Economic Update

Alan Tan Chew Leong T (603) 2146 7540 E alan.tan@affinhwang.com

Naomi Margaret Kasimir T (603) 2146 7532 E naomi.kasimir@affinhwang.com

Mas Aida Che Mansor T (603) 2146 7489 E aida.mansor@affinhwang.com

ASEAN Weekly Wrap

ASEAN PMI moved closer to stabilisation

Asean Manufacturing PMI recovered from 46.5 in July to 49.0 in August, but

remained below 50 for the sixth consecutive month

Global manufacturing PMI rose from 50.6 in July to 51.8 in August, a twenty

one month high

Indonesia’s headline inflation rate eased for the fifth straight month by 1.3%

yoy in August compared to 1.5% in July.

August manufacturing data potrays better yet subdued performance

After hitting a low of 30.7 in April, Asean’s Manufacturing PMI recovered further from

46.5 in July to 49 in August, with steady showing in Indonesia. However, Asean PMI

remained below the 50 level for the sixth consecutive month. The recovery in the

Asean PMI was not across the board, where only two out of seven countries

registered improvement i.e. Myanmar (53.2) and Indonesia (50.8), as both countries

exceeded the expansion 50 level. Meanwhile, manufacturing PMI in Malaysia

slowed to 49.3 in August, Thailand (49.7), Philippines (47.3), Vietnam (45.7) and

Singapore (43), where these countries continued to register a reading below 50. IHS

Markit also noted total the region’s new orders fell at its softest rate since March 2020

and moving closer to near stabilisation in August. This was consistent with the

recovery of the global manufacturing sector, as global manufacturing PMI rose from

50.6 in July to 51.8 in August, a twenty one month high, with further improvement in

China, US, Germany, UK, India and Brazil. China’s Caixin General Manufacturing

PMI returned to an expansion of 53.1 in August (52.8 in July), its fastest pace

expansion since January 2011, with increases in both output and new orders during

the month. As both US and China are major trading partners for Asean, as global

manufacturing sector recovers, we also expect Asean’s PMI to continue to improve

in the months ahead.

Meanwhile, Indonesia’s headline inflation moderated for the fifth straight month by

1.3% yoy in August compared to 1.5% in July, due to lower costs of food, beverage

and tobacco as well as sustained contraction in costs of transportation and

information, communication and financial service. Similarly, core-inflation eased to

2% yoy from 2.1% in July. Going forward, we believe weak domestic demand may

continue to weigh on inflation despite some easing of containment measures.

However, despite the government’s effort to continue to accelerate disbursement of

stimulus measures, with inflation trending towards Bank Indonesia’s (BI) inflation

target range of 2-4% level, we believe there is a possibility for BI to lower rates further

to support growth, especially if economic recovery is slower than anticipated. BI has

cut the benchmark interest rate four times this year (100bps) to 4%. Nevertheless,

BI will continue to maintain price stability and strengthen policy coordination.

In Thailand, the headline inflation rate declined for the sixth straight month by 0.5%

yoy in August (-1% in July), which was below Bank of Thailand’s (BOT) inflation rate

target range of 1-3% for 2020. Moving ahead, headline inflation will likely remain low

due to weak demand as well as low global oil prices. In terms of monetary policy, we

expect BOT to leave its policy rate unchanged after lowering it five times this year by

a total of 125 basis points to an all-time low of 0.5% in order to support the economy.

Fig 1: ASEAN economic releases (28 August – 3 September 2020)

NOV DEC JAN FEB MAR APR MAY JUN JUL AUG 2019 2019 2020 2020 2020 2020 2020 2020 2020 2020

PMI manufacturing (Index) Asean 49.2 49.7 49.8 50.2 43.4 30.7 35.5 43.7 46.5 49.0 Indonesia 48.2 49.5 49.3 51.9 45.3 27.5 28.6 39.1 46.9 50.8 Malaysia 49.5 50.0 48.8 48.5 48.4 31.3 45.6 51.0 50.0 49.3 Philippines 51.4 51.7 52.1 52.3 39.7 31.6 40.1 49.7 48.4 47.3 Thailand 49.3 50.1 49.9 49.5 46.7 36.8 41.6 43.5 45.9 49.7 Singapore 50.4 51.0 51.4 47.0 33.3 28.1 27.1 43.2 45.6 43.0 CPI (%yoy)

