On top of the data:What trade recovery?

Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Issuer of report: The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at: https://www.research.hsbc.com   An export recovery by end-2016 looks unlikely: China’s exports contracted sharply in September and Korea may see a slow-down in electronics shipments (see page 4 for more on exports)  CPI readings ticked up in most economies, but this was mostly driven by base effects and some rebound in commodity prices; disinflation remains a salient concern  Most Asian central banks kept policy on hold over the past month; with the BoK and the MAS standing pat last week, but we still expect easing by end-2016 in most economies... Despite some expectations in the market that trade data will improve into year-end 2016, the data does not reflect this. Most noticeably, China’s exports contracted by a sharp 10% in September, despite supportive base effects. Meanwhile, Samsung-related supply chain disruptions and industrial action could have a significant impact on Korea’s data in the coming months (with some collateral damage for Vietnam and China, too); see page 4 for our main story on exports. Most economies have seen increased consumer price pressures. In particular, CPI increased more than expected in China, South Korea, and the Philippines, but base effects are at play and core prices remain subdued: the acceleration in CPI was largely due to higher food prices. More noticeably, China’s PPI moved into positive territory for the first time since 2012, reflecting higher commodity prices. Indeed, oil prices increased 14% over the past month, alongside renewed exchange rate weakness, which could result in further price momentum in coming months. However, this shouldn’t have too much bearing on monetary policy decisions for now. Most economies will report 3Q GDP in the coming weeks. In particular, the market will focus on the China activity data “dump” on October 19 – we expect GDP to grow 6.7%, in line with 3Q. To date, only Singapore and Vietnam have reported. In Singapore, growth surprised significantly to the downside, contracting 4.1% q-o-q saar, driven by a slump in manufacturing. While there should be some technical recovery in 4Q, the sharp contraction led us to revise down our growth forecasts. Monetary policy will continue to play a role in supporting growth into year-end 2016. Over the past week central banks in Singapore and Korea kept policy on hold. The MAS refrained from re-centring the policy band, despite the sharp GDP contraction, and the BoK cited renewed household debt concerns. However, both economies are faced with soft growth outlooks: in the case of Korea this should lead the BoK to cut by year-end 2016, while in the case of Singapore any further labour market weakness increases the risks of a re-centring next year. Elsewhere, we forecast rate cuts this quarter in New Zealand, India, Indonesia, Japan, Malaysia, Taiwan, and Thailand; and 50bp of RRR cuts in China. 18 October 2016 Frederic Neumann Economist The Hongkong and Shanghai Banking Corporation Limited fredericneumann@hsbc.com.hk +852 2822 4556 Joseph Incalcaterra Economist The Hongkong and Shanghai Banking Corporation Limited joseph.f.incalcaterra@hsbc.com.hk +852 2822 4687 Dhiraj Nim Associate Bangalore On top of the data ECONOMICS ASIA What trade recovery?  ECONOMICS ● ASIA 18 October 2016 2 Best of Asian economics research 3 Asia’s export malaise 4 PMI Heatmaps 9 Indicators 11 GDP & Industrial Production 13 Exports 14 Consumer Spending 15 Headline & Core CPI 16 Major Asia Events 17 Australia 18 China 19 Hong Kong 20 India 21 Indonesia 22 Japan 23 Korea 24 Malaysia 25 New Zealand 26 Philippines 27 Singapore 28 Sri Lanka 29 Taiwan 30 Thailand 31 Vietnam 32 Disclosure appendix 33 Disclaimer 34 Contents  3 ECONOMICS ● ASIA 18 October 2016 Best of Asian economics research Country Title Author Date ASEAN ASEAN Perspectives: Thin wallets: What fiscal slippage means for ASEAN Su Sian Lim, Nalin Chutchotitham, Joseph Incalcaterra and Maitreyi Das 24-Sep Asia Global Economic Calendar – Asia Edition: 3-7 October 2016 Frederic Neumann and Asia Economics Team 30-Sep Asia Asia Chart of the Week: Quick check on exports Frederic Neumann and Abanti Bhaumik 30-Sep Asia Don’t get carried away: What the latest PMIs mean for Asia Frederic Neumann and Abanti Bhaumik 4-Oct Asia Asian Economics Quarterly: Where’s the fun? Frederic Neumann and Asia Economics Team 6-Oct Asia Asia Chart of the Week: Worried about oil? Frederic Neumann and Abanti Bhaumik 7-Oct Australia RBA deserves credit for Australia's record growth run: Paul Bloxham’s Oped in today’s Australian Financial Review Paul Bloxham 14-Sep Australia Australian labour market: Unemployment rate down, but participation also falls Paul Bloxham and Daniel Smith 15-