MNI ASIA PAC Weekly Macro Wrap:

Download the Full Report here

Executive Summary:

JAPAN 

• The BoJ held rates steady at 0.50%, but two board members were in favour of a 25bps hike. The BoJ also unveiled plans to dispose of its ETF and J-REIT holdings. August Japan headline CPI was close to market forecasts. Core CPI (ex fresh food, energy) remains sticky above 3%y/y.  Aug trade figures were mixed. Exports were -0.1%y/y, against -2.6% in July. Imports fell 5.2%y/y, after -7.4% in July. Tariff impact was seen, with exports to the US down -13.8%y/y.

AUSTRALIA 

• Australia’s monthly labour market data are volatile and August seemed to unwind July’s moves. Looking through this, annual employment growth was its lowest since the pandemic but the unemployment rate held steady at 4.2% and underemployment continued to trend down to its lowest since 1991.

NEW ZEALAND

• Both the production and expenditure-based GDP measures fell 0.9% q/q in Q2, the weakest since the pandemic. The RBNZ had expected a 0.3% q/q decline. This and the broad-based softness across sectors as well as a sluggish recovery in Q3 to date are likely to drive 25bp rate cuts in October and November. With two votes for a 50bp cut in August, the risk of a larger move before year end is material.
• The August monthly CPI series generally showed a slowdown in increases with food inflation up 0.3% m/m after 0.7% stabilising the annual rate at 5%. The stabilisation or moderation, especially travel-related prices, in August is likely to be welcomed by the RBNZ as it sees a risk that Q3 could print above 3%.

SHORT TERM RATES 

• Interest rate expectations across the $-bloc showed little net change over the past week, except in New Zealand, which was sharply lower (-19bps).

CHINA

• New and used house prices continued to decline in August, with used home prices down more than July.
• Multiple data releases pointed to a very modest slowing in the economic expansion. Retail sales expanded +3.4% for August, below the prior month of +3.7%. Industrial Production YoY expanded +5.2%, missing expectations of +5.6% and below the prior month of +5.7%.
• China announced wide-ranging measures to stimulate domestic demand by promoting services spending.

SOUTH KOREA 

•  The BoK noted this week the Fed easing gives it more room to focus on domestic issues. 

ASIA 

• Bank Indonesia (BI) unexpectedly cut rates 25bp to 4.75%, the third consecutive monthly easing, which is unusual. It is especially surprising given it has intervened to defend the rupiah in the last few weeks due to political instability. It appears to be shifting more towards a more pro-growth stance.
• BI’s accompanying statement added the phrase “joint efforts to stimulate economic growth”, which suggests that it may be supporting government policy.
• India's August imports contracted by -10.1%, the largest monthly decline since February. A -56.7% decline in gold exports was the biggest contributor, with coal down -26.2%.

ASIA EQUITY FLOWS 

• Tech related equity inflows remain positive.