Indonesia 2.7 2.6 2.7 3.0 3.0 2.7 2.2 2.0 1.5 1.3 Thailand 0.2 0.9 1.1 0.7 -0.5 -3.0 -3.4 -1.6 -1.0 -0.5

Source: All data from IMF, Bloomberg and CEIC, consensus from Bloomberg

4 September 2020

“With better global PMI performance, we expect Asean manufacturing sector will likely improve further”

2

Appendix I: ASEAN economic charts (28 August – 3 September 2020)

Source: All data for charts sourced from CEIC

Chart 1: ASEAN PMI Chart 2: ASEAN countries PMI

Chart 3: Indonesia’s headline inflation vs core-inflation Chart 4: Indonesia policy rate

Chart 5: Thailand’s policy rate Chart 6: Thailand’s CPI

30

35

40

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-18

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-19

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%yoyHeadline inflation Core inflation

3.0

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% pa

-4

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0%yoy

3

Appendix II: Monthly ASEAN economic data trend

SEP 2019

OCT 2019

NOV 2019

DEC 2019

JAN 2020

FEB 2020

MAR 2020

APR 2020

MAY 2020

JUN 2020

JUL 2020

AUG 2020

MALAYSIA

CPI (%yoy) 1.1 1.1 0.9 1.0 1.6 1.3 -0.2 -2.9 -2.9 -1.9 -1.3 -

Core CPI (%yoy) 1.5 1.4 1.4 1.4 1.6 1.3 1.3 1.3 1.1 1.2 1.1 -

IPI (%yoy) 1.5 0.1 2.1 1.3 0.6 6.2 -4.9 -32.0 -21.6 -0.4 - -

Exports (%yoy) -6.1 -6.4 -5.4 2.8 -2.6 10.0 -6.5 -24.9 -26.0 8.0 3.1 -

Imports (%yoy) 2.4 -8.7 -3.6 1.0 -2.5 11.3 -2.7 -8.0 -30.4 -5.6 -8.7 -

Trade balance (US$bn) 2.0 4.1 1.6 3.0 3.0 3.0 2.9 -0.8 2.4 4.9 5.9 -

Foreign reserves (US$bn) 103.0 103.2 103.2 103.6 104.2 103.4 101.7 102.5 102.9 103.4 104.2 -

INDONESIA

CPI (%yoy) 3.1 2.9 2.7 2.6 2.7 3.0 3.0 2.7 2.2 2.0 1.5 1.3

Core CPI (%yoy) 3.3 3.2 3.1 3.0 2.9 2.8 2.9 2.8 2.6 2.3 2.1 2.0

Exports (%yoy) -5.9 -6.5 -6.1 1.0 -2.8 9.9 -2.6 -6.9 -29.1 2.1 -10.1 -

Imports (%yoy) -2.4 -16.5 -9.2 -5.6 -4.9 -7.4 -2.9 -18.6 -42.2 -6.4 -32.6 -

Trade balance (US$bn) -0.2 0.1 -1.4 -0.1 -0.6 2.5 0.7 -0.4 2.0 1.2 3.2 -

Foreign reserves (US$bn) 124.3 126.7 126.6 129.2 131.7 130.4 121.0 127.9 130.5 131.7 135.1 -

PHILIPPINES

CPI (%yoy) 0.9 0.8 1.3 2.5 2.9 2.6 2.5 2.2 2.1 2.5 2.7 -

IPI (%yoy) -6.5 -5.8 -7.2 -6.8 -1.4 2.2 -12.0 -41.2 -31.2 -22.5 3.3 -

Exports (%yoy) 0.4 0.5 -0.2 21.6 9.4 2.8 -24.7 -49.9 -26.9 -13.3 - -

Imports (%yoy) -5.8 -7.6 -4.5 -2.1 -2.8 -11.6 -26.2 -65.3 -40.6 -24.5 - -

Trade balance (US$bn) -3.4 -3.6 -3.7 -3.0 -3.5 -1.7 -2.4 -0.4 -1.3 -1.3 - -

Foreign reserves (US$bn) 85.6 85.8 86.2 87.8 86.9 88.2 88.8 90.9 93.3 93.5 98.0 -

