UOB Economic-Treasury Research

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Wednesday, 04 August 2010 Asian Markets

News Highlights
Foreign Exchange Rates (as at 03 Aug 2010)
As at 04 Aug Asian High Asian Low NY High NY Low
SGD 1.3505 1.3535 1.3500 1.3518 1.3491 n Asian currencies turned flattish on Tue against the USD, as
MYR 3.1610 3.1660 3.1510 - - risk taking activities dissipated late in the morning.
IDR 8,936 8,947 8,930 - - Overnight actions were also mixed with equity markets lower
THB 32.16 32.20 32.18 - - on poor economic data but EUR stretching 0.4% higher to
PHP 45.20 45.26 45.12 - - $1.3231 and at the same time JPY firming 0.8%, to 85.79/
TWD 31.745 31.868 31.700 - -
USD late session. In addition, US Treasury yields fell and
KRW 1168.10 1172.80 1165.00 - -
HKD 7.7610 - - 7.7633 7.7601 Baltic dry index suggests commodities demand is still
CNY 6.7720 6.7751 6.7688 - - sluggish. These conflicting signals suggest that price actions
for risky assets are likely to be choppy, especially in the lead
up to the key nonfarm payroll on Fri. For today, Bank
UOB’s Estimation of SGD NEER (as at 04 August 2010)
Indonesia is expected to keep interest rate unchanged at
Assuming 2.5% on each side of the pivot point:
Lower-End ...........................................................................1.4111 6.5% but is under pressure given the spike in Jun inflation
Upper-End ...........................................................................1.3422 data. In Asian session on Tue, PHP rose 0.4% to 45.127/
Mid-Point ............................................................................1.3767 USD, the strongest level since 18 May, but other Asian units
were relatively muted with 0.1% gain seen for KRW at
1,171.43/USD and IDR at 8,943/USD. Both THB and TWD
Interest Rates also edged up 0.1%, to 32.18/USD and 31.850/USD,
Current Next CB Meet UOB’s Forecast
respectively. MYR was unchanged at 3.1585/USD.
SGD 3-Mth SIBOR 0.55% - -
MYR O/N Policy Rate 2.75% 02 Sep 2.75%
IDR O/N Rate 6.50% 04 Aug 6.50% n SGD retreated marginally on Tue, easing 0.2% 1.3506/USD
THB 1-Day Repo 1.25% 25 Aug 1.25% late session, in line with more cautious tone on Asian units
PHP O/N Reverse Repo 4.00% 26 Aug 4.00% earlier in the day and equity markets overnight after
TWD Discount Rate 1.375% 26 Sep 1.50%
disappointing results from Procter & Gamble, and mixed
KRW Base Rate 2.25% 12 Aug 2.50%
HKD Base Rate 0.50% - 0.50%
reports on US housing, factory orders and personal
CNY 1-Yr Wking Capital 5.31% - 4.77% spending. As a result, the trade weighted S$ index eased
from high of 2% yesterday morning to a more reasonable
1.8% above the midpoint this morning. For now, the trade-
Stock Indices (as at 03 Aug 2010) Closing % chg weighted index should hover around 1.5-2.0% band above
the midpoint, which implies USD/SGD range of 1.345-
Singapore Straits Times 3014.77 -0.34
Kuala Lumpur Composite 1363.83 +0.20 1.355.
Jakarta Composite 2973.66 -2.79
Bangkok SET 864.48 +0.15 n RMB ended firmer on Tue at 6.773/USD, its strongest
Philippines Composite 3484.08 +0.83 closing level since 13 Jul, after the central parity was set
Taiwan TAIEX 7957.53 +0.58
stronger at 6.7722/USD vs. 6.7742 on Mon as result of broad
Seoul Composite 1790.60 +0.46
Hong Kong Hang Seng 21457.66 +0.21
USD weakness. On the NDF market, prices continued to
Shanghai SE Composite IX 2627.00 -1.70 stay subdue, with expectations of 1.5% appreciation for the
Mumbai Sensex 30 18114.83 +0.19 RMB embed over the next 12 months, down from 1.65%
on Mon. This morning, the RMB central parity was set
stronger at 6.7715/USD, vs. 6.7722 on Tue.
Key Events
Date Event
n Asian stock markets mostly higher on Tue after Wall Street
opened August with a strong rally on positive economic
indicators from around the globe. Nikkei 225 jumped
123.70 points, or 1.3% to 9,694.01. Hang Seng advanced
0.2% to 21,457.66, and Kospi rose 0.5% to 1,790.60 with
 Asian Markets
Wednesday, 04 August 2010
p2

