MALAYSIA: Country Wrap: Manufacturing Rebounds in July

• President Donald Trump extended a pause of sky-high tariffs on Chinese goods for another 90 days into early November, stabilizing trade ties between the world’s two largest economies.  Trump signed an order extending the truce through Nov. 10, deferring a tariff hike set for Tuesday. The de-escalation first took effect when the US and China agreed to reduce tit-for-tat tariff hikes and ease export restrictions on rare earth magnets and certain technologies.  (source BBG)
• US President Donald Trump signed an executive order extending a tariff truce with China by another 90 days, a White House official said on Monday, hours before trade truce between Washington and Beijing was due to expire on Tuesday. (source China Daily)
• Three major Chinese financial institutions have announced coordinated measures to simplify account-opening procedures for overseas central banks and similar institutions, in a move aimed at optimizing China’s bond market.  The key institutions will no longer require a compliance commitment statement for account openings under both the Bond Connect and settlement agency models, according to official statements
• The changes are expected to improve efficiency and convenience for foreign central banks and monetary authorities, while further advancing the internationalization of China’s bond market, Securities Times reports  (source BBG)
• China and Hong Kong markets are higher, although more so for China. The CSI 300 is up around 0.6%, while the HSI is just in positive territory. There has been some drag from the HSI tech sub index.
• Yuan Reference Rate at 7.1418 Per USD; Estimate 7.1905
• The modest bout of weakness in the bond market continued and has seen the CGB10yr move higher to 1.73%.

The RBA made the unanimous decision to cut rates 25bp to 3.60% today as expected. There was a change in the statement language on the labour market. It also presented updated staff forecasts, which given the economy had developed close to the May expectations showed few major changes. The inflation trajectory is unchanged despite a lower cash rate assumption over 2026, which the Board reiterated showed a “gradual easing path”. With the extension of the forecasts to Q4 2027, core inflation now reaches the mid-point of the band. 

• The Board stated that “labour market conditions remain a little tight” compared to July’s “conditions remain tight”. “Tight” was removed from the paragraph on the lagged impact of policy on decision making. “The labour market remains strong” was changed to “labour market conditions easing slightly” in the penultimate paragraph of today’s statement.
• Trimmed mean inflation continues to be expected to be at 2.6% in Q4 2025 and then stay there until Q4 2027 when it reaches 2.5%. Q2 2025 was 0.1pp higher than forecast in May at 2.7%. Headline also moderates towards 2.5% as government rebates drop out.
• Q4 2025 GDP growth was revised down 0.4pp to 1.7% driven by lower public demand expectations. Export growth has also been revised down in 2025.
• The unemployment rate projections were unchanged with it reaching 4.3% and then staying there. Employment growth was revised higher in the near-term and was then little changed. Wages growth was revised slightly lower. Productivity was revised down in 2027 with it only briefly at 1%.
• There was little change to trading partner GDP projections despite the Board saying “there is a little more clarity on the scope and scale of US tariffs” suggesting that the “more extreme outcomes” should be “avoided”.