Monetary policy in 2019: where are rates going?

Transcription

1 Economics & Strategy Weekly Monetary policy in 2019: where are rates going? DBS Group Research 23 November 2018 Taimur Baig Chief Economist Nathan Chow Strategist/Economist Please direct distribution queries to Violet Lee Market correction, tech weakness, oil selloff, higher rates, China growth worries, and trade wars point to a worsening 2019 outlook Against this backdrop, we take stock of our monetary policy calls for G3+Asia In the US, the markets are trying to force the Fed s hand, but we don t think that labour market and domestic demand dynamics would alter meaningfully to cause a Fed relent from its desired path of quarterly rate hikes ECB and BOJ will take cautious steps toward policy normalisation next year, but actual policy rates will remain unchanged Will the markets cause the Fed to pause? Although US growth conditions have not changed, expectations have worsened for next year lately. Uncertainty about the outlook has risen as markets grapple with fears about peak growth, peak earnings, rising costs, and trade wars. Implied probability of the market s expectations of more than 2 rate hikes next year has declined considerably. We are not ready to throw in the towel yet though. We think that domestic demand (especially with regards to personal consumption and income) conditions in the US are likely to remain strong next year to warrant quarterly rate hikes by the Fed. We of course recognise that risks to that scenario has risen as markets have sold off, oil price has corrected sharply, and questions are being asked about the ability of the US housing sector to absorb substantially higher interest rates. US inflation vs Fed Funds rates % YoY, pa 4.0 Fed Funds DBS forecast 3.5 target 3.0 Core PCE Faced with growth worries, China is heading in the opposite direction from the rest, with both fiscal and monetary policy likely to ease further next year India and Indonesia, Asia s large deficit economies, will face sustained challenging funding conditions, justifying continued tight monetary policy stance. For the other central banks though, bias may shift toward waitand-see as opposed to pro-active tightening. The Fed would want to continue to hike, in our view, because its voting members will consider any GDP print around 2% or above sufficient to warrant continued normalisation, especially if core PCE inflation remains around 2%. We think both of those outcomes are highly likely next year. Growth will not be as high as seen this year, but that has been considered unsustainable by Fed officials in any case. Refer to important disclosures at the end of the report

2 We will reconsider our call in the coming months if Fed communication changes meaningfully, markets continue to correct, and global growth slows sharply. For the time being, we will hold on to our expectation that the Fed Funds rate will hit 3.5% by the end of next year. That may well set up a 2020 slowdown or recession scenario, but if wages continue to rise, monetary policy will have to remain active, in our view. Eurozone Taimur Baig Compared to stubbornly weak inflation last year, headline inflation is close to target this year. From 1.3% YoY in January 2018, Eurozone headline inflation rose to 2% in June 2018 and has remained there until October. While this fulfils the policy mandate, policymakers are concerned that the rise inflation is primarily due to costpush forces i.e. energy prices (transport was the single biggest contributor to price increases) and utility costs. Core inflation, by contrast, continues to flatline at % YoY for good part of the year. Headline inflation is likely to average 1.8% YoY this year, before slowing to 1.4% next year as base effects turn unfavourable. meanwhile, stand delayed beyond October 2019, after Draghi s term ends, possibly into Radhika Rao Japan The Bank of Japan (BOJ) has tweaked the Yield Curve Control policy this year, allowing the 10-year JGB yield to fluctuate in a slightly wider range around the 0% target (±0.2% vs ±0.1% previously). Given that the JGB yield curve remains very flat and the pressure on financial institutions profits continues to loom, it is possible that the BOJ will further adjust policy technically to allow the long-term yields to move more flexibly in That said, any substantial policy changes an end of the negative rate policy and outright hike in the long-term yield target would only happen in 2H 2020 at the soonest. The near-term growth outlook is challenged by the consumption tax hike scheduled for October 2019, as well as the external headwinds from trade protectionism, Fed tightening and emerging market slowdown. Meanwhile, CPI inflation is expected to continue hovering at % by end-2019 (excluding the tax hike effect), falling short of the BOJ s 2% target by a wide margin. Macro picture would require the BOJ to maintain a loose monetary policy through next year. Japan: Inflation vs policy rates % YoY, pa CPI target: 2% DBS forecast The European Central Bank is on track to cease QE purchases by end-2018 (barring reinvestments). Incoming signs of softness in growth indicators, however, suggests policy normalisation could be delayed. There is also a speculation that the ECB might consider another tranche of cheap financing program, under the TLTROs scheme (targeted long-term repurchase operation) to support growth and infuse liquidity. Rate hikes, BOJ deposit rate 10Y yield target CPI (ex VAT) Ma Tieying Page 2

