11 November 2011

Macro Asian Economics

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Global Research

Global Economic Calendar Asia Edition

14 - 18 Nov 2011

Top of the week Global Asia Asia

The euro: from "too big to fail" to "too big to save"? Hard Numbers: Exchange rates and inflation in Asia Here we go: Europes banking crunch may spill over to Asia

Stephen King & Janet Henry 09/Nov/11 Frederic Neumann & Sanchita Mukherjee 10/Nov/11 Frederic Neumann 10/Nov/11

Highlights of the week

Indias Oct WPI expected to remain sticky at 9.7%
Demand-led inflation pressures are still simmering despite the moderation in growth, keeping core inflation elevated Food and utility inflation has been trending up according to weekly data, a testament to pent-up inflation pressures from commodities These factors should counter the decline observed in weekly inflation for non-food primary articles

BOJ expected to leave rates on hold at 0.10%

After expanding its asset purchase program by JPY5trn to JPY55trn at the last meeting, monetary officials will likely pause at the upcoming meeting Looking ahead, BoJ officials may weigh expanding their asset purchase program to include JGBs with maturities of more than two years to lower long-term rates Despite having lowered its growth forecast at the last meeting for FY2012 from 2.9% to 2.2%, the Bank of Japan still regards economic growth as sufficiently robust to hold off on further easing for the moment

Asian Economics Team The Hongkong and Shanghai Banking Corporation Limited +852 2822 4556 asianeconomics@hsbc.com.hk View HSBC Global Research at: http://www.research.hsbc.com Issuer of report: The Hongkong and Shanghai Banking Corporation Limited

Malaysias 3Q GDP expected to rise 5.6% y-o-y (vs. 4.0% in 2Q)

Despite the global economic weakness, exports have fared well in 3Q led by commodities; however, shipments of electronics have been weak Domestic demand remains well-supported by favourable labour market conditions, high domestic confidence, and supportive monetary policy settings This, together with favourable base effects, is expected to lift the annual growth rate relative to 2Q

Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it

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Main Asia economic indicators calendar Date 14 Nov 14 Nov 14 Nov 14 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 Nov 16 Nov 16 Nov 16 Nov 17 Nov 17 Nov 17 Nov 18 Nov 18 Nov 11-15 Nov 11-15 Nov 11-15 Nov 11-15 Nov 14-17 Nov 14-18 Nov 16-25 Nov 16-25 Nov Location New Zealand Japan Japan India Australia Singapore Singapore Philippines Australia Sri Lanka Sri Lanka Japan Singapore Singapore Hong Kong Malaysia Malaysia China China Sri Lanka Sri Lanka China Japan Singapore Singapore Local time 05:45 07:50 12:30 14:30 08:30 13:00 13:00 n/a 08:30 10:00 10:00 n/a 08:30 08:30 16:30 18:00 18:00 n/a n/a n/a n/a n/a n/a n/a n/a Subject Retail Sales- volume GDP annualized-prelim Industrial Production- final WPI Reserve Banks Board Minutes Retail Sales Retail Sales ex auto Overseas Remittances Labour Price Index Repurchase rate Reverse repo rate BOJ Target rate Non- Oil Domestic Exports Non- Oil Domestic Exports- sa Unemployment rate- sa GDP GDP- sa New Yuan Loans Money Supply- M2 Exports Imports Actual FDI Nationwide Dept Sales GDP-final GDP- saar (final) Unit % q o-q % q-o-q % y-o-y % y-o-y % y-o-y % y-o-y % y-o-y % y-o-y % % % % y-o-y % m-o-m % % y-o-y % q-o-q RMB bn % y-o-y % y-o-y % y-o-y % y-o-y % y-o-y % y-o-y % q-o-q Period of data 3Q 3Q Sep Oct Nov Sep Sep Sep 3Q Nov 16 Nov 16 Nov 16 Oct Oct Oct 3Q 3Q Oct Oct Sep Sep Oct Oct 3Q 3Q Previous 0.9 -2.1 -4.0 9.7 3.3 7.4 11.1 3.8 7.00 8.50 0.10 -4.5 -9.3 3.2 4.0 0.9 470.0 13.0 19.1 66.5 7.9 -2.4 5.9 1.3 HSBC forecast 0.6 5.6 -3.8 9.7 2.3 5.9 3.1 3.8 7.00 8.50 0.10 -6.8 4.0 3.3 5.6 1.8 500.0 13.2 19.2 64.9 n/a -1.8 5.9 1.3 Consensus n/a 5.8 n/a 9.6 -3.0 n/a n/a n/a 7.00 8.50 0.10 -10.0 n/a 3.3 n/a n/a 500.0 13.0 n/a n/a n/a n/a n/a n/a

