- February 13, 2023
- Posted by: admin
- Category: Centennial Asia Insights
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Asian currencies face a bumpy ride towards recovery
- The USD has peaked. Its descent, though uneven, will benefit battered Asian currencies.
- China’s reopening provides tailwinds for Asia via export, commodity, and tourism demand. Countries that historically relied on Chinese demand will benefit more.
- Asian central banks are beginning to diverge in their policy stances as their respective inflation outlooks differ. A longer-than-expected tightening cycle will prop up their notes.
- Asian currencies are likely to trend upwards against the Dollar in general, although the magnitude and timing of their movements will vary.
Political risks in asia: where could the surprises come from?
- Despite Xi’s dominance, the party-state will face subtle but substantial forms of dissent and pushback. Beijing, in turn, will double down on driving growth to keep anger at bay.
- Despite underlying risks, we are cautiously optimistic about political developments in Taiwan, Malaysia, and Thailand as pragmatism allows for navigating uncertainty.
- India and Indonesia are sources of potential downsides, with identity politics and economic and foreign policy nationalism being sources of potential turbulence.
Regional updates
- China: the lunar new year spending boost might be temporary. Low inflation will allow monetary policy to remain accommodative.
- India’s central bank continued to tighten but at a slower pace. Sticky core inflation and strong demand conditions mean that it still has some way to go before halting rate hikes.
- Malaysia experienced strong headline GDP growth, but this masks an underlying slowdown. Political stability is a welcome boon given the uncertain outlook.
- Taiwan’s exports fell by 21.2% y/y, with the semiconductors industry taking a similarly large hit. A festive spike in inflation complicates the central bank’s calculus.
- Thailand gears up for a potentially-decisive poll in May, with hopes that the likely winner, Pheu Thai, cuts a deal with the monarchy-military establishment to allow it to govern.
- Inflation in the Philippines still shows no sign of peaking. Further tightening is likely.
Read more: CAA-Weekly-13-Feb-2023.pdf
13-Feb-2023