SINGAPORE

CPI (%yoy) 0.4 0.5 0.6 0.8 0.8 0.3 0.0 -0.7 -0.8 -0.5 -0.4 -

IPI (%yoy) -1.4 3.9 -12.3 -3.7 3.4 -1.0 21.0 11.8 -8.2 -6.5 -8.4 -

Non-oil domestic exports (%yoy) -8.1 -12.5 -5.9 2.4 -3.3 3.0 16.6 9.7 -4.6 13.9 6.0 -

Electronic exports -24.8 -16.4 -23.3 -21.3 -13.0 2.5 5.8 -0.6 12.4 22.2 2.8 -

Imports (%yoy) -4.8 -10.3 -5.8 -2.3 -0.9 9.4 0.2 -13.1 -26.2 -9.9 -9.9 -

Trade balance (US$bn) 2.9 3.3 2.4 2.6 0.7 1.0 2.4 1.8 2.8 3.3 2.8 -

Foreign reserves (US$bn) 272.2 276.8 276.0 279.5 278.6 283.0 279.1 301.8 301.0 312.5 321.4 -

THAILAND

CPI (%yoy) 0.3 0.1 0.2 0.9 1.1 0.7 -0.5 -3.0 -3.4 -1.6 -1.0 -0.5

Core CPI (%yoy) 0.4 0.4 0.5 0.5 0.5 0.6 0.5 0.4 0.0 0.0 0.4 0.3

IPI (%yoy) -5.0 -8.0 -8.0 -4.4 -4.0 -4.2 -10.5 -18.2 -23.8 -17.8 -14.7 -

Exports (%yoy) -1.7 -4.5 -7.4 -1.2 3.3 -4.5 4.2 2.1 -22.5 -23.2 -11.4 -

Imports (%yoy) -4.6 -7.7 -14.0 1.9 -7.9 -4.3 7.2 -17.2 -34.4 -18.1 -26.4 -

Trade balance (US$bn) 1.3 0.5 0.6 0.7 -1.6 3.9 1.6 2.5 2.7 1.6 3.3 -

Foreign reserves (US$bn) 220.5 222.8 221.0 224.3 230.3 229.5 226.5 235.7 237.2 241.6 250.4 -

REAL GDP (%yoy) 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

MALAYSIA 6.1 5.8 5.2 4.7 4.4 4.8 4.5 4.8 4.4 3.6 0.7 -17.1

INDONESIA 5.1 5.2 5.1 5.3 5.2 5.2 5.1 5.1 5.0 5.0 3.0 -5.3

PHILIPPINES 7.5 6.6 6.5 6.4 6.1 6.4 5.7 5.4 6.3 6.7 -0.2 -16.5

SINGAPORE 5.1 4.5 4.8 4.9 3.0 1.3 1.0 0.2 0.7 1.0 -0.3 -13.2

THAILAND 4.4 4.0 5.0 4.6 3.2 3.8 2.9 2.4 2.6 1.5 -1.8 -12.2 Source: Bloomberg, CEIC

4

Appendix III: ASEAN Economic Calendar for September 2020

September 2020

Monday Tuesday Wednesday Thursday Friday

1 2 3 4

MY Aug. Markit PMI SG Aug. Markit PMI MY Aug. 28 Reserves

ID Aug. Markit PMI PH Aug. CPI

ID Aug. CPI SG Jul. Retail Sales

PH Aug. Markit PMI TH Aug.28 Reserves

TH Aug. Markit PMI

7 8 9 10 11

ID Aug. Reserves MY MPC Meeting MY Jul. IPI

PH Aug. Reserves PH Jul. Trade TH Sep.4 Reserves

SG Aug. Reserves

TH Aug. CPI

14 15 16 17 18

ID Aug. Trade ID MPC Meeting

SG Aug. NODX

21 22 23 24 25

MY Aug. CPI SG Aug. IPI

SG Aug. CPI TH Sep.18 Reserves

TH Aug. Trade

TH MPC Meeting

28 29 30

MY Aug. Trade TH Aug. Trade

ID=Indonesia, MY=Malaysia, PH=Philippines, SG=Singapore, TH=Thailand Dates for indicators are subject to change

Source: Bloomberg

5

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