Taiex up 45.85 points, or 0.57% to close at 7,957.53 on Tue. reserves in the medium or long run, in contrast with SAFE's
However, Shanghai Composite retreated 1.7% to close at comments earlier that US Treasuries offer 'relatively good'
2,627. In the region, STI fell 10.27 points or 0.34% to safety, liquidity and low trading costs .
3,014.77, while KLCI was flat at 1,363.83. SET composite
moved up 1.30 points, or 0.15%, to close at 864.48, while n China began a five-day live-fire air defence exercise on Tue
Jakarta Composite slumped 2.8% to 2-week low as concerns with fighter jets and thousands of servicemen against a
about interest rate hike weighed on sentiment. backdrop of increased military and diplomatic tension with
the US. The drills are taking place across Henan and eastern
n Overnight US equity markets closed lower Tue, trimming coastal province of Shandong, which backs on to the Yellow
some of the previous session's big gains, as optimism over Sea, Xinhua news agency said on Tue.
corporate earnings gave way to concerns about the strength
of the economic recovery. The Dow fell 38 points, or 0.3%, n Hong Kong may introduce RMB-denominated funds by the
while S&P 500 slid 6 points, or 0.5%. Nasdaq composite end of this year, Reuters reported Tue, citing KC Chan, Hong
dropped 12 points, or 0.5%. The retreat came after stocks Kong's secretary for financial services and the treasury. The
surged Mon, on the back of less disappointing ISM data and funds will invest in stocks listed in China, according to the
strong bank earnings from Europe. But sentiment turned report.
cautious on Tue following disappointing results from Procter
& Gamble, and mixed reports on US housing, factory orders n Indonesia's central bank said on Tue it is studying plans to
and personal spending. redenominate its currency, a move that would simplify many
routine daily transactions which typically run into millions
n China's new bank loans may have totaled some RMB700bn of rupiah. Darmin Nasution, central bank governor-
in July, the largest increase since Apr, the Shanghai Securities designate, said the move would probably involve lopping
News reported on Tue. Note that for China to hit its loans off three zeroes and would have no inflationary impact in a
target of RMB7.5tn new loans this year, average monthly new country that has had a history of double-digit inflation.
loans in 2H need to come in around RMB450bn per month.
n Malaysia's June exports rose a slower-than-expected
n PBoC advisor Yu Yongding said on Tue that US Treasuries 17.2%y/y vs. 21.9% in May, suggesting a weaker expansion
do not provide safety or liquidity for China's USD2.45tn in the second quarter.

Economic Indicators
Local Time Indicators Mth Actual UOB Forecast Mkt Forecast Previous
03/08
0500 SK Foreign Exchange Reserve USD Jul 285.96 - - 274.22b
0900 CH Non-manufacturing PMI Jul 60.1 - - 57.4
1801 MA Exports y/y Jun 17.2 - 17.3 21.8%
1801 MA Imports y/y Jun 30.1 - 24.8 34.2%
1801 MA Trade Bal Jun 6.04 - 8.0 8.13b
2130 SG Purchasing Manager Ind Jul 52.2 - 51.0 51.3
2130 SG Electronic Sector Index Jul 55.7 - 50.1 50.5

04/08
1030 HK Purchasing Manager Index Jul - - 52.6

05/08
0900 PH CPI y/y Jul - 4.1 3.9%
0900 PH CPI nsa m/m Jul - 0.4 0.2%
1600 TW CPI y/y Jul - 1.27 1.18%
1600 TW WPI y/y Jul - 6.10 7.18%
1620 TW Foreign Exchange Reserves-US$ Jul - - 362.38

06/08
1530 TH Foreign Reserves Jul 30 - - 150.1b
1730 MA Foreign Reserves Jul 30 - - 94.81n

Jimmy Koh Suan Teck Kin, CFA Ho Woei Chen Chow Penn Nee
(65) 6539 3545 (65) 6539 3922 (65) 6539 3948 (65) 6539 3923
Jimmy.KohCT@UOBgroup.com Suan.TeckKin@UOBgroup.com Ho.WoeiChen@UOBgroup.com Chow.PennNee@UOBgroup.com
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