INDONESIA: Could Indian Positive Sentiment Spill Over to Indonesia? (Part 2)
- Post the US tariff announcements, local forecasters have moved quickly with their USDINR forecasts. Via BBG: "The rupee outperformed its Asian peers after the US tariff announcement, and analysts from Societe Generale see the currency moving to 87-88 per dollar in the coming weeks, while those from HSBC Holdings forecast a move to 88 by the end of March". A potential 3.8% gain in INR (to 87) could spill over to IDR. INR / IDR correlations average near +0.30, suggesting downside potential for USDIDR (close to 1.15%).
- This would get USDIDR near to 16,570, only just above the BI target range of 16,400 -16,500 and with further, ongoing intervention and support from the BI; could get there.
- Looking for a tipping point / catalyst is difficult when bond yields are already at the top of Q1 forecasts of 6.30% (current 6.31%). Our bias though is for downside risks rather than a break higher. The 10yr started the year closer to 6.00%. Note as well year end forecasts of 5.80-6.00%.
- Bond yields have a negative correlation to the JCI (see the chart below) and if Purbaya's message is true for equities and if the near terms trend of higher yields/weaker IDR dissipates, watch USDINR and its relationship to USDIDR moves as a potential input into turnaround of the fortunes in Indonesia.
Fig 1: JCI vs INDOGB 10-Yr Yield (inverted)
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CHINA PRESS: Beijing Calls For Improving Expectation On Real Estate
Authorities should maintain strong policy support to stabilise the real estate market, ensuring measures meet market expectations and avoid a piecemeal approach, while coordinating with other macro policies and preparing for potential developer bankruptcies and restructurings, according to a commentary published by the party-run magazine Qiushi. The magazine also said it was necessary to strengthen price monitoring and improve expert interpretation of sensitive indicators, including real estate investment, the number of foreclosed properties, and developers’ bankruptcies and debt restructurings, in order to better guide market expectations.
AUSTRALIA: November CPI This Week’s Focus As Market Has Hikes Priced In
The focus of this week will be Wednesday’s November CPI, which is the new complete monthly series. While the quarterly data on 28 January will be the decisive input into the 3 February RBA decision, the new monthly headline and services have a very close fit with the previous monthly CPI series. However, the new trimmed mean will need some time for not only the seasonal adjustment factors to emerge but for the trend to emerge as there is also very limited history.
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- Bloomberg consensus is forecasting trimmed mean to be stable at 3.3% in November, which would be at or above the top of the RBA’s 2-3% band for the fifth consecutive month. Headline is expected to moderate 0.2pp to 3.6% but this series continues to be distorted by previous government electricity rebates.
Australia CPI trimmed mean y/y% - new vs old monthly series
Source: MNI - Market News/ABS
- Building approvals for November are also out on Wednesday and are projected to rise 2.0% m/m after falling 6.4% m/m. The data is particularly volatile due to the multi-dwelling component.
- Thursday sees November trade data with the merchandise surplus forecast to widen slightly to $5.0bn from $4.4bn.
- The final December S&P composite/services PMIs are released on Tuesday. The preliminary readings showed activity remaining positive but slowing from November and Q4 growth softer than Q3.
CHINA PRESS: A-shares Seen To Rise Early This Year
China’s A-share market performance will be supported by the restructuring of the international order and the country's industrial innovation, potentially with an initial rise followed by stabilisation, Securities Times reported citing Li Qiusuo, chief domestic strategy analyst at China International Capital Corporation (CICC). A-shares are expected to see a sustained rise in a stable external environment till the end of the U.S. midterm elections with the implementation of a China-U.S. trade deal, but external disturbances may increase sharply after the election, said Qiu Xiang, chief A-share strategist at CITIC Securities.