3 China China s inflation is projected to edge up to 2.3% in 2019 from 2.1% in Rising food prices will continue to put upward pressure on the headline. Pork price inflation, which carries hefty influence in the CPI basket, is on the rise due to the ongoing outbreak of African swine fever. On top of tariff, the weakening CNY are pushing up import prices. Yet there are some offsetting factors. For instance, health cost inflation, which had surged in recent years after the relaxation of price controls on public medical services, is set to decline. A tightening property curbs will also depress home prices and rentals. Faltering economic momentum is dampening companies incentive for hiring keeping wage ascendency at bay. Against such backdrops, we expect three cuts on the reserve requirement ratio next year. Meanwhile, PBOC should drive market rates lower by cutting reverse repo rate as pressure on corporate balance sheets continues to mount. More supportive steps are also warranted to encourage banks to aid the cash-squeezed private sector. Inflation vs policy rate % (YOY) % CPI Year benchmark lending rate (RHS) DBS forecast Hong Kong We have revised our CPI forecast for 2018 from 2.0% to 2.5%. The largely favourable domestic economic conditions in 1-3Q18 (grew by 3.7% YOY) and the feed through of higher rents over the past year should uphold inflationary pressures. Rising local labour cost also fuelled inflation. The apparent on-year increase in vegetable price in China also boosted imported food costs. In 2019, robust economic conditions in the past 21 months will slow down due to external headwinds. Local labour cost will moderate accordingly. Softening housing market will drag private rental cost down the road. Upward adjustment in public housing rentals will also play a role in upholding the headline price pressure. CPI for 2019 is projected to be flat at 2.7%. Inflation vs policy rate % (YOY) % 7.0 CPI HKMA base rate (RHS) DBS forecast Samuel Tse Nathan Chow Page 3

4 India FY19 is tracking an average of 4.2% YoY in first seven months of the year, higher than FY18 s 3.6%, but sequential trends are undershooting historical averages. Bulk of this downside surprise has been because of lower food costs, with little material boost from MSPs (Minimum Support Prices), suggesting procurement of crops have not kept pace. While positive for inflation, a prolonged phase of weak food/ farm prices trigger concern over the negative repercussions for agricultural incomes and rural demand. Notwithstanding the pass-through of a weak rupee and firm oil prices, we revise down FY19 inflation to 4.0% YoY from 4.4% previously. Demand conditions are also expected to moderate further. FY20 inflation is likely to be slightly firmer at 4.2%, factoring in a modest increase in food inflation on pro-farm support measures and steady commodity prices. With expectations for rising inflation and rate hikes pared back, real rates are at elevated levels. The RBI is likely to get the leeway to hold rates unchanged this year owing to below target inflation. We pencil in measured hikes in FY20 to contain core pressures, with oil and currency direction seen as wildcards. Indonesia 2018 inflation is expected to stay at 3.2% and inch to 4% in Benign 2018 inflation was driven by stable food price especially rice owing to better domestic supply management and stable domestic fuel prices. We revise down our 2019 inflation to 3.8% from 4% on the back of lower oil price. Consequently, estimated domestic fuel price adjustments will only occur after the election in May19. Yet, we still think that any adjustments to domestic oil price will occur after the election in May18. Heightened sensitivity over rice imports recently could pose risk to inflation. Otherwise, we think rice price contribution to CPI will remain subdue. Bank Indonesia has raised policy rate by 175bps this year emphasizing its intention to be pre-emptive and ahead of the curve. Given soft inflation, BI primary focus has been on higher balance-of-payment pressure. Higher rate improves interest-rate differential competitiveness and might narrow current account deficit (CAD) by suppressing domestic demand (complemented by nonmonetary measures, such as B20 requirements and higher consumption good imports taxes, by the government) We think the last policy rate hike might be the last one this year as interest rate differential is still competitive even with additional Fed hike this December, inflation is still benign and the CAD is expected to narrow in 4Q18 with falling oil price. We pencil in two more rate hikes for 2019 and zero change in 2020 as growth is expected to slow down. Radhika Rao Masyita Crystallin Page 4