Sources: Bloomberg, Reuters, CEIC, HSBC estimates

Main European and US economic indicators calendar Date 14 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 Nov 16 Nov 16 Nov 16 Nov 16 Nov 16 Nov 17 Nov 17 Nov 17 Nov 17 Nov Location EMU France Germany UK EMU Germany US US US UK EMU UK US US UK US US US BST time 10:00 06:30 07:00 09:30 10:00 10:00 13:30 13:30 13:30 09:30 10:00 10:30 13:30 14:15 19:30 13:30 13:30 15:00 Subject Industrial production GDP-prelim GDP-prelim CPI GDP-prelim ZEW survey-current conditions PPI Retail sales Empire manufacturing Unemployment rate HICP-final BoE-quarterly inflation report CPI Industrial production Retail sales Initial jobless claims Housing starts-annual rate Philadelphia Fed Unit % y-o-y % y-o-y % y-o-y % y-o-y % y-o-y Index % y-o-y % m-o-m Index % % y-o-y % y-o-y % m-o-m % y-o-y 000s 000s Index Period of data Sep 3Q Oct 3Q 3Q Nov Oct Oct Nov Oct Oct Oct Oct Oct Week Nov 12 Oct Nov Previous 5.6 1.7 2.8 5.2 1.7 38.4 6.9 1.1 -8.5 5.0 3.0 3.9 0.2 0.6 390 658 8.7 HSBC forecast 3.1 1.6 2.5 5.0 1.5 28.0 6.1 0.3 1.0 5.1 3.0 3.6 0.5 -0.6 395 620 8.0 Consensus n/a n/a 2.6 5.1 2.6 n/a 6.3 0.3 -2.2 5.1 3.0 3.6 0.4 n/a n/a 610 10.0

Sources: Bloomberg, Reuters, CEIC, HSBC estimates

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Major releases preview

Tuesday, 15 November
Singapore: Retail Sales (September)
Singapore % y-o-y Last Forecast Consensus Retail Sales 3.3 2.3 3.0

Following a slump in August when global financial jitters spooked consumers, retail sales are expected to have recovered a bit in September on a sequential basis. However, the annual pace of growth should ease somewhat, partly due to base effect.

Philippines: Overseas Remittances (September)

Philippines % y-o-y Last Forecast Consensus Remittances 11.1 3.1 n/a

Inflows from overseas Filipino workers have been resilient thus far. However, they are expected to decelerate in September due to sluggish global growth. Remittances from workers based in Europe are expected to decline further. However, inflows are expected to pick-up towards November and December due to the Christmas season. This should provide a much-needed relief for the trade-battered economy.

Thursday, 17 November
Hong Kong: Unemployment rate-sa (October)
Hong Kong % Last Forecast Consensus Jobless rate 3.2 3.3 3.3

Despite ongoing turbulence in global financial markets and weakness in global investor sentiment, Hong Kong employers still see sufficient business demand to continue hiring, keeping the last unemployment rate at a 13-year low. Weakening external demand and on-going global financial market turbulence continues to cast a cloud over the sustainability of the citys robust job market conditions, but with the employment index in Octobers HSBC Hong Kong PMI rising to a three-month high (of 49.1 from 47.5 previously), we expect any normalization to be moderate.

Singapore: Non Oil Domestic Exports (October)

Singapore % y-o-y Last Forecast Consensus NODX -4.5 -6.8 -10.0

Following the big sequential drop in September, led by the volatile pharmaceutical sector, exports are expected to recover some of the lost ground on a sequential basis. However, a high base in October last year should further increase the annual decline.

