Markets Overview HIGHLIGHTS AHEAD

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1 Global Economics & Markets Research URL: Friday, 13 May 2016 HIGHLIGHTS AHEAD In the US, we will receive the main interest of the week, which is April retail sales a number that will shed light into the early Q2 GDP picture. Markets are looking for a 0.8% rebound at the headline, 0.5% ex auto, and 0.3% ex auto and gas. The US PPI should reveal an energy-related lift in April. The March business inventories report and the preliminary May University of Michigan consumer survey will round out the US data diary. San Francisco Fed s John Williams will speak in Sacramento. Before we get to the US, in Europe, the first Q1 GDP reports are released in Germany and Italy. Following the release of the German report we will get a second reading on GDP for the euro area in aggregate. Final April CPI reports in Germany and Spain will also be released. The data focus in Asia today is 1Q16 GDP data in Malaysia (Bloomberg: 4.0% y/y; 4Q15: 4.5%) and Hong Kong (Bloomberg: 1.5%; 4Q15: 1.9%). Malaysia s 1Q16 current account will also be out at 12 pm today together with the GDP data and consensus is for the surplus to narrow to MYR6.8 bn from MYR11.4 bn in 4Q15. Singapore s March retail sales at 1 pm is forecast to rebound to 3.6% y/y growth from -3.2% in February mainly driven by car sales. Nonetheless ex-auto sales should also improve to -3.9% y/y from -9.6% in February. Thailand s foreign reserves will also be released this afternoon. BOK monetary policy decision is expected at around 9.00 am SG time. 15 out of 18 polled by Bloomberg are expecting no change in interest rate while 3 are expecting a 25bps cut today. Also watch out for China s April new CNY loans, April aggregate financing loans & money supply data which will be out anytime. Market is expecting a slowdown in new loans growth in April. Further out on Saturday, China is poised to release its April industrial production (IP), April retail sales & fixed assets investment data. Some stabilization in the April numbers will bring relief to the market. Golkar National Congress and election of new party chairman to replace Aburizal Bakrie kicks off in Bali on Saturday. Front runners are House of Representatives Speaker Ade Komarudin and former House speaker Setya Novanto. CENTRAL BANK MEETINGS As widely expected, the BoE left policy on hold following its latest MPC meeting. The Inflation Report saw the Bank cut its economic growth forecast. However, the Bank s inflation view was little changed. Needless to say most of the focus, however, was on shocks that might knock the UK economy off that path, including the impact of the EU membership referendum. On that score, at the post-meeting press conference, Governor Carney said A vote to leave the EU could have material effects on the exchange rate, demand and supply potential, and said that the impact could possibly include a technical recession. In South Korea, despite the moderation in growth momentum in 1Q16 and the continuation of weak exports data in April, the BOK is likely to maintain its 7-day repo rate at record low of 1.50% today for the 11th straight month, with 4 out of 7 new members this meeting. Analysts will be watching how the new board members vote. We think the room for a rate cut remains open in the second half as the authorities are under pressure to boost growth. FX The US dollar has recovered Wednesday s losses. USD/ JPY staged a partial bounce-back on speculation about BoJ easing next month, following comments by BoJ Governor Kuroda as well as a remark by a former Japanese official. EUR/USD has experienced a renewed gravitational pull below the mark. GBP ended up getting a brief lift from the BoE minutes as well as Inflation Report, despite the outcome being broadly as expected. The commodity currencies saw some benefit from oil s latest rally. NOK was also buoyed by Norges Bank s policy statement on Thursday, which maintained its outlook but referred to better Norwegian growth prospects on account of higher oil prices. AUD has shown less upward momentum within its range. USD/Asians closed mixed on Thursday. MYR ended up 0.2% at 4.025/USD while IDR edged up 0.1% at 13,299/ USD and KRW gained 0.4% to 1,162.53/USD on Thursday. THB was 0.2% lower at 35.33/USD and PHP closed 0.3% lower after two preceding sessions of gains. INR closed 0.1% lower at /USD. TWD ended marginally lower at /USD compared to on Wednesday.

