Summer got off to a strong start in Asia. The PMIs have suggested as much. After afew months of moderation, new export orders improved sharply in June. The incipientramp-up of iPhone-related component production may be a key driver: indeed, recentexport and industrial production data suggest that electronics continues to be the maindriver of Asia’s cyclical growth rebound. However, export orders are also up in placesnot traditionally associated with semiconductors and technology, a hint that the exportrecovery may be more broad-based than we originally anticipated.
www.773.net ， As we pass the half-year mark and await the release of 2Q GDP prints, it is increasinglyclear that the strong base in 1H17 implies that most economies should have little troublemeeting and even exceeding growth targets, from Thailand to Taiwan (Vietnam is anexception). However, that doesn’t mean policymakers can let down their guard. Weexpect momentum to gradually slow into the end of the year, pointing to GDP risks in2018. On one hand, we expect some moderation in exports following the Apple cycle;on the other hand, consumption in many economies continues to be restrained byhousehold debt and tepid wage growth.
Sustained strength in China’s activity data has allowed officials to continue pursuinggradual financial deleveraging policies, reflected in record-low M2 growth of 9.4% y-o-y inJune. But don’t conflate this with de-leveraging in the real economy: after all, new loangrowth actually accelerated beyond market expectations. Instead, the PBoC tweakedmonetary conditions at the margins to stunt growth in financial sector leverage. So far,this goal seems to have been fulfilled without jeopardising growth during an all-importantleadership transition year. It remains to be seen, however, if we will see any fundamentalchanges to China’s credit-driven growth after the transition.
While there has been some divergence in monetary policy expectations across Asia– the market is pricing in a hike in Korea (we disagree), and an imminent cut in India(we agree: with inflation at a record low amid weak investment, this now seemsrather likely) – for the most part, central banks will be reticent to tweak policy. Afterall, despite the impressive export bounce, we continue to observe lingeringdisinflationary pressures, partly stemming from still-subdued commodity prices, partlyfrom disappointing wage growth. If anything, calls for easing are likely to eventuallyreturn. Indeed, Vietnam’s central bank just delivered a surprise rate cut in a bid toboost growth towards the government’s target.