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Region – podcast
A discussion with IRF about my views on the region
Paul Cavey
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East Asia Today
A lot on China today, with the release of the main official economic indicators for April, Friday's BOP data for Q1, and today's fx settlement figures. Also, an update on the implications for Taiwan of Trump's interview to Fox news following his summit with Xi Jinping.
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Taiwan – Trump shifts position
My initial interpretation of the Xi-Trump meeting looks wrong. While in the official talks neither side gave much, in a subsequent interview with Fox news, President Trump softened US support for Taiwan. Over the medium-term, that could be significant for politics in Taiwan, and currency valuations.
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China – cycle weaker in April
Most of the headline activity data in April weakened, with goods retail sales being particularly bad. So, clearly no macro recovery. But services retail sales picked up, and the stability in home sales and household liquidity preference, and firmer pricing, continue to suggest broad stabilisation.
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Last week, next week
The main regional themes weren't challenged by events last week: macro stabilisation in China; upside risks to inflation, particularly in Japan; and upside risks to growth, a theme for both Taiwan and Korea as long as the energy crisis in the Middle East doesn't derail the semiconductor super cycle.
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East Asia Today
Highlights of a longer note exploring why China's imports have suddenly picked up so sharply. Also, some analysis of trade price data for Korea and Japan: import prices in both are rising fast, but it is export prices increasing at record-breaking rates. Finally, yesterday's monetary data in China.
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Region – import prices up, export prices up more
Data today for Japan and Korea show the inflationary impact of the War, with import prices in both economies rising at double-digit rates. However, such rises have been seen before. By contrast, export price inflation is setting records, offsetting the hit from energy prices to domestic growth.
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China – why are imports so strong?
The big trade story this year is the sudden rise in imports. There are some signs of firmer domestic demand. But 80% of the increase is from two categories alone: precious metals and semiconductors. And most of the semi strength is volumes, which is puzzling when global IC prices are rising so much.
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East Asia Today
A quick review of inflation trends in China, with the release today of upstream price data for the first 20 days of May. Also, highlights of the speech by BOJ policy board member Masu Kazuyuki.
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East Asia Today
A longer piece on how the impact of pricier energy imports is being offset by big increases in electronics export prices. Today's data releases showed competing cycle indicators in Japan: strong bank lending versus a weak EW survey. Some contradictions also in Korea, with low UE, but soft wages too.
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Region – the other terms of trade shock
The Iran War will push up inflation. But for growth, transmission is via the terms of trade, and higher import prices are being offset by historical rises in export prices, increases that are unlikely to be just cyclical. That supports growth in Asia, at the expense of even more inflation for ROW.
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East Asia Today
Signs of less loosening in China, in both the PBC monetary policy report for Q126, and the April release of the central bank's liquidity operations. In Japan, the summary of the April MPC show more pressure to tighten. Consumption data for March and trade data for early April were stable.
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East Asia Today
China CPI and PPI data for April showed a further strengthening of inflation. Korea's trade data for the first 10 days of May indicate no slowdown in semi exports (or rise in energy imports). Data for Taiwan through March point to a slowdown in wage growth in recent months.
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China – inflation up again
PPI inflation accelerated again in April, and with CPI inflation firm, the GDP deflator is on track to rise in Q2 for the first time in 2022. The turn is being led by energy and commodity prices. There are some signs of a stabilisation in underlying prices too, but so far, they are tentative.
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Last week, next week
Stabilisation in China seems to be becoming a more popular view. Hope is building for a BOJ hike in June, but one won't be enough. KRW should be strengthening, but likey needs more Middle East certainty. The big event for the region this week is the Xi-Trump meeting.
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China – imports strong again
After doing nothing for 3 years, imports are suddenly growing 20%. Chips are one component, but while I thought that related to prices, official data show the bigger diver of overall imports is volumes. I am not sure that's because of domestic demand, but it is starting to reduce the trade surplus.
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East Asia Today
Korea March data finally showed a fall in offshore buying by residents, only to be replaced by domestic selling by foreigners. Taiwan's April trade data show limited Iran impact. Japan wage growth in March was strong, but only at the headline level. And my latest video, on why Taiwan macro matters.
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Taiwan – limited impact yet
April trade data show little damage from the Iran war. If the crisis remains limited to energy prices, Taiwan should be somewhat insulated. Energy imports are small relative to chip exports, and while import prices will rise, export prices are now also increasing for the first time in a generation.
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Taiwan – why macro matters
Latest video, discussing one of my main themes: that Taiwan macro is more relevant for global investors than it has been for a long time.
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Korea – from foreign buying to foreigner selling
March data offer more evidence that the KRW just can't get a break. Finally, retail outflows into foreign assets eased, only to be replaced by huge domestic selling by overseas investors. That has normalised in April, so perhaps investors are realising that a CA surplus of 20%+ of GDP should matter
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East Asia Today
Highlights of longer notes on the regional outlook, and growth trends in Korea. Also, a summary of today's inflation data in Taiwan, where import prices are rising, but export prices are too. Finally, high-frequency upstream price data in China, and the April monetary base update in Japan.
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Korea – semi still offsetting energy
The BOK's current forecast assumes no GDP growth in the rest of the year, and contracting exports. But export growth still looks to be picking up, capex indicators are improving, and there is a tailwind from growth in real Gross Domestic Income in Q1 being faster than any time since the 1990s.
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Region – slide pack
With the full consequences of the Iran War yet to be felt, the outlook remains uncertain. But so far, upside risks to inflation in the region are dominating the downside risks to growth. The big driver is the semiconductor cycle. The pack starts with regional themes, then 15 charts for each economy.
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East Asia Today
The S&P/RatingDog PMI suggests China's services sector is doing much better than is indicated by the official version. Korean CPI data for April today showed the impact of the energy price spike has so far been modest. Taiwan's fx reserves last month bounced after the fall in March.
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Korea - services inflation still firm
Dearer oil boosted pump prices and so headline CPI in April, but also airline fares and so services inflation. That is another reason to think that personal services inflation of near 4% YoY isn't a true reflection of underlying prices. But it will still matter for the BOK if the chip cycle holds up