5 Malaysia Monetary policy is expected to remain stable in 2019 despite a slower growth trajectory of 4.5%, from 4.7% in The risk is on inflation, which will likely rise above the policy rate in the middle of next year. The low base from 2018, coupled with the potential second order effects from the reintroduction of the Sales and Services Tax and higher minimum wages that was introduced in the most recent budget, could potentially push inflation higher Malaysia: Inflation and monetary policy outlook % YoY, % p.a. 5.0 CPI 4.5 OPR DBSf GST removal 0.0 Beside higher inflation, the potential impact of the US Fed tightening on the ringgit are some of the key factors that underscore Bank Negara s limitations to adopt an even more accommodative stance. Like many regional countries, the economy was not spared from the concerns of outflow arising from higher US interest rates and weak external financing fundamentals. Any premature easing could potentially exacerbate the pressure on the currency. However, should conditions in the external environment deteriorate faster than expected, the risk is that BNM may be compelled to introduce pre-emptive easing to support growth, particularly given the constraints on the fiscal front. Else, we expect the authority to continue to stand pat on monetary policy and the Overnight Policy Rate (OPR) should remain unchanged at 3.25% till the end of Philippines Inflation soared to 5.3% (DBSf) but might ease to 4.7% in One of the major driver was higher price related to the first phase of tax reform (TRAIN) which started in January 1, 2018 and higher global oil price. The first phase which includes higher excise taxes for fuel, automobiles, sugar-sweetened beverages, cosmetics and tobacco has caused inflation to accelerate from 2.9% in 2017 to 6.7% YoY in October and November this year. Yet, the taxreform impact might start to dissipate after 1Q19 due to base effect causing overall inflation to ease to 4.7% in 2019 (DBSf). Despite the strong supply-side drivers, we could not exclude the possibility that part of the increase was also demand driven. Core inflation has also inched up from 2.6% YoY in Jan18 to 4.9% in Oct18 implying strong domestic demand which is in line with robust consumption and investment. The high inflation this year has prompted BSP to raise rates several times by 175bps. They emphasized that they will remain proactive to anchor inflation expectation. We pencil in two-25bps hikes next year because even though inflation ease next year, the level is still way above BSP upper limit requiring tighter monetary position. In addition, Philippines robust growth compared to peers provides space for more hikes. Masyita Crystallin Irvin Seah Page 5

