Paul Cavey

Taiwan – first to cut?

The industrial cycle is slowing, consumer confidence is weak, and a modest rise in inflation has likely peaked. Given all that, Taiwan is well-placed to be the first regional economy to cut rates. The risks are yet more aggressive Fed hikes, or a powerful economic turnaround in China.

Korea – core CPI still high

Core inflation remains elevated, but the BOK is signalling it is near done with hiking. That's because of the deterioration in activity. That slowing of growth is sharp enough to make cutting a possibility, though the BOK likely needs to first see a fall in employment.

Korea – exports drop again

China – weaker again

The PMIs suggest renewed weakening of the economy in November. That perhaps explains the accelerated pace of property easing. That loosening is an important development, but as long as China remains mired in covid difficulties, the outlook for the economy will remain very difficult.

China – third time...unlucky?

The population is starting to chafe against lockdowns, but isn't prepared for opening. The compromise path forward is rising covid cases signalling more eventual openness, but lockdowns continuing to be used to try to slow the spread of the virus. That's a very messy path for financial markets.

Korea - BOK still hawkish

Korea – cutting on the agenda

The business sentiment survey is suggesting a deterioration in activity, and a fall in inflation. The survey hasn't yet fallen into cutting territory for the BOK, but likely will in Q123. That will become a more important message for the central bank if the labour market also starts to slacken.

Korea – the case for a pivot

Taiwan - US orders fall

Korea – DM exports holding up

Japan – some help from autos

China - no liquidity flood

China – property prices falling

Japan - sluggish

In Q3, the economy contracted. Leading indicators suggests that this is noise, and that a mild rate of growth should resume. But corporate sentiment remains unstable, and consumers continue to feel the pressure of rising prices.

China – a soft floor

China – Beijing blinks again

China - credit better than the headlines

The monetary data aren't bullish, but are more constructive than the headlines suggest. That's because credit growth outside of government borrowing is rising. This keeps alive the possibility that China is through the worst, though such an interpretation is a stretch as long as M1 growth is weak.

China – is that it for deflation?

In October, headline PPI fell back into deflation, and CPI inflation eased quite sharply too. But there are signs that China is nearer the end of this deflation shock than the beginning.

Korea - labour market turning

It isn't enough yet, but there are signs that the labour market is starting to cool. The unemployment rate remains low, but employment was more or less unchanged in October for the fifth consecutive month. The risks for the BOK are shifting.

Taiwan – cycle slowing, CPI stable

Japan – inflation overhang

China – taking stock

China - export growth stops

YoY export growth fell to zero in October. More downside is ahead, though surging car shipments suggest autos might buck this trend. Import demand is also slowing. It should contract aggressively in the next 6M, though that looks pessimistic given commodity prices and imports in the PMI.

The East Asia Economist

The 1997 double play isn't yet at work, and the HKD doesn't look as over-valued as then. But Hong Kong does now face a double whammy of Fed tightening and zero covid. With maintenance of the peg ultimately being a political decision, the question is how much economic pain the authorities can take.

China - modest net outflows