Ahead Today
G3: US initial jobless claims
Asia: China’s NPC meeting, BNM policy rate decision, Philippines CPI, Thailand CPI, Singapore retail sales, Taiwan industrial production
Market Highlights
US macro data continue to point to a resilient economy. Private-sector employment rose by 63k in February, beating market consensus of 50k and rebounding sharply from 11k in January. Meanwhile, the ISM services index climbed to 56.1 in February, above expectations and up from 53.8 previously, signalling an acceleration in services activity. Both the new orders and employment sub-indices expanded at a faster pace than in January. Despite these firm data prints, markets continue to price in some degree of policy easing, with around 43bps of Fed rate cuts expected this year.
Energy markets present a more complex risk backdrop. While oil prices have not surged to the extreme levels seen during the Russia–Ukraine war, LNG prices have risen sharply following the shutdown of Qatar’s largest LNG export plant after Iranian attacks. Qatar is one of the world’s largest LNG exporters, alongside the US and Australia, and around 20% of global LNG trade transits the Strait of Hormuz - mostly originating from Qatar. Notably, about 86% of LNG volumes passing through Hormuz are delivered to Asia, with China, India, Taiwan, and South Korea accounting for roughly 60% of these flows.
Among Asian economies, South Korea and Taiwan appear particularly exposed. Both have a relatively high share of natural gas in electricity generation and import nearly all of their gas requirements, leaving them vulnerable to a sustained period of elevated gas prices. The KOSPI has fallen sharply over the past two sessions. The rising risk of energy-driven inflation could keep both the Bank of Korea and Taiwan’s central bank cautious.
Regional FX
Some improvement in risk sentiment yesterday, as reflected by a rebound in US equities, may help broadly lend some support for Asian markets.
China’s National People’s Congress (NPC) will also come into focus today. At the meeting, the government will outline the policy agenda for the next 5 years, setting the macro and reform backdrop. The government has somewhat softened its GDP growth target to 4.5%-5.0%, which may reduce the prospects of aggressive policy stimulus.
In Malaysia, we expect BNM to keep policy rate unchanged at 2.75% today. Growth has been resilient, while inflation has been contained. Being a net oil exporter, Malaysia’s terms of trade should also improve on the back of higher oil prices, lending support for the ringgit.