PBoC holding back?
Local Rates: Is the PBoC losing its appetite for rate hikes? We like CNY steepeners.
FX: USD-Asia has already sold off. We like relative plays such as long INR-KRW.
Economics: Bank Indonesia and Bank of Korea announce rate decisions on Thursday and Friday respectively. We look for no change by BI and a rate hike by the BoK.
Week ahead
The main highlights in Asia this week are two central bank meetings – Bank Indonesia on Thursday and the Bank of Korea on Friday.
Week in review
Trade data for Thailand, Korea and Indonesia remained strong last week. China’s PMI for May only eased moderately. Asian activity data still compares favourably with developments elsewhere, notably the US.
Risk environment
Foreign equity outflows abated over the past week. Optimism over a second Greek bailout package combined with no imminent Fed tightening outweighed concerns over slowing US growth.
Asian local rates
We like Korean and Chinese steepeners.
Asian FX
Relative plays make sense to us. We like long INR-KRW. For those with a longer time horizon, now is a good time to hedge CNY risk, with the NDF market only pricing in 1.9% appreciation over 12 months.
Commerzbank Corporates & Markets
Emerging Markets