6 Singapore The Monetary Authority of Singapore (MAS) is, barring global shocks, likely to keep normalizing monetary policy in We expect CPI inflation and real GDP growth to average 1.8% and 3% respectively in 2019, in the upper half of their official forecast ranges. The MAS has, at its October review, forecast inflation to increase into a higher 1-2% range from 0-1% this year. The Ministry of Trade and Industry has, on increased global risks, widened its forecast range for growth to % from % previously. DBS SGD NEER and policy band Index (6-10 Apr 2015 ave=100) Appreciation Neutral stance stance 98 Jan-15 Jan-16 Jan-17 Jan-18 Appreciation stance The scope for more normalization is also reflected by the rise in the Sing dollar nominal effective exchange rate (SGD NEER) to the top of its policy band. The Singapore dollar policy was first returned to a modest and gradual appreciation stance in April 2018 with a slight increase in the policy band. This followed by a similar back-to-back adjustment in October. According to our model, the slope has yet to return to the appreciation pace seen before the first easing in January Philip Wee South Korea The Bank of Korea (BOK) is expected to raise the benchmark repo rate by a modest 25bps between now and end The earliest timing for this rate hike to be delivered is the forthcoming policy meeting on 30 November The key reason to hike rates is to contain the risk of financial imbalances caused by the persistently loose monetary policy the surge in property prices, in particular. Unlike the emerging markets in South/Southeast Asia, the BOK is not under serious pressure to hike rates to contain capital outflows. External financing burdens are manageable, thanks to the strong foreign reserve and current account positions. On the macro front, growth outlook will likely face more challenges in While domestic demand will be supported by an expansionary fiscal policy, exports may lose momentum due to the rise in trade protectionism and slowdown in the world s major economies. CPI inflation is expected to stay comfortably below the BOK s 2% target, thanks to the stabilising oil prices and weak labour market. Macroeconomic prospect does not support the case of more rate hikes in South Korea: Inflation vs policy rate % YoY, pa CPI target: 2% 7D repo rate CPI DBS forecast 0.00 Ma Tieying Page 6

7 Taiwan Taiwan s central bank (CBC) is expected to keep monetary policy accommodative in The CBC has refrained from hiking rates this year, in absence of serious pressure from consumer price inflation, asset price inflation, or capital outflows. Growth and inflation numbers have both passed the peak, in our view. GDP growth is forecasted to ease to 2.2% in 2019 from 2.7% this year, as exports may lose momentum amid the rise in trade protectionism, tightening of US monetary policy, and slowdown in China and other emerging economies. CPI inflation is expected to ease to 1.0% next year, thanks to lukewarm domestic demand, stabilising oil prices, and favourable base effects. Capital outflows, property price increases, debt expansion may not be glaring problems that require policy responses from the CBC. Taiwan s external financing capabilities remain strong, thanks to its robust foreign reserve and current account positions. The ongoing modest uptrend in property prices and bank loan growth may not accelerate further, given the weaker prospect for corporate earnings and household incomes next year. All considered, we expect the CBC to keep the benchmark discount rate flat at 1.375% in Thailand From 0.7% YoY in January 2018, inflation rose to 1.6% in August, before easing to 1.2% in October, driven by lower food and fuel costs. With global oil prices down more than 20% from year s highs and THB outperformance, imported inflationary risks are subdued. This puts our 2018 forecast of 1.1% barely above the lower end of BOT s target 1-4% range. Inflation has peaked and is likely to trend lower in rest of this year, before inching up modestly in 2019 on firmer consumption and base effects. The BOT adopted a slightly hawkish commentary in recent meetings, driven by the need for policy buffer and to narrow negative rate differentials between Thai and US policy rates. A sharp slowdown in 3Q GDP growth to 3.3% vs 4.8% in H118, however, challenges this hawkish rhetoric. With weakness primarily stemming from weaker net exports, and domestic sectors (consumption and investment) staying relatively resilient, the BOT might draw the confidence to tighten policy in December or early 2019, but it will be a close call. Even if policy normalisation kickstarts, the cycle will be front-loaded and shallow. Taiwan: Inflation vs policy rate % YoY, pa DBS forecast Discount rate CPI 0.00 Ma Tieying Radhika Rao Page 7

