UOB Economic-Treasury Research

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Tuesday, 03 August 2010 Asian Markets

News Highlights
Foreign Exchange Rates (as at 02 Aug 2010)
As at 03 Aug Asian High Asian Low NY High NY Low
SGD 1.3495 1.3585 1.3529 1.3546 1.3482 n Asian currencies were generally firmer on Mon, despite
MYR 3.1555 3.1800 3.1500 - - weaker PMI data releases for China and elsewhere in Asia
IDR 8,940 8,949 8,930 - - as well as pending key economic reports in the days ahead.
THB 32.17 32.23 32.20 - - Risk taking accelerated late Mon after strong earnings from
PHP 45.37 45.51 45.30 - - European banks HSBC and BNP. Note that firmer prices in
TWD 31.730 32.050 31.798 - -
global equities and currencies are shadowed by only
KRW 1167.30 1182.50 1171.50 - -
HKD 7.7643 - - 7.7653 7.7635 marginally higher US Treasury yields, with 2Y at record low,
CNY 6.7735 6.7751 6.7690 - - 10Y below 3%, and USD/JPY barely higher at 86.50,
suggesting opposing views from risky and riskless asset
markets. However, with sentiment still buoyed, risk assets
UOB’s Estimation of SGD NEER (as at 03 August 2010)
such as equities and Asian currencies are expected to remain
Assuming 2.5% on each side of the pivot point:
Lower-End ...........................................................................1.4133 in play for now. In Asian session on Mon, TWD rose for the
Upper-End ...........................................................................1.3444 seventh straight day, up 0.6% to 31.87/USD. MYR traded at
Mid-Point ............................................................................1.3788 3.1595/USD, gaining nearly 1% from 3.1900 on Fri and
bringing YTD appreciation to 8.5%. PHP closed at 45.33/
USD on Mon, up 0.5% from Friday's finish of 45.54.
Interest Rates Elsewhere, IDR was little changed at 8,949/USD while THB
Current Next CB Meet UOB’s Forecast
edged up 0.2% to 32.23/USD.
SGD 3-Mth SIBOR 0.55% - -
MYR O/N Policy Rate 2.75% 02 Sep 2.75%
IDR O/N Rate 6.50% 04 Aug 6.50% n SGD surged 0.9% to 1.3486/USD late Mon from 1.3605
THB 1-Day Repo 1.25% 25 Aug 1.25% last Fri, rebounding off from intraday low of 1.3585 in Asian
PHP O/N Reverse Repo 4.00% 26 Aug 4.00% session. The up-move was buoyed by risk taking activities
TWD Discount Rate 1.375% 26 Sep 1.50%
as investors warmed to stronger-than-expected results from
KRW Base Rate 2.25% 12 Aug 2.50%
HKD Base Rate 0.50% - 0.50%
BNP and HSBC, as well as July US ISM manufacturing, which
CNY 1-Yr Wking Capital 5.31% - 4.77% weakened less than expected at 55.5. With risk taking still
on, SGD NEER this morning popped the 2% band above
the midpoint, and the band limit of 2.5% will see SGD
Stock Indices (as at 02 Aug 2010) Closing % chg capped at 1.3430.
Singapore Straits Times 3025.04 +1.25
Kuala Lumpur Composite 1363.60 +0.20 n RMB rose slightly to close at 6.7742/USD, from 6.7750
Jakarta Composite 3058.98 -0.34 close on Fri, as broad USD continued to weaken, which
Bangkok SET 863.18 +0.86 saw the midpoint set at 6.7742/USD earlier on Mon, up from
Philippines Composite 3455.24 +0.83 Friday's 6.7750. Chinese media reported on Mon that PBoC
Taiwan TAIEX 7911.68 +1.95
Vice Gov Hu Xiaolian said the USD/RMB's current trading
Seoul Composite 1782.27 +1.30
Hong Kong Hang Seng 21412.79 +1.82
band is "appropriate" for now but could be widened in the
Shanghai SE Composite IX 2672.52 +1.33 future. It should be noted that the current +/-0.5% around
Mumbai Sensex 30 18081.21 +1.19 the midpoint for USD/RMB has yet to be breached, and such
comments merely point out the fact that such band is not
cast in stone and is subject to changes. Offshore NDF prices
Key Events
Date Event remain subdued and ratcheted up expectations for RMB
appreciation to 1.5% over the next 12 months, up from 1.3%
on Fri. This morning, the RMB central parity was set stronger
at 6.7722/USD, vs. 6.7742 on Mon.
 Asian Markets
Tuesday, 03 August 2010
p2

