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 improvement in activity data across developed markets is unlikely to provide much of a boost to growth in EM Asia...  Policy uncertainty in the US has spurred market volatility in the region; on page 3, we look at credit conditions in Asia  Asian central banks are likely to take a more cautious stance due to market volatility, but growth remains below-potential Despite increased political uncertainty, G3 activity data have improved markedly. In the US, October retail sales and durable goods orders surpassed expectations, suggesting 4Q16 growth is likely to sustain momentum. Meanwhile, Eurozone manufacturing and services PMIs imply that growth in 4Q16 is gaining traction. Even in Japan, where activity has been sluggish so far this year, the 3Q16 GDP print revealed a welcome upside surprise: stronger growth into year-end 2016, coupled with renewed yen weakness, should allow the Bank of Japan (BoJ) to stay on hold for the time being. As we have written in the past, EM Asia is now less sensitive to growth in the US, partly a reflection of reduced US import intensity. Domestic demand and import demand in China matter more for the region – and while growth is humming along, we, nonetheless, expect a steady deceleration into 2017. Fortunately, consumption has held up in most of Asia – supporting 3Q16 GDP data – while investment spending on the back of fiscal stimulus continues to boost growth in ASEAN, particularly in Thailand, Indonesia, and the Philippines. In the latter, growth accelerated to a three-year high of 7.1% y-o-y, thanks to a strong cocktail of investment and private consumption. Despite the relative stability in recent data, there is an uneasy calm in Asia. The election of US president-elect Donald Trump introduces the risk of increased trade protectionism and has effectively derailed the TPP (Trans-Pacific Partnership) – which would not only have boosted trade volumes across member nations but would have also been a fillip for domestic reform in places like Vietnam and Malaysia. As we await more clarity on US trade policy, negotiations for the RCEP (Regional Comprehensive Economic Partnership, a regional trade deal) are likely to accelerate, led by China, but the reduced scope of the project means that it will have a more modest impact on growth than the TPP. For some time we have said that central banks are likely to maintain accommodative monetary policy stances due to cyclical and structural growth concerns (despite the futility of addressing the latter with monetary policy). However, market volatility following the US elections will likely result in increased restraint by central banks, particularly those that have displayed some form of easing bias in recent months (in particular, Malaysia, Indonesia, Korea, India, and Taiwan). While inflation will pick up next year due to base effects and some policy adjustments, underlying price pressures remain subdued, which could support selective easing in 2017. 28 November 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 Maitreyi Das Associate Bangalore On top of the data ECONOMICS ASIA Growth stable, but risks remain  ECONOMICS ● ASIA 28 November 2016 2 Best of Asian economics research 3 Asia’s credit squeeze? 4 PMI Heatmaps 6 Indicators 8 GDP & Industrial Production 11 Export 12 Consumer Spending 13 Headline & Core CPI 14 Major Asia Events 15 Australia 16 China 17 Hong Kong 18 India 19 Indonesia 20 Japan 21 Korea 22 Malaysia 23 New Zealand 24 Philippines 25 Singapore 26 Sri Lanka 27 Taiwan 28 Thailand 29 Vietnam 30 Disclosure appendix 31 Disclaimer 32 Contents  3 ECONOMICS ● ASIA 28 November 2016 Best of Asian economics research Country Title Author Date ASEAN ASEAN Perspectives: Reflation, of sorts Joseph Incalcaterra and Su Sian Lim 31-Oct Asia Asia Chart of the Week: China’s credit gap Frederic Neumann and Abanti Bhaumik 14-Oct Asia Asia Economics Comment: The big inflation turn? Frederic Neumann and Abanti Bhaumik 17-Oct Asia Engine trouble: Asia’s productivity challenge Frederic Neumann and Abanti Bhaumik 19-Oct Asia Asia Chart of the Week: Why exports matter Frederic Neumann and Abanti Bhaumik 21-Oct Asia Asia Chart of the Week: The trouble with real rates Frederic Neumann and Abanti Bhaumik 28-Oct Asia Trade trouble: What the latest PMIs mean for Asia Frederic Neumann and Abanti Bhaumik 2-Nov Asia Asia Economics Comment: The Fed and Asia Frederic Neumann 3-Nov Asia Asia Chart of the We