EM ASIA CREDIT: Indonesia: Linked to Grab-GoTo deal

• Amongst the raft of new initiatives announced today, a cut in the loan rates for the individual housing provident fund by 0.25bps was announced.
• This directly impacts home loans that have a maturity of greater than 5 years  with the PBOC governor suggesting it will save borrowers up to CNY20bn of interest annually.
• China has been in the grips of a multi year downturn for the property sector with recent data showing that used home prices have contracted every month since July 2021.
• The housing provident fund is a long-term housing savings plan made up of compulsory monthly deposits by both employers and employees. It can only be used by employees for house-related expenses.

Brad Setser posted a thread via X on the US trade data out overnight highlighting the surge in pharmaceuticals to avoid tariffs (and how it is likely to impact trade data going further), below are some key excerpts:

• Almost impossible to overstate just how crazy the US trade data -- and the pharmaceutical trade data -- has become.’

• “I would not believe my spreadsheets if it wasn't 100% clear exactly what was going on -- big US pharma (and some European pharma companies) rushing high value goods into the US to beat the tariffs.”

  

• “The aggregate data is crazy"

  

• “And the numbers on trade with all the centers of tax avoidance* collectively are crazy - - ”
• “The adjustments for pharma trade alone are gonna muck up the US h1 data (I suspect the front running continued in April), the  EU & euro area data, the Swiss data and no doubt many other variables. Really hard to capture importing a year's worth of supply in a month!”

• “The only silver lining is that the pharmaceutical companies have made the role that trade plays in their tax avoidance strategies abundantly clear -- the charts here make it easy for me to demonstrate that "modern" global trade is often mostly about tax avoidance”

  

Thailand’s headline CPI inflation fell into negative territory at -0.2% y/y for the first time in over a year driven by state subsidies and lower vegetable and global oil prices. Core rose 0.1pp to 1.0% y/y, the bottom of the Bank of Thailand’s 1-3% target band, “mainly due to higher prepared food inflation”. Goldman Sachs continues to forecast 25bp rate cuts in Q3 (August) and Q4 resulting in a terminal rate of 1.25%. This assumes that it will be on hold at its June 25 meeting. 

• Goldmans observes that “transport and communication inflation slowed to -3.0% yoy in April (vs. -0.4% yoy in March) mainly due to lower domestic fuel prices. This shaved 67bp from headline inflation in April, compared to a -9bp contribution the previous month.”
• “Housing and utilities inflation slowed to -0.7% yoy in April (vs. 0% yoy in March) mainly due to lower electricity tariffs in April. This shaved 17bp from the headline inflation in April, compared to a 0bp contribution the previous month.”
• “Food inflation also slowed to 1.6% yoy in April (vs. 2.4% yoy in March) due to lower vegetable and fruit inflation, with a partial offset from higher protein inflation. This contributed 64bp towards headline inflation in April, compared to a 92bp contribution the previous month.”