Disclaimer: This material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. This material should be considered with professional advice when deciding if an investment is appropriate. UOB Bank accepts no liability whatsoever with respect to the use of this document or its content. Markets Strategy 1Q 2019 More stormy weather ahead Heng Koon How, CAIA Head of Markets Strategy, Global Economics & Markets Research Jan 2019 http://www.uobgroup.com/research
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Discla imer: This mater ia l that follows is a presentat ion of general background informat ion about the Bank’s act iv it ies current at the date of the presentation. It is informat ion given in summary form and does not
purport to be complete. It is not to be rel ied upon as advice to investors or potent ia l investors and does not take into account the investment object ives, f inancia l s ituat ion or needs of any part icular investor. This
material should be considered with professional advice when deciding if an investment is appropriate. UOB Bank accepts no liabil ity whatsoever with respect to the use of this document or its content.
Markets Strategy 1Q 2019 More stormy weather ahead
A controlled pace of depreciation for the RMB Forward points are deceptively low
UOB Global Economics & Markets Research 29
What is the longer-term trend for USD/CNY ? We see further gradual weakness in CNY to 6.90 in 2H19
UOB Global Economics & Markets Research 30
Pre-WTO peg of 8.28
GFC peg of 6.83
Dec 16 high of 6.96
Nov 18 high of 6.97
Longer term positive of manufacturing relocation to ASEAN China’s wage cost is now higher that most of ASEAN
UOB Global Economics & Markets Research 31
There are many considerations for plant relocation It’s not just trying to reduce tariff costs
UOB Global Economics & Markets Research 32
Competitive
wage cost
Attractive tax
incentives
Strong intellectual
rights protection
Strong
infrastructure
connectivity Minimal disruption
to supply chain
Strong industry
ecosystem
Easy access to
local market
4) Singapore: MAS has kept the SGD relatively strong
Inflation outlook in Singapore remains constructive Core CPI still seen exceeding 2% in 2019
UOB Global Economics & Markets Research 34
But NODX and PMI are turning south fast Worth noting that NODX is inherently very volatile
UOB Global Economics & Markets Research
SGD short-dated rates are not coming down 3M SOR and 3M SGS bills trading above 2%
UOB Global Economics & Markets Research 36
SGD started 2019 on a strong note S$NEER now trading at strong premium to estimated mid-point
UOB Global Economics & Markets Research
SGD has diverged from ADXY MAS’ twin tightening in 2018 has kept the SGD strong vs Asian peers
UOB Global Economics & Markets Research 38
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Disclaimer
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