8 Vietnam We expect economic growth to ease heading into But the silver lining is that economic growth will increasingly be driven by productivity gains. Strong FDI flows into technology in recent years would augment domestic factors, resulting in better quality of growth. Movement in oil prices was originally a risk factor on inflation but pressure from energy prices have since moderated and unlikely to post a significant threat in the coming quarters due to weaker global growth. Moreover, the upside risk from oil prices has also been offset by the high base effect resulting from earlier healthcare and education subsidy reforms. Last but not least, the government had in recent years stepped up its spending on infrastructure projects, as well as liberalise the property market to foreign investment. But policy direction on this front has since been moderated and this would could imply lesser extent of demand pull and asset inflation going forward. Overall, we reckon that inflation has peaked, and we foresee a more stable inflation outlook ahead. Coupled that with a slower, albeit more sustainable GDP growth, the economy will be enjoyed a balanced growth and inflation dynamics in With that, we expect the SBV to maintain a stable monetary policy in The refinance rate is likely to remain unchanged at 6.25%. Vietnam: Balanced growth and inflation % YoY Real GDP growth % YoY Inflation (RHS) 8.5 Policy rate (RHS) DBSf Irvin Seah Rates: Further tightening in Asia Volatility in the markets is not going to deter the Fed from hiking several more time in As USD rates edge even higher, Asia policy rates will be dragged higher again, but with nuance. Through the Fed normalisation over the past two years, the reaction for Asia rates is different in 2017 and In 2017, policy makers were able to keep rates low due to synchronised global growth and a risk-on environment. This kept funds flowing into the region even as the Fed hiked three times that year. That changed in When global growth diverges, USD strength became apparent, prompting a much more cautious tone for investors. Twin-deficit Asia economies (Indonesia, India and the Philippines) hiked rates to ensure financial market stability when stress started appearing in the 3M rates and longer-dated yields is likely to be a blend of 2017 and Global growth divergences should narrow as US growth moderates to 2.5%. Moreover, Asia rates in the higheryielding economies have already adjusted significantly (real rates are high in Indonesia and India) over the past few quarters as complacency gets worked out of the system. This sets the stage for a more modest hike cycle for the twin deficit economies in 2019 (compared to 2018) even as we see the Fed hiking another four times. In fact, we argue that there is still some risk and/or liquidity premium imbedded in the interest rates of twin deficit economies. As such, policy rate hikes need not necessarily translate into a 100% passthrough unto 3M interbank or FX-implied rates. Similarly, even if yields rise in these economies, local currency govvies (with much higher absolute yields) may be attractive from a total return perspective. Malaysia, Thailand, Korea and Taiwan are lagging peers in the monetary policy cycle. Korea and Taiwan have well-supported external balances and are likely to face headwinds from trade. There is little scope for policy rates (we have a token hike for Korea by the end of this year) or govvie yields to rise even if USD rates get meaningfully higher in For Malaysia, we expect yields to be broadly steady with the central bank facing inertia in either direction. Oil prices remain a key risk and we suspect that the curve would steepen if prices fell much lower. Meanwhile, the THB curve is already pricing Page 8