Sri Lanka: Exports (September)

Sri Lanka % y-o-y Last Forecast Consensus Exports 19.1 19.2 n/a

Heightened economic uncertainty in advanced economies is expected to keep exports growth in Sri Lanka at muted levels. On the other hand, imports should continue to rise at elevated levels thanks to growing investment and consumption demand locally. The impact from a slowdown in exports is likely to be limited due to its small share in the economy and resilience provided by commodities in the export basket.

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2011 main economic indicators forecast GDP (% y-o-y) Australia New Zealand China Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Sri Lanka Taiwan Thailand Vietnam Asia Asia ex China Asia ex Japan Asia ex China & Japan US UK Eurozone 1.8 2.0 8.9 5.0 7.4 6.4 -0.6 3.4 4.8 4.3 5.0 8.1 4.0 3.9 5.8 4.7 2.3 7.3 5.5 1.8 1.0 1.6 CPI (% y-o-y) 3.6 4.4 4.8 5.0 8.0 5.6 -0.5 4.4 3.2 4.4 4.7 6.9 1.5 4.0 18.4 3.3 2.5 5.2 5.7 3.2 4.4 2.7 Policy rate (%, end) 4.50 2.75 6.56 0.50 8.50 6.00 0.05 3.25 3.00 4.50 0.40 8.50 1.875 3.50 14.00 4.0 2.5 5.9 5.2 0.00-0.25 0.50 1.25 FX (vs. USD, end) 0.95 0.76 6.35 7.80 49.0 8800 74.0 1150 3.10 43.5 1.27 109.0 30.0 30.7 21500 N/A N/A N/A N/A N/A 1.59 1.38

Source: HSBC, CEIC, NZ and JN FX forecasts are for the period average

2012 main economic indicators forecast GDP (% y-o-y) Australia New Zealand China Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Sri Lanka Taiwan Thailand Vietnam Asia Asia ex China Asia ex Japan Asia ex China & Japan US UK Eurozone 3.9 3.8 8.6 4.5 8.1 6.7 1.9 4.1 5.0 4.8 5.1 6.8 1.7 5.0 7.0 5.5 3.8 7.3 5.8 1.8 1.3 0.6 CPI (% y-o-y) 3.1 3.0 2.9 5.3 7.7 6.2 -0.3 3.6 3.0 4.5 3.0 5.8 2.0 3.6 11.2 2.6 2.4 4.0 5.3 1.8 2.4 1.8 Policy rate (%, end) 4.50 4.25 6.56 0.50 8.25 6.50 0.05 3.75 3.50 5.00 0.40 10.00 2.250 4.00 14.00 4.0 2.6 6.0 5.4 0-0.25 0.50 1.00 FX (vs. USD, end) 0.93 0.74 6.15 7.80 45.5 8300 72.0 1070 2.88 41.0 1.19 106.0 28.0 28.8 21500 N/A N/A N/A N/A N/A 1.66 1.44

Source: HSBC, CEIC, NZ and JN FX forecasts are for the period average

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Asian central banks meeting schedule - 2011 calendar year IN Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 25 17 3 16 26 16 25 16 ID 5 4 4 12 12 9 12 9 11 10 8 JP 25 15 15 7,28 20 14 12 4 7 27 16 20-21 KR 12 10 9 11 12 9 13 10 7 12 10 8 MA 27 11 5 7 8 11 1 10 24 13 5 16 28 8 20 PH SG SR 11 7 7 18 16 14 7 19 15 10 15 20 TW TH 12 31 9 20 1 13 24 19 30 30 1 1 5 3 7 5 2 6 31 1 5 AUS NZ 26 9 27 8 27 14 26 7 US 26 15 27 22 9 21 2 13 UK 13 10 10 7 5 9 7 4 8 6 10 8 EU 13 3 3 7,20 5,19 9 7,21 4 8 6 3,17 8,22

