Entries for 'Asia Pacific'

• China experienced a record net portfolio outflow of $80 bln last year. • The outflows were predominantly in bonds, suggesting Fed hikes were the main trigger for the outflows.

• Given the weak export and housing prospect, consumption is crucial for economic recovery this year. • Chinese households amassed almost ¥18 tln new deposits in 2022, 80% more than the previous year… • …thanks to higher savings, fewer home purchases, and asset reallocation.

• PBoC was restrained in terms of direct FX intervention amid the intense CNY depreciation this year. • PBoC increasingly deploys monetary and regulatory tools to lean against the wind. • These tools include required reserves on FX deposit and forward contracts, … • …and macroprudential policies

• China's PPI is trending down and diverging from others, a sign of a weak domestic economy and deglobalization. • CPI is subdued due to housing woes and lockdowns. • Despite the domestic weakness, China is not exporting deflation. • CPI may face moderate upward pressure late next year due to food and service prices after reopening.

• RMB experienced a record pace of depreciation this year, … • … driven by Fed hikes and interest rate arbitrage. • The large current account surplus is partly offset by a record large portfolio outflow. • However, the expectation of further depreciation is absent this time, unlike in 2015-16.

China's housing rout will continue to weigh on growth, but a housing-triggered financial retrench can be avoided. Despite deteriorating asset quality and returns, Chinese banks can still make loans. The covid policy will be eased, yet gradually. Thus the sequential growth path in 2023 will be backloaded.

CCA countries have shown remarkable resilience in the face of external shocks. A sharp increase in tourism receipts and remittances, along with high energy prices, led to solid growth. While the terms of trade shock has had diverging effects on the region.

Debt default risk has gone up substantially, as the financing gap has increased.

ASEAN-5 is highly dependent on China for exports. The region is also an important indicator of global activity. External demand remained surprisingly robust in 1H2022. However, we expect some deceleration in 2H2022. China’s slowdown remains the key risk for ASEAN-5.

• This year's PBoC easing has created ample liquidity yet failed to stimulate loan growth. • Total credit growth is also much weaker if government bonds are excluded. • This is largely due to a lack of demand and weak confidence. • Thanks to policy guidance, medium/long-term loans to industrial

China's invincible housing market finally collapsed

Portfolio investment flow to China is a weathervane for China's financial health and global investor confidence. This China Spotlight examines the forces that drive China's net bond and equity flows.

Indonesia has faced less pressure than other ASEAN countries. Favorable terms of trade and fiscal subsidies helped contain energy prices. Bank Indonesia can afford to be patient with hikes as core CPI remains moderate. Policy normalization through term structure and government bond sales, should help ease capital outflow pressures amid global tightening.

China’s banking sector has expanded rapidly in the past decade, with a brief pause in 2018-19 due to deleveraging efforts. It is also competitive globally, with one of the lowest cost ratios. However, banks’ returns and interest margins have deteriorated, and credit risk remains elevated.

Shanghai’s lockdown in the spring grabbed global attention and shook investor confidence, but its impact was less severe than Wuhan’s lockdown in 2020. However, the recovery may be more difficult this time due to housing woes. We maintain our subdued outlook of 3.5% growth for 2022.

The spillovers from the war in Ukraine appears to be somewhat more contained than expected earlier.

After loans were swapped into bonds by 2018, the local government's on-balance-sheet debt is straightforward. However, debt hidden in various government-backed investment entities is still a major concern. We argue that this so-called hidden debt is, at most, LG contingent liabilities.

China’s exports to Russia fell in March-May, as sanctions limited Russia’s ability to pay. China’s imports from Russia hit a record high in May, lifted by both growing volume and rising prices. We estimate that China has been paying spot price for Russian oil, but a discounted price recently.