Economics. Uncertainty rules. Capital Nomura Securities Public Company Limited Investment Research and Investor Services

Transcription

1 Connecting Markets East & West Economics Uncertainty rules Capital Nomura Securities Public Company Limited Investment Research and Investor Services Nuchjarin Panarode ( ) 19 January 2019 Nomura

2 Executive Summary Global: Uncertainty rules US: Transitioning to slower growth Euro area: Downside materialising UK: Another fine mess Japan: Closing window of opportunity China: After winter comes the spring Asia: The Phoenix rising from the ashes Thailand: One and done Capital Nomura Securities Public Company Limited Economics - 1

3 Global : Synchronised slowing down Source : Nomura, Global Annual Economic Outlook : Uncertainty Rules ( 12 December 2018) ; Japan Economic Weekly: Events in 2019 ( 30 November 2018) Capital Nomura Securities Public Company Limited Economics - 2

4 Global : Uncertainty rules China-US trade war and peace/ Brexit Mounting headwinds for global growth in 2019 to leave policymakers even more data dependent. Source : Nomura,. Global Economic Outlook Monthly : Global growth forecast downgraded ( 15 January 2019) Note : EEMEA = Czech Republic, Hungary, Poland, Romania, South Africa, Turkey, Russia Israel and Egypt Capital Nomura Securities Public Company Limited Economics - 3

5 FX : Dollar in Yield vs deficits 2019 should see a renewed focus on growing US current account and budget deficits, yields not being high enough to compensate for these risks, a reconvergence of US and rest of the world growth and capital repatriation by other countries. Source : Nomura,. FX Insights/ Dollar in 2019: Yield vs deficits (3 December 2018); FX portfolio update (3 January and 17 January 2018) Capital Nomura Securities Public Company Limited Economics - 4

6 US : Transitioning to slower growth Waning fiscal stimulus, tighter monetary policy and increased supply constraints will slow growth over 2019 and into We expect two hikes in 2019 but the timing is uncertain as decision become more data-dependent. Risk : Trade policy uncertainty; a sharp deterioration in financial conditions Source : Nomura, Global Economic Outlook Monthly : Global growth forecast downgraded (15 January 2019) ; Capital Nomura Securities Public Company Limited Economics - 5

7 US: Waning fiscal policy Source : Nomura, Economics Insights /US : Upcoming Fiscal Deadlines and Their Implication (9 November 2018) Nomura, Global Annual Economic Outlook : Uncertainty rules (12 December 2018) Capital Nomura Securities Public Company Limited Economics - 6

8 Euro Area : Downside materialising While we see some recovery in economic growth back to trend, it should remain well below 2017 rates. We see core inflation rising gradually thanks to capacity pressures, but headline rates should fall due to lower oil prices. We expect the ECB to start raising interest rates in September 2019, though recent data outturns raise the risk of delay. Source : Nomura, Global Annual Economic Outlook : Uncertainty rules (12 December 2018) ; Nomura, European Perspectives : ECB Preview and Presidential race (7 December 2018) Capital Nomura Securities Public Company Limited Economics - 7

9 Euro Area: The big four Germany is at risk from slowing global growth. Further French reforms could prove tricky. The Italian recession could widen the fiscal deficit. A snap election is a risk in Spain Capital Nomura Securities Public Company Limited Economics - 8

10 UK : Another fine mess The rejection in parliament of May s Brexit deal raises the risk of both a no-deal outcome but also of remaining in the EU. Bank of England and Treasury : A disorderly no deal/ no transition outcome would mean GDP close to 8% lower in five year times, inflation peaking at 6.5% and Bank Rate (mechanically) rising to 5.5% Source : Nomura, Global Annual Economic Outlook : Uncertainty rules (12 December 2018) ; Nomura, UK Perspectives: Probability rising of Referendum 2.0 (7 December 2018) Capital Nomura Securities Public Company Limited Economics - 9

