Transcript Slide 1

Macro Briefing
A monthly review of the economy and markets
– June 2012
US
Dow Jones Industrial Average
17000
12000
1000
9000
700
7000
Jun-11
MoM Chg %
4.97
Oct-11
Feb-12
Jun-12
Jun-11
MoM Chg %
5.43
Feb-12
Jun-12
Jun-11
MoM Chg %
2.5
500
6500
Oct-11
ASIA ex- JAPAN
MSCI AC Asia ex-Japan
700
11500
1300
MoM Chg %
3.93
JAPAN
Topix Index
EUROPE
FTSE Eurofirst 300 Index
ASIA ex- JAPAN
300
Oct-11
Feb-12
Jun-12
Jun-11
Oct-11
Feb-12
Jun-12
Data as of Jun 2012
Country
US
Eurozone
Japan
Country GDP (1Q12)
Inflation
(% changes YoY)
(% change YoY)#
2.00
-0.10
2.80
Eurozone’s crisis is impacting
the rest of the world. Even in the
US, where manufacturing has
been underpinning the country’s
recovery to date, the latest
figures confirm a slowdown
Slowing US growth prompted the
Federal Reserve to extend its
“Operation
Twist”
program
through to the end of the year
Second quarter earnings have
thus far not revealed any
negative surprises. Although
profit
outlooks
are
being
downgraded,
corporate
fundamentals remain strong
1.70
2.40
0.20
5/12
5/12
5/12
Agreement to use the Continent's
bailout funds to directly aid the
region's ailing banking sector
seem to have pacified markets
for now. But as yet no concrete
plans to solve the sovereign
crisis have emerged
Against the backdrop of the
weakening
economy
the
European Central Bank reduced
its benchmark rate by 25 basis
points to 0.75%, the lowest level
in the history of the euro
Despite the headwinds, selective
value can be found; Germany
and Italy stand out
Benchmark Interest
Rate (%)#
0.25
1.75
0.10
12/08
12/11
12/08
Currency
Country Rating ^
(% change vs US$)
Moody's
S&P *
1.43
-0.79
Aaa
Aa3
AA+u
AA-u
Ongoing signs of improving
domestic activity continues to
drive Japan’s recovery. Retail
sales growth remains solid as
rebuilding boosted consumption
Markets in the Asia Pacific
region ex-Japan ended June
firmer buoyed by the betterthan-expected outcome of a
two-day EU summit
Extreme investor sentiment has
contributed to a significant
mispricing of assets. Valuations
are arguably the most attractive
they have been in a generation
Slowdown concerns triggered
policy easing in China but India
kept policy rates constant as
inflationary pressures have yet
to ease
Companies that are attractively
valued relative to their trend
earnings
potential
offer
compelling
investment
opportunities
Chinese equities stand out as
valuations remain attractive
versus history and the region.
Current levels suggest that
downside risks seem to be
priced in
Source : Eastspring Investments(Singapore) Limited and Bloomberg as of June 2012. Data shown in the graphs extracted from Bloomberg in local currency terms. Note: MoM refers to month-on-month, YoY refers to
year-on-year. # based on latest available data. US – Federal Funds Target Rate, Europe – ECB Marginal, Japan – BOJ Target Rate of Unsecured Overnight Call Rate . ^Refers to Foreign Currency Long Term Debt. *
“u” denotes that the rating is unsolicited (refers to S&P’s website for more details).