n Asian stocks firmed on Mon, brushing aside the PMI reports
out of China that point to a slowdown in economic growth
momentum. Nikkei ended the day up 0.35%, or 33.01
points, at 9,570.31. Shanghai Composite rose 1.3% to
2,672.52, its highest close since 24 May. Hang Seng climbed
1.8%, Taiex rose 2.0%, and Kospi gained 1.3% to two-year
high of 1,782.27. In regional markets, STI gained 37.34
points, or 1.25% to close at 3,025. However, Jakarta
Composite Index bucked the overall trend and ended in
negative territory for the second day, with a loss of 10.30
points, or 0.34%, at 3,059. KLCI inched up 0.2% to
1,363.60.
n Overnight, US equity markets opened the month of Aug
with a rally on Mon, extending last month's gains of 7%, as
investors welcomed upbeat economic reports and strong
earnings from European banks HSBC and BNP. The Dow
rose 208 points, 2%.S&P 500 jumped 24 points, or 2.2%,
and the Nasdaq composite gained 41 points, or 1.8%.
n Chinese media reported on Mon PBoC Vice Gov Hu Xiaolian
as saying the RMB daily trading band is "appropriate" for the
time being but could be widened in the future.
n HSBC China Manufacturing PMI index moved into
contraction in July, with a reading of 49.4 vs. 50.4 in Jun,
the second consecutive month of m/m decline for the index
and the first sub-50 reading since March 2009. In contrast,
the official CFLP PMI index released on Sun showed third
straight m/m decline to 51.2 in July from 52.1 in June,
suggesting that China's growth momentum is decelerating.
n Elsewhere, manufacturing activity slowed in some other
parts of Asia. HSBC's Taiwan PMI for July dropped to 50.5 in
July from 53.8 in June, South Korea's slipped to 53.2
seasonally-adjusted from 53.3 in June, though India's PMI
edged up to 57.6 from 57.3.
n Inflation accelerated in Thailand, Indonesia and South Korea
in July, putting pressure on central banks to raise interest
rates further despite concerns of slowing Western demand
for Asian exports. Indonesia's inflation rate rose more than
expected to a 15-month high in July at 6.22%y/y from 5.05%
in Jun, topping central bank's target range of 4-6%, raising
questions over whether policymakers will drop a long-held
pledge to leave rates at a record low until 2011. Thai annual
inflation rate nudged up to 3.4% in July. South Korea's
consumer price inflation accelerated 0.3% from June, vs -
0.2% in May and in line with expectations, but both the
government and the central bank have warned that price
pressures will start picking up this year along economic
activities.

Asia key data and events for the week ahead

CPI data from various Asian countries (South Korea, Indonesia, Thailand, Philippines, and Taiwan) dominate this week, which will
largely show inflationary pressures remaining intact that already prompted a number of central bank rate hikes, as opposed to
absence of such price pressures in G7. Nevertheless, Bank Indonesia on Wed is likely to leave its interest rate unchanged given that
it is likely to take comfort in that its real interest rate remaining positive. On the growth front, Singapore's PMI report on Tue should
point to moderation in the months ahead, as flagged by China's PMI report which came out this past Sunday.

Caution is likely to return this week, after a weaker than expected US 2Q GDP report last Fri that suggests weak growth momentum
and raises concerns on the outlook for 2H and beyond, while other key US data including ISM and nonfarm payroll report looms
large. US Fed chairman Bernanke is also due to give a speech on the economy this Monday. ADP payroll report will be out on
Wed, which will give some sense on the US labour market. The July nonfarm payrolls report is the main focus on Fri, and layoffs of
temporary Census workers and ongoing weakness in other government employment could create additional pressures on the
headline figure for July while jobless rate is expected to edge higher from current 9.5%. ISM surveys (manufacturing and non-man)
are likely to have edged down, but still at decent levels in Jul.

URL: www.uob.com.sg/research
Email: EcoTreasury.Research@UOBgroup.com
 Asian Markets
Tuesday, 03 August 2010
p3

Economic Indicators
Local Time Indicators Mth Actual UOB Forecast Mkt Forecast Previous
02/08
0700 SK Consumer Pr Ind m/m Jul 0.3 - 0.3 -0.2%
0700 SK Consumer Pr Ind y/y Jul 2.6 - 2.6 2.6%
0700 SK Core Consumer Pr Ind y/y Jul 1.7 - - 1.7%
1500 TH Consumer Pr Ind y/y Jul 3.4 - 3.6 3.3%
1500 TH Consumer Pr Ind nsa m/m Jul 0.2 - 0.2 0.3%
1500 TH Core CPI y/y Jul 1.2 - 1.2 1.1%
1630 HK Retail Sales - volume y/y Jun 12.1 - 14.7 16.3%

03/08
0500 SK Foreign Exchange Reserve USD Jul 285.96 - - 274.22b
0900 CH Non-manufacturing PMI Jul - - 57.4
1801 MA Exports y/y Jun - 17.3 21.9%
1801 MA Imports y/y Jun - 24.8 34.2%
1801 MA Trade Bal Jun - 8.0 8.14b
2130 SG Purchasing Manager Ind Jul - 51.0 51.3
2130 SG Electronic Sector Index Jul - 50.1 50.5

04/08
1030 HK Purchasing Manager Index Jul - - 52.6

05/08
0900 PH CPI y/y Jul - 4.1 3.9%
0900 PH CPI nsa m/m Jul - 0.4 0.2%
1600 TW CPI y/y Jul - 1.29 1.18%
1600 TW WPI y/y Jul - 6.10 7.18%
1620 TW Foreign Exchange Reserves-US$ Jul - - 362.38

06/08
1530 TH Foreign Reserves Jul 30 - - 150.1b
1730 MA Foreign Reserves Jul 30 - - 94.81n

Jimmy Koh Suan Teck Kin, CFA Ho Woei Chen Chow Penn Nee
(65) 6539 3545 (65) 6539 3922 (65) 6539 3948 (65) 6539 3923
Jimmy.KohCT@UOBgroup.com Suan.TeckKin@UOBgroup.com Ho.WoeiChen@UOBgroup.com Chow.PennNee@UOBgroup.com
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URL: www.uob.com.sg/research
Email: EcoTreasury.Research@UOBgroup.com