2 USD/SGD rebounded strongly above the peak seen earlier this week, touching a session high of from high on Wednesday. The pair ended up 0.5% at The trade-weighted SGD NEER is around -0.8% from the mid-point this morning with mid-point to -1.0% corresponding to USD/SGD range of based on current FX levels. CNY and CNH closed lower against USD even though the PBoC set the CNY central parity 0.38% firmer than the previous fix on Thursday. CNY and offshore CNH fell 0.3% to /USD and /USD respectively. Upcoming April loans data as well as industrial production (IP), retail sales & fixed assets investment on Saturday will provide further direction for the currency. This morning, the UOB central parity model is projecting a HIGHER USD/CNY fix of compared to on Thursday. EQUITIES The major US equity indexes closed a mixed bag, weighed by declines in health care and technology stocks, as market participants eyed oil prices and awaited the retail sales report due Friday. The Dow Jones industrial average closed up 9.38 points (0.05%) at 17,720.50; the S&P 500 closed down 0.35 points (0.02%) at 2,064.11; and the Nasdaq composite closed down points (0.49%) at 4, European equities ended mostly in negative territory as a renewed decline in oil prices, a sharp fall in mining stocks and a mixed set of earnings capped gains in the region. Tracking the drop in US equities on Wednesday night, Asian stock indexes mostly ended lower in Asia on Thursday. SHCOMP Index ended little-changed while HSI fell 0.7%. Philippines stock index was down 1% as it reversed two preceding sessions of gains after the presidential election. However, Nikkei was buoyed by weaker JPY to end up by 0.4% and the FSSTI rose 0.5% on Thursday. US TREASURIES US Treasuries pushed lower on Thursday, alongside equity market gains. The Treasury Department saw weak demand at the 30-year bond auction. The $15bn sale was at a high yield of 2.615%. The bid/cover was 2.19 compared with a recent average of Indirect bidders were awarded 59.7% versus a recent average of 59%. Direct bidders bought 8.8% compared with a recent average of 11%. Thursday s session saw the 2-year yield at 0.75% and the 10-year yield at 1.75%. Markets now look to a greater flow of data on Friday, highlighted by retail sales, producer prices, business inventories and University of Michigan consumer sentiment releases. for US crude futures. Gold fell as a strengthening dollar prompted some buyers to cash in gains after its biggest daily rise this month, briefly paring losses after downbeat US jobs data. ECONOMIC NEWS & DATA US Initial jobless claims for the week ending 7 May increased +20k to 294k, versus the unrevised 274k reading seen in the week prior, well above expectations for a 267k result. The 4-week average was reported at 268.3k, from the unrevised 258.0k reading seen in the week prior. Meanwhile, continuing claims for week ending 30 April increased to 2.161mln, versus the revised 2.124mln reading seen prior. The insured unemployment rate held unchanged at 1.6%. US import prices came in at +0.3% m/m (-5.7% y/y) in April, versus the revised +0.3% m/m reading in March, alongside upward pressure seen from both petroleum prices (+4.1% m/m) and industrial supplies (+1.5% m/m). This comes in below expectations for a +0.6% m/m result. Meanwhile, ex-petroleum import prices increased +0.1% m/m in April, versus the -0.1% m/m reading seen in March. The Bloomberg US consumer comfort index decreased to 41.7 for the week ending 8 May, versus the 42.0 reading seen the week prior. As expected, the Philippines central bank kept its overnight deposit rate at 4.00% for the 13th straight meeting and the special deposit accounts rate