AUSTRALIA
ASX - FTSE All-Share Index
4800
4000
2400
3200
Jun-11
MoM Chg %
-6.19
20300
Feb-12
Jun-12
Jun-11
MoM Chg %
4.36
Oct-11
Feb-12
Jun-12
Jun-11
MoM Chg %
7.47
17500
10000
16000
1600
Oct-11
25000
24600
3200
MoM Chg %
0.45
INDIA
BSE India Sensex 30 Index
HONG KONG
Hang Seng Index
CHINA
Shanghai Composite Index
Oct-11
Feb-12
Jun-12
Jun-11
Oct-11
Feb-12
Jun-12
Data as of Jun 2012
Country
Australia
China
Hong Kong
India
Country GDP (1Q12)
Inflation
(% changes YoY)
(% change YoY)#
4.30
8.10
0.40
5.30
1.60
2.20
4.30
7.55
3/12
5/12
5/12
5/12
Benchmark Interest
Rate (%)#
3.50
6.31
5.00
8.00
5/12
7/11
11/08
4/12
Currency
(% change vs US$)
Moody's
S&P *
4.53
-0.22
0.09
0.56
Aaa
Aa3
Aa1
Baa3
AAAu
AAAAA
BBB-u
China’s equity market posted
gains in June but lagged the
regional benchmark
Property stocks rose following
the unexpected interest rate cut
by China’s central bank
Sales of newly built homes
slowed in May as interest-rate
reductions failed to make an
immediate impact on the
nation’s property market
The People’s Bank of China
lowered borrowing costs for the
first time since Dec 2008 and
relaxed controls on banks’
lending and deposit rates, a
move seen to step up efforts to
combat the slowdown
Financial Secretary’ John Tsang
said that the government may
not rule out the possibility of
lowering the economic growth
forecast even further if the global
growth outlook deteriorates
Loans provided by Australian
banks and finance companies
surged by the most in almost 3
years on rising business
borrowings
Economic statistics released in
June showed some modest
improvement over the previous
month but overall China’s
economy continued to weaken
The Reserve Bank slashed
official rates over May and
June, as Europe’s debt crisis
spread to Spain, undermining
confidence in financial markets
Country Rating ^
Hong
Kong’s
government
welcomed
measures
to
strengthen cooperation between
the mainland and Hong Kong,
particularly in financial sector
Economic data continued to
disappoint,
wholesale-price
index rose in May from a year
earlier as food and fuel prices
surged
The Reserve Bank of India
disappointed the market when
it kept policy rates unchanged,
indicating a hawkish monetary
policy stance
Standard & Poor’s and Fitch
Ratings indicated that India is
at risk of losing its investmentgrade rating if the government
fails to mend its finances
Source : Eastspring Investments (Singapore) Limited and Bloomberg as of June 2012. Data shown in the graphs extracted from Bloomberg in local currency terms. Note: MoM refers to month-on-month, YoY refers
to year-on-year. # # based on latest available data. Australia - RBA Daily Cash Rate Target, China – 1 Year Best Lending Rate, Hong Kong - Prime Rate HSBC, India – RBI REPO Cutoff Yield, ^ Refers to Foreign
Currency Long Term Debt. * “u” denotes that the rating is unsolicited (refers to S&P’s website for more details).
KOREA
Kospi Index
INDONESIA
Jakarta Composite Index
2600
5000
3500
MoM Chg %
3.20
Oct-11
Jun-11
Data as of Jun 2012
Country
Indonesia
Korea
Malaysia
Philippines
Feb-12
Oct-11
Feb-12
Jun-12
Country GDP (1Q12)
Inflation
(% changes YoY)
(% change YoY)#
Indonesia’s central bank held off
from raising its key interest rates
in June, keeping the benchmark
reference rate at 5.75%
Headline inflation picked up
marginally due to higher food
prices
The
Energy
and
Mineral
Resources Minister
clarified
that the country has no plans to
impose an export tax on thermal
coal as mining companies are
becoming increasingly frustrated
by the country’s mining policy
4.53
2.20
1.70
2.80
6/12
6/12
5/12
6/12
South Korea also announced a
8.5 trillion won (US$7.3 billion)
spending package to support the
economy,
which
includes
assistance for small businesses
and low-income earnings
The Bank of Korea kept the base
rate unchanged in June as
inflation moderated
The Finance Ministry lowered its
forecasts for inflation and
economic growth this year, citing
the European debt crisis as a
“long-term threat’’
MoM Chg %
3.05
3700
2200
1200
Jun-12 Jun-11
6.31
2.80
4.70
6.40
MoM Chg %
1.17
1450
800
2000
5200
1700
MoM Chg %
0.57
1700