9 Policy Rates: The tightening cycle is not done bps chg in a modest rate hike cycle as the central bank turns modestly more hawkish. Lastly, policy settings are going to stay accommodative in China through While we do not think conditions warrant an adjustment in the 1Y lending rate, we have assumed that liquidity would be kept ample (more RRR cuts could be in the offing) to cushion downside from the ongoing trade war with the US. That said, we think that longer-term govvie yields may be rangebound (drifting lower before heading back up). Yields are low in absolute and relative (compared to the US) terms. It is unclear that lower CNY rates can be sustained in when China s current account dynamics has deteriorated and we still expect USD rates to climb. 2018f 2019f US PH ID IN MY TH KR TW Eugene Leow FX: Global monetary outlook is siding with the USD Expect G3 monetary policies to diverge in favour of the US dollar in We see the Fed Funds Rate increasing four times to 3.50% next year and the Eurozone and Japan pushing out their rate hikes into 2020 from late It was not lost on us that the Fed has, over the past year, been unwinding its balance sheet to 20% of GDP from 23%. This compares favourably with the sizable balance sheets at the European Central Bank (40%) and the Bank of Japan (100%). Given the concerns over the side-effects of their ultra-loose policies, ECB and BOJ will, compared to the Fed, have less flexibility to respond effectively to any global shocks ahead. Hence, the risk remains for the USD Index (DXY) to appreciate above 100 next year, on further depreciation in the euro and Japanese yen past 1.10 and 115 respectively. The divergence story will also drive the Chinese yuan weaker past the 7 level. We see three cuts in the reserve requirement ratio by a total bps in Trade tensions with the US have already led China s growth to the lows of the global financial crisis. Looking ahead, the US import tariff rate on USD200bn of Chinese goods is set to rise to 25% from 10% from January 1, US President Trump has also reserved the right to impose tariffs on the remainder USD267bn of its goods. Unlike the GFC, China has today, a weaker current account position and accumulated large debts in the housing, corporate and local government sectors. It will be more challenging to cushion growth with domestic demand while maintaining financial stability this time around. The greenback will also be widening its positive interest rate differentials with the surplus- and export-led Asian currencies. Despite their half-full outlook, the South Korean won and the Singapore dollar have found it increasingly hard to ignore the faster-than-expected growth moderation in the world s largest economies (Eurozone, China and Japan) from trade tensions. Asia s twin-deficit currencies (the Indian rupee, the Indonesian rupiah and the Philippine peso) will also need to be mindful of rising US real interest rates. After having turned positive this year, real Fed Funds Rate is estimated to be some 100 bps above the core PCE deflator in Philip Wee Page 9

10 Asia equities: Inflation and interest rates more sensitive to the outlook for Indonesia, Philippines, ASEAN consumer sector and SG/HK banks While we expect inflation to rise generally in Asia next year, the potential slowdown in growth is likely to drive central banks to stand pat on their monetary policies. On the back of US Fed hikes, interest rates in Singapore and Hong Kong will rise in tandem with the US due to their currency policies, while rates in Indonesia and Philippines will rise modestly to pre-empt capital outflows. All Asia countries except Philippines have no inflation problem. To this extent, Philippines has hiked rates by 175bps this year to tame inflationary expectations. We see the following impact on Asia equities under this environment:- 1. Asia consumer sector has been enjoying a modest margin recovery since the beginning of this year as inflationary pressure is generally benign. We believe margins are likely to remain healthy in the first half of next year, but downside risks portend in the second half. There is a lagged effect of rising inflation on margins as raw material prices are contracted about 6-9 months ahead. We maintain our positive stance on consumer stocks in the first half of the year as defensive plays but would be watchful for slowdown in earnings growth in the second half, from weaker top line as well as lower profit margins. ASEAN consumer sector: profit margin vs inflation 2. With Philippines hiking rates extensively this year due to high inflation, talks about potential rate cuts could revive market sentiments next year. We believe this will happen as soon as inflation starts to fall, peso stabilises, and US fed hikes expectations lowered. Note that DBS economist still thinks inflation is likely to ease in 2019 and impact from tax reform will start to dissipate around the end of 1Q19. However, she expects inflation to average 4.7% in 2019 vs 5.3% this year, which will still be above BSP s target range of 1-4%. She has pencilled in two rate hikes for next year. We have recommendation for Philippines as Neutral in our Asia ex-japan market allocation but would turn more positive if prospects of rate cuts come about. 3. In Indonesia, we believe the risk of inflation is high post elections as controlled prices on essentials such as food and fuel have artificially brought prices down this year. Moreover, with pressure from a weak rupiah, retailers may need to raise prices next year. While investors embrace this year s rate hikes as they are seen as a necessary evil to maintain rupiah stability, policy actions could be dicey under a rising inflation scenario. Market sentiments could be affected post elections. 4. We believe the Singapore market is still attractive compared to its regional counterparts from its relative macro and currency stability point of view. 5. We are positive on Singapore and Hong Kong Banks as net interest margin (NIM) expansion is more likely to occur in these markets. While the economies are slowing and rising interest rates could result in slower loan growth, the banks earnings are more sensitive to NIM expansion than loan growth on average. Rising interest rates should still be net positive for the banks. Joanne Goh Source: DBS, Thomson Reuters. Inflation simple average for ASEAN5. Profit margin calculated from DBS coverage list of stocks. Page 10