30

29

14

Source: HSBC, Bloomberg

Inflation and policy rate outlook Latest headline inflation (% y-o-y) AUS NZ CH HK IN* ID JP KR MA PH SG SL TW TH VN 3.5, 3Q11 4.6, 3Q11 5.5, October 5.8, September 9.7, September 4.4, October 0.0, September 3.9, October 3.4, September 5.2, October 5.5, September 5.1, October 1.2, October 4.2, October 21.6, October Latest policy Latest monetary move rate (% pa) 4.50 2.50 6.56 0.50 8.50 6.00 0-0.10 3.25 3.00 4.50 0.37 8.50 1.875 3.50 14.00 Oct 2011, -25bp in cash target rate Mar 2011, -50bp in cash rate July 2011, +25bp in 1-yr lending rate Dec 2008, -100bp in base rate Oct 2011, +25bp in Repo rate Nov 2011, -50bp in reference rate Oct,2010, n/a June 2011, +25bp in call rate May 2011, +25bp in overnight rate May 2011, +25bp in overnight rate Reduced the slope of the S$NEER band Jan 2011, -50bp in Reverse Repo rate June 2011, + 12.5bp in rediscount rate Aug 2011, +25bp in Repo rate July 2011, -100bp in OMO rate HSBC's expectation on next monetary move Keep policy rate on hold this year Possible 25bps hike in Q4 2011 Keep policy rate on hold this year Keep rates on hold Keep policy rate on hold this year Keep policy rate on hold this year Keep rates on hold Keep policy rate on hold this year Keep policy rate on hold this year Keep policy rate on hold this year n/a Keep policy rate on hold this year Keep policy rate on hold this year Keep policy rate on hold this year Keep policy rate on hold this year

Note: *=WPI Source: HSBC, Bloomberg, CEIC

Recent HSBC Economics publications Report title Global Global Global EMU Global KR EMU VN ID Global EMU Asia Malaysia Asia The East can't and won't be Europe's saviour: Stephen King's column in today's Times G20 communiqu: Promises - easy to make, difficult to keep Global PMI wrap-up: Are emerging markets de-coupling? A small step forward for Greece: a government of national unity Now opened, the door to exit Eurozone can no longer be shut: article in this week's Independent Korea central bank watch: Dropping gold aint cutting it France: new credible austerity measures: Govt announces EUR7bn of new austerity measures A Closer Look: How Vietnam conducts monetary policy Indonesia Central Bank Watch: Cutting it close The euro: from "too big to fail" to "too big to save"? Italy: austerity bill vote and bond auctions Hard Numbers: Exchange rates and inflation in Asia Malaysia Central Bank Watch: A pre-emptive pause Here we go: Europes banking crunch may spill over to Asia Contributor Stephen King Karen Ward Madhur Jha & Karen Ward Janet Henry Stephen King Ronald Man Mathilde Lemoine Trinh Nguyen Leif Eskesen & Prithviraj Srinivas Stephen King & Janet Henry Janet Henry & Steven Major Frederic Neumann & Sanchita Mukherjee Leif Eskesen & Namrata Mittal Frederic Neumann Published date 4-Nov-11 4-Nov-11 4-Nov-11 6-Nov-11 7-Nov-11 7-Nov-11 7-Nov-11 8-Nov-11 8-Nov-11 9-Nov-11 9-Nov-11 10-Nov-11 10-Nov-11 10-Nov-11

Source: HSBC

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Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Frederic Neumann, Hongbin Qu, Leif Eskesen, Paul Bloxham, Donna Kwok, Luke Hartigan, Ronald Man and Trinh Nguyen

Important Disclosures
This document has been prepared and is being distributed by the Research Department of HSBC and is intended solely for the clients of HSBC and is not for publication to other persons, whether through the press or by other means. This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other investment products mentioned in it and/or to participate in any trading strategy. Advice in this document is general and should not be construed as personal advice, given it has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to their objectives, financial situation and needs. If necessary, seek professional investment and tax advice. Certain investment products mentioned in this document may not be eligible for sale in some states or countries, and they may not be suitable for all types of investors. Investors should consult with their HSBC representative regarding the suitability of the investment products mentioned in this document and take into account their specific investment objectives, financial situation or particular needs before making a commitment to purchase investment products. The value of and the income produced by the investment products mentioned in this document may fluctuate, so that an investor may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal or exceed the amount invested. Value and income from investment products may be adversely affected by exchange rates, interest rates, or other factors. Past performance of a particular investment product is not indicative of future results. Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues. For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research. * HSBC Legal Entities are listed in the Disclaimer below.

