It is likely to be a quiet week ahead as Indonesia will be out for the whole of this week, Malaysia Wed to Thu, and Singapore and India on Wed.

 

Quiet Week Ahead

      It is likely to be a quiet week ahead as Indonesia will be out for the whole of this week, Malaysia Wed to Thu, and Singapore and India on Wed. The US is off for Independence Day on Mon. This means that liquidity in ASEAN is likely to be poor and we could see FX swings as a result. The impact of Brexit has temporarily faded into the background as government and central bank measures are expected to be introduced in mitigation. Already hints by BOE of monetary easing measure and the British government’s move towards expansionary fiscal measures have calmed the markets. This has helped to reverse the fund outflow seen earlier. The return of foreign investors into emerging markets including ASEAN should help to keep the Asians supported ahead.

      USDAXJs should move broadly lower for now. However, key risk event ahead is the US NFP for Jun. A strong NFP together better wage data could spur some USD demand and weigh on the Asians. This could put an end to the slide the USDAXJs have enjoyed to date. As mentioned earlier, this week would be quiet as onshore Indonesian market is closed, so we look for opportunities to sell the one-month USDIDR in the offshore market towards 13360 (SL above 200DMA at 13650) with first objective at 12850 and the second at 12450. Our regression analysis of the tax amnesty bill showed that if some of the USD200bn of undeclared Indonesian funds managed in Singapore flows back to Indonesia, the SGDIDR could fall to 9497 and 9700 as a result.  

      After the US NFP print this Fri, we will be looking out for the advanced estimates of Singapore’s 2Q GDP which is due sometime 7-14 Jul. The week after will see BoK and BNM meet to decide on monetary policy. The BoK (14 Jul) is expected to stand pat on policy (at 1.25%) after cut the rate by 25bp in Jun. As for the BNM (13 Jul), our house view is for a possible cut in the SRR (now at 3.5%) rather than an OPR cut. However, there is a rising likelihood that the BNM might move to reduce the rate by 25bp to 3.0%, coupled with a dovish statement.