Noble Apex eNewsletter Issue 794-The “Wintertime” For Asian Exports Could Last Into Summer

2019-02-04 04:37
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4 Feb 2019 Issue 794

Global Market Commentary


  • US: The Sino-US trade negotiations in Washington ended. Trump said that the China and the United States might reach a deal at the end of February during his meeting with Xi Jinping. For the entire week, the Dow rose by 1.32% to 25,063.89. The S&P 500 index rose by 1.57% to 2,706.53. The Nasdaq rose by 1.38 % to 7,263.87.
  • Europe: The United Kingdom asked the EU to renegotiate the Brexit agreement, but the EU may not be willing to do so. However, The EU may consider to postpone the Brexit date. Over the week, the UK’s FTSE 100 index rose by 3.10 %, the German DAX index fell by 0.90 %, and the French CAC40 index rose by 1.90 %. The STOXX 600 index rose by 0.52% to 359.71.
  • Asia: The Purchasing Managers’ Index (PMI) shows that factory production activity is shrinking in most Asian countries. The deputy governor of the Bank of Japan said that if the US Federal Reserve policy helps to maintain the US economy, it will also benefit the Japanese economy. Over the week, the Nikkei 225 index rose by 0.07 % to 20,788.39points. The MSCI Asia Pacific Index rose by 0.90 % to 156.25.


  • US: The Fed kept the interest rates unchanged, meeting market expectations. It released a stronger dovish signals, promising it would be “patient” in lifting borrowing costs further this year. For the whole week, the US 10-year bond yield fell by 7 basis points to 2.686%.
  • Europe: President of the European Central Bank Draghi said that although the euro zone economy was worse than the expectation, it was not necessary to take further monetary policy stimulus measures. For the whole week, the German 10-year bond yield fell by 3 basis points to 0.165%.


  • Oil: Crude oil production in the Organization of Petroleum Exporting Countries (OPEC) hit 2-year low in January, as the main exporter Saudi Arabia over-delivered on the group’s supply-cutting pact. Over the week, New York oil futures rose by 2.92% to close at $55.26 a barrel.


  • US dollar: The non-farm payroll numbers in January was increased by 304,000, the most in almost a year. Meanwhile, US consumer confidence fell to a new 18-month low during the government shutdown. For the whole week, the Dollar Index fell by 0.224% to 95.579.
  • China: The manufacturing situation improved slightly. The manufacturing PMI rose to 49.5 in January from 49.4 in the previous month, but it is still below the 50%. For the whole week, the yuan rose by 0.422% against the US dollar at 6.735.


Economic-related News

  • US: Federal Reserve Chairman Powell said that political factors will not be considered in monetary decision-making. The shutdown of US government should have limited impact on the economy, and the economic growth rate in the second quarter will be recovered.
  • US: U.S. Treasury Secretary Nuchin said that if China makes enough concessions on trade, the US may seek to cancel all tariffs.
  • US: US prosecutors filed criminal charges against Huawei, alleging that the company had stolen the trade secrets of T-Mobile USA Inc. and accused Huawei and its chief financial officer, Meng Xizhou, of having transactions with Iran.
  • US: The US Congressional Budget Office expects that the budget deficit will expand further in the next few years, and economic growth will slow down, predicting that the growth rate would be below the growth target of the Trump administration of 3%.
  • Euro-zone: The European Commission said that eight banks were suspected of collusion in purchasing and trading European government bonds in the period of 2007 to 2012.
  • Euro-zone: The British Bankers Association (BBA) announced that after seasonal adjustments, the UK’s residential mortgage loan volume fell for two months last December, recording nearly 38,800, which was expected by the market.
  • Euro-zone: The UK’s retail sales balance came in at zero in January, missing the consensus of +2 but beating -13 in the previous month, reported the Confederation of British Industry (CBI).
  • Japan: The Japanese Cabinet Office announced that Japan’s household consumer confidence index fell from 42.7 to 41.9 in January 2019, which is lower than market expectations of 42.4.
  • Japan: Japan’s top foreign exchange official, Asakawa Asa, hinted that Japan would oppose the inclusion of monetary terms in any trade agreement with the United States.
  • Japan: According to the data from the Bank of Japan, the growth of Japan’s corporate service price index was slowed down slightly to 1.1% in December, lower than the market expectation, 1.2%.


China Market Commentary
Economic-related news
• China Securities Regulatory Commission announced that the Shanghai and Shenzhen Stock Exchanges are revising the details of the margin financing and securities lending, and intend to cancel the uniform limit of the “closing position” of no less than 130%, allowing the security companies and customer to negotiate on the minimum maintenance guarantee ratio independently.
• On the occasion of Sino-US trade talks, the Standing Committee of the National People’s Congress completed the second trial of the Foreign Investment Law draft, which aims to protect the intellectual property rights of foreign investors and prohibit compulsory technology transfer.

The “Wintertime” For Asian Exports Could Last Into Summer

On the occasion of Sino-US trade talks, the Standing Committee of the National People’s Congress completed the second trial of the Foreign Investment Law draft, which aims to protect the Since the beginning of January 2019, the Asia’s exporters start to feel pain of falling export growth on the back of supply-chain disturbances triggered by U.S.-China trade war and a cyclical slowdown in the global economy, in particular China, which hit the trade-reliant region. South Korea was the first to set an alarm to the region which reported negative export growth in two consecutive months as January export further slipped by -5.8% YoY after a -1.3% decline in December last year. The negative growth was a surprise to the market, especially semiconductor export in January plunged by -23.3%, which looks worrisome for the already cooling technology sector.

South Korea publishes trade data earliest globally and its export growth has a high correlation to the export growth of other Asian economies, with recent data show that except for Malaysia, the key major Asia countries showed either slowing or negative growth for their latest export numbers (figure 1). However, this weakening momentum may go for another 2-3 months as there is still no early signs that neither the Chinese nor global economy is recovering soon. Lacklustre global demand is affecting the merchandise exports of China, and in return hurting Asia’s exporters as China has been a major importer of primary goods in the region. On the other hand, China’s slowdown has led to falling domestic consumption growth and as a result, countries like Japan, Korea and Taiwan are seeing deteriorating export of consumer products to China in recent months. The Nomura’s Export Leading Index is suggesting that Asian aggregate exports for 10 countries* in February will remain negative, and in fact it could be even worse as the impacts of “front-loading” exports from China to U.S. due to the potential tariff may be more significant that many expected.

Figure 1. Asian exports declined sharply in latest figure.

Source: Bloomberg, iFund/Noble Apex

Figure 2. Asia ex-Japan’s total export growth decline to negative when it fall below 61

Source: Bloomberg, iFund/Noble Apex

Despite weakening export growth in the region, Asian stocks markets have rebounded strongly by +6.8% since the beginning of January as markets start factoring a recovery of exports from 2H18 amid some positive news-flow related to US-China trade negotiation. However, we are cautions on the current rebound as the sustainability of export recovery is questionable, if any in our view. Besides, history has proved that South Korea exports are a good leading indicator of global corporate earnings, meaning that global EPS growth may fall to low-single digit or even negative in the next 6-12 months, which is much lower than the 6% global EPS growth for 2019.

Figure 3. South Korea export growth has been a great leading indicator of global EPS

Source: Bloomberg, iFund/Noble Apex


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