PHILIPPINES
Philippines Composite Index
MALAYSIA
FTSE Bursa Malaysia KLCI
Jun-11
Oct-11
Feb-12
Benchmark Interest
Rate (%)#
5.75
3.25
3.00
4.00
2/12
6/11
2/09
2/12
Jun-12
Jun-11
Currency
Oct-11
Feb-12
Jun-12
Country Rating ^
(% change vs US$)
Moody's
S&P *
1.00
2.94
0.06
3.5
Baa3
A1
A3
Ba2
BB+
A
ABB
Inflation eased for the seventh
consecutive month in May to its
lowest in almost two years,
giving the government more
room to hold interest rates
Progress
seen
in
the
government’s Public Private
Partnership
infrastructure
programme bolstered market
sentiment
Malaysia’s government proposed
to expand the annual budget on
increasing pressure to shield the
economy from the European
sovereign-debt crisis
Remittances from overseas
Filipino workers rose 5.3% in
April to US$1.7 billion, bringing
year-to-date remittances to
$6.5 billion, up 5.4% year-onyear
The Malaysian Ringgit weakened
against the US dollar in June to
become
the
second-worst
performing currency in Asia exJapan
The Philippine central bank
kept its benchmark interest
rate unchanged as inflation
eased
Source : Eastspring Investments (Singapore) Limited and Bloomberg as of June 2012. Data shown in the graphs extracted from Bloomberg in local currency terms. Note: MoM refers to month-on-month, YoY refers
to year-on-year. # based on latest available data. Indonesia – BI Reference Interest Rate, Korea - Target Overnight Call Rate Daily, Malaysia – Overnight Policy Rate, Philippines – Overnight Reverse Repurchase
Agreement RRP Rate. ^ Refers to Foreign Currency Long Term Debt. * “u” denotes that the rating is unsolicited (refers to S&P’s website for more details).
SINGAPORE
FTSE Strait Times Index
3300
2750
2200
Jun-11
TAIWAN
Taiwan Taiex Index
10000
7500
MoM Chg %
3.82
Oct-11
1300
MoM Chg %
-0.07
Jun-12
Jun-11
MoM Chg %
2.68
900
5000
Feb-12
THAILAND
Stock Exchange of Thai
Index
500
Oct-11
Feb-12
Jun-12
Jun-11
Oct-11
Feb-12
Jun-12
Data as of Jun 2012
Country GDP (1Q12)
Country
(% changes YoY)
Inflation
Benchmark Interest Rate
(%)#
(% change YoY)#
Currency
Country Rating ^
(% change vs US$)
Moody's
S&P *
Singapore
1.60
5.00
5/12
5.38
1/08
1.30
Aaa
AAAu
Taiwan
0.39
1.74
5/12
1.88
6/11
-0.06
Aa3
AA-u
Thailand
0.30
2.53
5/12
3.00
1/12
0.27
Baa1
BBB+
Overall the country’s macro data
has been resilient, helping boost
the market’s gains in June; the
Purchasing Managers’ Index
rose to the expansionary level of
50.4 in May after dropping
below the neutral 50 level in
April
Taiwanese stocks came under
pressure as prolonged worries
about the proposed capital gains
tax weighed on sentiment
The Singapore property sector
advanced on the back of
reduced policy risks on the
housing market
The central bank said stricter
credit control measures on
luxury home loans will be
imposed from June 22, a move
aimed
to
curb
property
speculation
and
maintain
financial stability
Home prices rebounded to a
record in the second quarter as
developers sold more homes
Economic
data
generally
disappointed
with
industrial
production falling in May from a
year earlier
Thailand raised its 2012 GDP
growth (between 5.2% to 6.2%
range) as manufacturing and
local demand recovered from the
country’s worst floods
Thailand’s consumer confidence
dropped for the first time in six
months in May on concerns over
costlier oil and food
Tensions are rising in the country
as Prime Minister Yingluck
Shinawatra’s ruling party is
considering a draft bill that may
lead to an amnesty for Thaksin
Shinawatra, the former prime
minister deposed in a 2006 coup
Source : Eastspring Investments (Singapore) Limited and Bloomberg as of June 2012. Data shown in the graphs extracted from Bloomberg in local currency terms. Note: MoM refers to month-on-month, YoY refers
to year-on-year. # based on latest available data. Singapore – Prime Lending Rate, Taiwan – Central Bank of China Taiwan Discount Rate Daily, Thailand - BOT Repurchase Market Rates 1 Day Official Rates. ^
Refers to Foreign Currency Long Term Debt . * “u” denotes that the rating is unsolicited (refers to S&P’s website for more details).
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