at 2.5%. Growth in the country is expected to pick up with election-related spending likely providing an additional boost. The government expects growth to exceed 6% this year. The central bank maintained that inflation will be within target range of 2-4% at 2.1% in 2016 and 3.1% in Malaysia s Industrial production index (IPI) rose 2.8% y/y in March (+3.9% in February) tad lower than market consensus (3.0%) but better than our estimates (2.0%). Broad sectors that expanded included manufacturing (4.4%) and electricity (7.7%). Mining sector reversed to contract 2.5%.Based on data including 1Q16 industrial output data (3.3%), we estimate 1Q16 real GDP growth of 4.0% y/y. Actual numbers will be released at noon today. India s consumer prices rose a quicker-than-expected 5.39% y/y in April compared to Bloomberg s consensus forecast of 5.05% and 4.83% in March as a result of higher food prices. Industrial output came in below expectation at 0.1% y/y (Bloomberg: 2.5%) and weakened from 2.0% increase in March. COMMODITIES Oil prices stabilized on Thursday, though futures remained under pressure on signs of another storage build at the hub Friday, 13 May P a g e

3 Economic Indicators Date Time Indicators Month Actual Market Forecast Previous 11 May 1530 THB 1-Day Repo May % 1900 US MBA Mortgage Applications May % 12 May 0200 US Monthly Budget Statement Apr bn 1100 SK Bank Lending To Household Total KRW Apr trn 1200 MY Industrial Production y/y Mar % 1900 GBP Repo Rate May % 2030 US Import Price Index m/m Apr % 2030 US Import Price Index y/y Apr % 2030 US Initial Jobless Claims May k 2030 US Continuing Claims Apr k 13 May 1200 MY GDP q/q sa 1Q % 1200 MY GDP y/y 1Q % 1200 MY BoP Current Account Balance MYR 1Q bn 1300 SG Retail Sales y/y Mar % 1300 SG Retail Sales m/m sa Mar % 1530 TH Foreign Reserves USD May bn 1630 HK GDP q/q sa 1Q % 1630 HK GDP y/y 1Q % 1700 EZ GDP q/q 1Q P % 1700 EZ GDP y/y sa 1Q P % 2030 US Retail Sales Advance m/m Apr % 2030 US Retail Sales Ex Auto m/m Apr % 2030 US PPI Final Demand m/m Apr % 2030 US PPI Ex Food and Energy m/m Apr % 2030 US PPI Ex Food, Energy, Trade m/m Apr % 2030 US PPI Final Demand y/y Apr % 2030 US PPI Ex Food and Energy y/y Apr % 2030 US PPI Ex Food, Energy, Trade y/y Apr % 2200 US U. of Mich. Sentiment May P May 1330 CN Industrial Production y/y Apr - 6.8% 1330 CN Retail Sales y/y Apr % 16 May 1030 TH GDP q/q sa 1Q - 0.8% 1030 TH GDP y/y 1Q - 2.8% 2030 US Empire Manufacturing May MAHB Housing Market Index May May 0400 US Total Net TIC Flows USD Mar bn 0400 US Net Long-term TIC Flows USD Mar bn 1630 HK Unemployment Rate sa Apr - 3.4% 2030 US Housing Starts Apr k 2030 US Building Permits Apr k 2030 US CPI m/m Apr - 0.1% 2030 US CPI Ex Food and Energy m/m Apr - 0.1% 2030 US CPI Index nsa Apr US Real Avg Weekly Earnings y/y Apr - 1.1% 2115 US Industrial Production m/m Apr % 2115 US Capacity Utilization Apr % Friday, 13 May P a g e

4 18 May 0750 JP GDP q/q sa 1Q P % 0750 JP GDP Annualized q/q sa 1Q P % 0750 JP GDP Deflator y/y 1Q P % 0750 JP GDP Private Consumption q/q 1Q P % 1200 MY CPI y/y Apr - 2.6% 1630 UK Claimant Count Rate Apr - 2.1% 1630 UK Jobless Claims Change Apr - 6.7k 1630 UK ILO Unemployment Rate 3Mths Mar - 5.1% 1900 US MBA Mortgage Applications May May 0930 AU RBA FX Transactions Market Apr - 954mn 1000 PH GDP y/y 1Q - 6.3% 1000 PH GDP q/q sa 1Q - 2.0% 1530 TH Foreign Reserves May MYR O/N Policy Rate May % 2030 US Chicago Fed Nat Activity Index Apr US Initial Jobless Claims May US Continuing Claims May US Philadelphia Fed Business Outlook May US Leading Index Apr - 0.2% 20 May 1620 TW BoP Current Account Balance USD 1Q mn 2200 US Existing Home Sales Apr mn 23 May 0830 TW Unemployment