11 Highlights of the week: Chart of the Week: China s weakening monetary policy transmission Philippines: Further policy rate hike is likely Hong Kong: Looking beyond the typhoon Thailand: Slow 3Q growth challenges hawkish BOT Hong Kong chart book - Increasing external headwinds G3 Rates: Quantitative tightening s shadow Bank Indonesia s ahead-of-the-curve move Page 11

12 Key Forecasts GDP growth, % YoY CPI inflation, % YoY, ave f 2019f f 2019f China Hong Kong India* Indonesia Malaysia Philippines** Singapore South Korea Taiwan Thailand Vietnam Eurozone Japan United States*** * refers to year ending March ** new CPI series *** eop for CPI inflation Policy interest rates, eop 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 China* India Indonesia Malaysia Philippines Singapore** South Korea Taiwan Thailand Vietnam*** Eurozone Japan United States * 1-yr lending rate; ** 3M SOR ; *** prime rate Exchange rates, eop Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 China Hong Kong India Indonesia Malaysia Philippines Singapore South Korea Thailand Vietnam Australia Eurozone Japan United Kingdom Australia, Eurozone and United Kingdom are direct quotes Page 12

13 Rates forecasts Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 US 3m Libor Y Y Y-2Y Japan 3m Tibor Y Y Y-2Y Eurozone 3m Euribor Y Y Y-2Y Indonesia 3m Jibor Y Y Y-2Y Malaysia 3m Klibor Y Y Y-3Y Philippines 3m PHP ref rate Y Y Y-2Y Singapore 3m Sibor Y Y Y-2Y Thailand 3m Bibor Y Y Y-2Y China 1 yr Lending rate Y Y Y-3Y Hong Kong 3m Hibor Y Y Y-2Y Korea 3m CD Y Y Y-3Y India 3m Mibor Y Y Y-2Y %, eop, govt bond yield for 2Y and 10Y, spread bps Page 13

14 Group Research Economics & Strategy Taimur Baig, Ph.D. Chief Economist - G3 & Asia taimurbaig@dbs.com Nathan Chow Strategist - China & Hong Kong nathanchow@dbs.com Ma Tieying, CFA Economist - Japan, South Korea, & Taiwan matieying@dbs.com Masyita Crystallin, Ph.D. Economist Indonesia & Philippines masyita@dbs.com Joanne Goh Regional equity strategist joannegohsc@dbs.com Neel Gopalakrishnan Credit Strategist neelg@dbs.com Eugene Leow Rates Strategist - G3 & Asia eugeneleow@dbs.com Chris Leung Economist - China & Hong Kong chrisleung@dbs.com Radhika Rao Economist Eurozone, India & Thailand radhikarao@dbs.com Irvin Seah Economist - Singapore, Malaysia, & Vietnam irvinseah@dbs.com Samuel Tse Economist - China & Hong Kong samueltse@dbs.com Duncan Tan FX and Rates Strategist - Asean duncantan@dbs.com Philip Wee FX Strategist - G3 & Asia philipwee@dbs.com Sources: Data for all charts and tables are from CEIC, Bloomberg and DBS Group Research (forecasts and transformations). Disclaimer: The information herein is published by DBS Bank Ltd (the Company ). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation & the particular needs of any specific addressee. The information herein is published for the information of addressees only & is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company & its associates, their directors, officers and/or employees may have positions or other interests in, & may effect transactions in securities mentioned herein & may also perform or seek to perform broking, investment banking & other banking or financial services for these companies. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Sources for all charts & tables are CEIC & Bloomberg unless otherwise specified. DBS Bank Ltd., 12 Marina Blvd, Marina Bay Financial Center Tower 3, Singapore Tel: Company Registration No E. Page 14