Politics more than hard data driving trade numbers, says HSBC

April 13, 2018

HONG KONG - Most Asian PMIs pulled back in March, along with those in Europe and the US, and trade seems no longer quite as robust as it was at the turn of the year, says HSBC in a new research note. But talk of a "synchronised global stumble" -- so soon after a "synchronised global upswing" -- seems a touch premature, says HSBC.

“Some sectoral indicators, like electronics PMIs, are showing a worrying trend, yet, overall, activity remains at a robust pace and the global policy setting hasn't suddenly tightened.”

In China, both the CPI and the PPI pulled back in March, more sharply than expected, the note says.

Elsewhere, from Korea to Taiwan, and across ASEAN, inflation remains subdued, and broadly unchanged since the start of the year.

In India, price pressures seem to be finally cooling, prompting the RBI to lower its inflation forecast. As elsewhere in the region, there is no pressing need to push policy rates higher.

Only in Singapore and the Philippines will monetary policy likely be tightened this quarters, HSBC says, with others sitting back and watching things unfold.

In Japan, a recent "pop" in wage growth, as well as steadying CPI readings, re-ignited talk about when the BoJ might begin to tighten the reins.

But HSBC says a tax hike looming in the second half of 2019, and other data from Japan suggest that first quarter growth has slowed from last year.

“For now, it's politics that drives sentiment more than hard data. Trade, tweets, and tariffs, are perhaps what most investors currently focus on.

“But it's too early to discern their impact, or that of attendant uncertainty, on economic data.” www.hsbc.com (ATI).