Oil price rally begins to hurt Asia Premature to call another commodity super-cycle

Highlights from the CAA Weekly Table:

Asian political risks:

  • Little should be expected from this Thursday’s first high-level talks between the US and China since President Biden took over. Note how last week’s summit meeting of the US-led Quad edges it towards becoming an anti-China front. At best, a road map for more talks might be laid out, one that might eventually produce a new equilibrium in their relationship.
  • China’s imposition of a new electoral law in Hong Kong strengthens its grip on the city. But there is a silver lining in that it is now more likely that necessary social and economic reforms in Hong Kong might actually get done.

Asian economies: 

  • China: We see modest upside risks to our growth forecasts off the back of a better export performance in coming months and a reduced likelihood that fixed asset investment might tail off as quickly as we had earlier anticipated. Monetary policy will remain accommodative.
  • Our nowcast estimates for GDP in Indonesia and the Philippines show their economic recoveries faltering while India’s upturn could also lose momentum. However, India and Indonesia show further commitment to supply side reforms.

Oil price rally begins to hurt Asia

  • OPEC’s extension of output cuts should allow oil prices to rise above USD70. This will start to hurt Asian economies through 3 channels – growth, inflation and external accounts:
  • Economic growth in Singapore and Hong Kong are most at risk.
  • India is where an inflationary impact might do more damage.
  • Indonesia, India and the Philippines could suffer wider external imbalances, more so when economic activity revives and the infrastructural agenda is back on track.

Premature to call another commodity super-cycle

  • The release of pent-up demand in 2H21 will support commodity prices as soaring demand meets capacity constraints. However, it is premature to call for another broad-based commodity super-cycle since we are not likely to see a replication of the massive surge in demand that China exerted in the early 2000s.
  • A surge in infrastructure spending led by President Biden’s plans for the US could produce a more bullish picture.

Baseline View: Winners and Losers from Rising Commodity Prices


Bullish commodity: CPO, Rubber, Nickel, Copper, Coffee

2.6% of GDP

Balanced commodity: Coal

1.6% of GDP


Bullish commodity: CPO, Rubber

2.9% of GDP


Bullish commodity: Rubber, Rice

1.4% of GDP


Bullish commodity: Rubber, Rice, Coffee

3.0% of GDP

The Philippines

Bullish commodity: Copper, Nickel

0.4% of GDP


Bullish commodities: Rice

0.2% of GDP

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