Additional disclosures
1 2 3 This report is dated as at 11 November 2011. All market data included in this report are dated as at close 11 November 2011, unless otherwise indicated in the report. HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

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Global Economics Research Team

Global
Stephen King Global Head of Economics +44 20 7991 6700 stephen.king@hsbcib.com Karen Ward Senior Global Economist +44 20 7991 3692 karen.ward@hsbcib.com Madhur Jha +44 20 7991 6755 madhur.jha@hsbcib.com

Global Emerging Markets

Pablo Goldberg Head of Global EM Research +1 212 525 8729 pablo.a.goldberg@hsbc.com Bertrand Delgado EM Strategist +1 212 525 0745

bertrand.j.delgado@us.hsbc.com

Emerging Europe, Middle East and Africa

Murat Ulgen Chief Economist +44 20 7991 6782

Europe & United Kingdom

Janet Henry Chief European Economist +44 20 7991 6711 janet.henry@hsbcib.com Astrid Schilo +44 20 7991 6708 Germany Lothar Hessler +49 21 1910 2906 France Mathilde Lemoine +33 1 4070 3266 astrid.schilo@hsbcib.com

muratulgen@hsbc.com

Alexander Morozov +7 495 783 8855 alexander.morozov@hsbc.com Simon Williams +971 4 507 7614 Melis Metiner +90 212 376 4618 simon.williams@hsbc.com melismetiner@hsbc.com.tr

lothar.hessler@hsbc.de

Latin America
Andre Loes Chief Economist, Latin America +55 11 3371 8184 andre.a.loes@hsbc.com.br Argentina Javier Finkman Chief Economist, South America ex-Brazil +54 11 4344 8144 javier.finkman@hsbc.com.ar Ramiro D Blazquez Senior Economist +54 11 4348 5759 Jorge Morgenstern Senior Economist +54 11 4130 9229 Brazil Constantin Jancso Senior Economist +55 11 3371 8183 Marcos Fernandes +55 11 6847 9787 Mexico Sergio Martin Chief Economist +52 55 5721 2164 Claudia Navarrete Economist +52 55 5721 3284 Central America Lorena Dominguez Economist +52 55 5721 2172

mathilde.lemoine@hsbc.fr

North America
Kevin Logan Chief US Economist +1 212 525 3195 kevin.r.logan@us.hsbc.com Ryan Wang +1 212 525 3181 Stewart Hall +1 416 868 7523 ryan.wang@us.hsbc.com stewart_hall@hsbc.ca

ramiro.blazquez@hsbc.com.ar

Asia Pacific
Qu Hongbin Managing Director, Co-head Asian Economics Research and Chief Economist Greater China +852 2822 2025 hongbinqu@hsbc.com.hk Frederic Neumann Managing Director, Co-head Asian Economics Research +852 2822 4556 fredericneumann@hsbc.com.hk Leif Eskesen Chief Economist, India & ASEAN +65 6239 0840 leifeskesen@hsbc.com.sg Paul Bloxham Chief Economist, Australia and New Zealand +61 2925 52635 paulbloxham@hsbc.com.au Donna Kwok +852 2996 6621 Trinh Nguyen +852 2822 6975 Ronald Man +852 2996 6743 Luke Hartigan Economist +612 9255 2635 Sun Junwei Associate Sophia Ma Associate donnahjkwok@hsbc.com.hk trinhdnguyen@hsbc.com.hk ronaldman@hsbc.com.hk

jorge.morgenstern@hsbc.com.ar

constantin.c.jancso@hsbc.com.br marcos.r.fernandes@hsbc.com.br

sergio.martinm@hsbc.com.mx

claudia.navarrete@hsbc.com.mx

lorena.dominguez@hsbc.com.mx

lukehartigan@hsbc.com.au