20 USD-THB
3.85
3.90
3.95
4.00
4.05
4.10
4.15
4.20
4.25
4.30-1800
-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
Malaysia
Equity 20D RS USD-MYR
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
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
-25000
-21000
-17000
-13000
-9000
-5000
-1000
3000
7000
11000
15000
19000
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
Asian aggregate portfolio flows (20D Rollsum)
Equity Bond
• In the 19 Feb edition of this report, we thought it baffling that the portfolio flows environment in Asia was as benign as it
was. The expected deluge of the outflows has been actualizing in the weeks since. Both bond and equity flows are
capitulating, and no economies are being spared. Watch this space, with the risk-off tone deepening, expect the flow
environment to worsen further – a negative weight on the Asian currencies.
14
SGD NEER: Stay calm for now
• The SGD NEER has reacted lower again. This is perhaps not surprising as MAS policy easing in April may increasingly
be priced as the base case scenario. Our scenario analysis on the SGD NEER done early in the COVID-19 episode
(see FX Viewpoint – SGD NEER: Virus-stricken, 6 Feb) suggests that the SGD NEER may fall to -0.80% to -1.30%
below parity at the height of the COVID-19 situation, and put an initial floor at -1.00% below parity. Thus, we think the
current weakening of the SGD NEER (to approximately -0.80% below parity) is within expectations.
• Looking forwards, forward points and risk reversals are signaling for a weaker SGD. Expect the USD-SGD to track the
broad USD higher at this juncture.
-0.6000
-0.5000
-0.4000
-0.3000
-0.2000
-0.1000
0.0000
0.1000
0.2000
Contribution of SGD NEER component currencies (since coronavirus)
INR
AUD
IDR
KRW
GBP
CNY
THB
TWD
JPY
MYR
EUR
USD
SGD strengthens agst currency
SGD weakens agst currency x
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
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
15
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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
16