11 Brexit : Tail risk scenario Source : Nomura, UK Perspectives : No sense of an ending ( 17 January 2019) ; Anchor Report : The Brexit Guide for 2019 ( 8 January 2019) Capital Nomura Securities Public Company Limited Economics - 10

12 Japan : Brace for downside risks The recovery in economic activity is still rolling on, but the growth momentum is likely to weaken. We expect core CPI inflation to remain below the targeted 2% level as it turns into deceleration in As inflation momentum subsides, the likelihood that the Bank of Japan will normalize monetary policy has fallen sharply. Risk : Renewed yen appreciation caused by concerns over a global recession and US protectionism Source : Nomura,. Global Economic Outlook Monthly : Global growth forecast downgraded *12 December 2018) Capital Nomura Securities Public Company Limited Economics - 11

13 Asia : A story of two halves Nomura expect Asia to soon enter the third and final wave of a bear market a credit crunch, as an accelerated growth slowdown interacts with property market corrections. An economic recovery in H will be Emerging Asia s time to shine, with a widening growth differential over slowing advanced economies in We are more downbeat on China, India and Malaysia, and more upbeat on Indonesia and the Philippines. Source : Nomura, Asia in 2019: Always darkest before the dawn (10 December 2018) Capital Nomura Securities Public Company Limited Economics - 12

14 Asia : Always darkest before the dawn Source : Nomura, Asia in 2019: Always darkest before the dawn (10 December 2018) Capital Nomura Securities Public Company Limited Economics - 13

15 China: After winter comes the spring Economic growth to bottom in Q2. More policy stimulus/easing measures could be rolled out by then, which should help underpin a rebound in growth in H2 Source : Nomura, Global Economic Outlook Mohthly (15 January 2019) Capital Nomura Securities Public Company Limited Economics - 14

16 Asia : The Phoenix rising from the ashes Source : Nomura, Asia in 2019: Always darkest before the dawn (10 December 2018) Capital Nomura Securities Public Company Limited Economics - 15

17 Asia : Fiscal stance to support growth Source : Nomura, Asia Economic Monthly : The widening growth gulf in Asia (10 December 2018) Capital Nomura Securities Public Company Limited Economics - 16

18 Asia : Interest rate hiking cycle is over Source : Nomura, Asia Economic Monthly : The widening growth gulf in Asia (10 December 2018) Capital Nomura Securities Public Company Limited Economics - 17

19 Thailand: Q3 GDP growth decelerated to 3.3%y-o-y (Q2 :4.6%) Source : NESDB Capital Nomura Securities Public Company Limited Economics - 18

20 Thailand : Favorable domestic expansion Source :Nomura, Asia Insights/Thailand : Rising risks of below-target inflation in 2019 (2 January 2019) ; The Bank of Thailand Capital Nomura Securities Public Company Limited Economics - 19

21 Thailand : Favorable domestic expansion Source :The Bank of Thailand Capital Nomura Securities Public Company Limited Economics - 20

22 Thailand : One and done We expect the GDP growth of 4.3% in 2018 before slowing down to 3.7% in We expect the BOT to keep policy unchanged in in the light of slower growth and low inflation. Risks: A worsening global economic outlook and renewed political uncertainty. Source : Nomura,. Global Economic Outlook Monthly : Global growth forecast downgraded (15 Janauary 2019) Capital Nomura Securities Public Company Limited Economics - 21

23 Thailand forecast : BoT vs. NESDC The Bank of Thailand ( as of 19 Dec 18) NESDB ( as of 19 Nov 18) Source : The Bank of Thailand ; NESDB Capital Nomura Securities Public Company Limited Economics - 22

24 ANALYST CERTIFICATION FOR REGULATION I, Nuchjarin Panarode, a research analyst employed by Capital Nomura Securities, hereby certify that all of the views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views that I have expressed in this research report, nor is it tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or by any other Nomura Group company or affiliate thereof. Explanation of CNS rating system for Thailand companies under coverage published from 2 March 2009: Stocks: Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price) / Current Price, subject to limited management discretion. 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