Rate Apr % 1300 SG CPI m/m nsa Apr - 0.0% 1300 SG CPI Core y/y Apr - 0.6% 1300 SG CPI y/y Apr % 1600 TW Industrial Production y/y Apr % 2145 US Markit US Manufacturing PMI May P May 2200 US Richmond Fed Manufact. Index May US New Home sales Apr - 511k 25 May 1900 US MBA Mortgage Applications May US Advance Goods Trade Balance USD Apr bn 2145 US Markit US Services PMI May P US Markit US Composite PMI May P May 0900 CN Swift Global Payments CNY Apr % 1300 SG Industrial Production m/m sa Apr - 1.0% 1300 SG Industrial Production y/y Apr % 1630 HK Exports y/y Apr % 1630 HK Imports y/y Apr % 1630 HK Trade Balance Apr bn 1630 UK GDP q/q 1Q P - 0.4% 1630 UK GDP y/y 1Q P - 2.1% 2030 US Initial Jobless Claims May US Continuing Claims May US Durable Goods Orders Apr P - 0.8% 2030 US Durables Ex Transportation Apr P % 2200 US Pending Home Sales m/m Apr - 1.4% Friday, 13 May P a g e

5 Foreign Exchange Rates (as of 12 May 2016) FX Close Asian High Asian Low NY High NY Low EUR GBP AUD NZD JPY SGD MYR IDR THB PHP INR TWD KRW HKD CNY Stock Indices (as of 12 May 2016) Indices Closing % chg ytd % chg Dow Jones Industrial Average S&P NASDAQ Composite Tokyo Nikkei London FTSE Frankfurt DAX All Ordinaries FTSE Straits Times Index FTSE Bursa Malaysia KLCI Index Jakarta SE Composite Index Thailand SET Index Philippines SE PSEi Index Taiwan SE Weighted Index Korea SE KOSPI Index Hong Kong Hang Seng Index Shanghai SE Composite Index India Sensex 30 Index UOB s Estimation of SGD NEER (as of 13 May 2016) Assuming 2.0% on each side of the pivot point Lower-End Upper-End Mid-Point Interest Rates Rates Current Next CB Meet UOB s Forecast USD Fed Funds Rate % Jun % EUR Refinancing Rate 0.00% 02 Jun 0.00% GBP Repo Rate 0.50% 16 Jun 0.50% AUD Official Cash Rate 1.75% 07 Jun 1.75% NZD Official Cash Rate 2.25% 09 Jun 2.25% JPY Official Cash Rate % Jun % SGD 3-Mth SIBOR 1.00% - - MYR O/N Policy Rate 3.25% 19 May 3.25% IDR O/N Rate 6.75% 19 May 6.75% THB 1-Day Repo 1.50% 22 Jun 1.50% PHP O/N Reverse Repo 4.00% 12 May 4.00% INR Repo Rate 6.50% 07 Jun 6.50% TWD Discount Rate 1.50% 21 Jun 1.375% KRW Base Rate 1.50% 13 May 1.50% HKD Base Rate 0.50% % CNY 1-Yr Wking Capital 4.35% % Commodities (as of 12 May 2016) Commodities Closing % Chg NYMEX Crude (Jun) Comex Gold (Jun) Reuters CRB Index Bond Yields (as of 12 May 2016) Bond Yields Closing Net Chg US 2-Year Bond US 10-Year Bond JP 10-Year JGB EU 10-Year Bund UK 10-Year Long Gilt Market Holidays Country Date Event TH May 20 Wisaha Bucha Day UK May 30 Spring Bank Holiday US May 30 Memorial Day NZ June 06 Queen s Birthday SK June 06 Memorial Day CN/TW June Dragon Boat Festival AU June 13 Queen s Birthday MY June 22 Nuzul Al-quran TH July 01 Mid-year Holiday US July 04 Independence Day ID July Idul Fitri SG July 06 Hari Raya Puasa Disclaimer: This analysis is based on information available to the public. Although the information contained herein is believed to be reliable, UOB Group makes no representation as to the accuracy or completeness. Also, opinions and predictions contained herein reflect our opinion as of date of the analysis and are subject to change without notice. UOB Group may have positions in, and may effect transactions in, currencies and financial products mentioned herein. Prior to entering into any proposed transaction, without reliance upon UOB Group or its affiliates, the reader should determine, the economic risks and merits, as well as the legal, tax and accounting characterizations and consequences, of the transaction and that able to assume these risks. This document and its contents are proprietary information and products of UOB Group and may not be reproduced or otherwise. Singapore Company Reg No Z