UOB Economic-Treasury Research

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Thursday, 05 August 2010 Asian Markets

News Highlights
Foreign Exchange Rates (as at 04 Aug 2010)
As at 05 Aug Asian High Asian Low NY High NY Low
n Asian currencies largely eased against the USD on Wed, as
SGD 1.3525 1.3543 1.3508 1.3544 1.3509
MYR 3.1670 3.1705 3.1570 - - uncertainty in the financial markets saw prices moving in
IDR 8,942 8,960 8,933 - - choppy manners. While equity markets overnight reacted
THB 32.13 32.18 32.16 - - positively to better-than-expected US ADP payroll and non-
PHP 45.18 45.25 45.05 - - man ISM data, conflicting signals are still coming out of US
TWD 31.80 31.87 31.62 - - Treasury markets with sub-3% for 10Y yield, and Baltic Dry
KRW 1,167.00 1,171.70 1,166.00 - -
HKD 7.7635 - - 7.7650 7.7630
Index hovering at more than one-year low after recovering
CNY 6.7705 6.7751 6.7705 - - since mid-July. This suggests that asset prices are likely to
stay volatile for now, especially with the key US nonfarm
payroll report looming on Fri. In Asian session on Wed, KRW
UOB’s Estimation of SGD NEER (as at 04 Aug 2010)
rose for a fourth day, rising 0.3% to 1,168.43/USD, while
Assuming 2.5% on each side of the pivot point:
Lower-End ...........................................................................1.4136 THB edged up 0.2% to 32.17/USD. Elsewhere, TWD fell
Upper-End ...........................................................................1.3446 0.1% to 31.87/USD, snapping an eight-day rally, on
Mid-Point ...........................................................................1.3791 speculation the authorities may have intervened. MYR fell
for the first time in three days, down 0.4% to 3.1690/USD,
after reaching 3.15 on Wed, the highest level since May
Interest Rates
Current Next CB Meet UOB’s Forecast 2008. PHP fell 0.2% to 45.225/USD and IDR declined 0.1%
SGD 3-Mth SIBOR 0.55% - - to 8,948/USD.
MYR O/N Policy Rate 2.75% 02 Sep 2.75%
IDR O/N Rate 6.50% 03 Sep 6.50% n SGD eased on Wed, ahead of the key US payroll report on
THB 1-Day Repo 1.50% 25 Aug 1.75% Fri and in line with paring back of risks overnight and other
PHP O/N Reverse Repo 4.00% 26 Aug 4.00%
Asian currencies, with SGD down 0.14% to 1.3521/USD
TWD Discount Rate 1.375% 26 Sep 1.50%
KRW Base Rate 2.25% 12 Aug 2.50% vs. 1.3506 on Tue. The local unit fluctuated within a narrow
HKD Base Rate 0.50% - 0.50% range of 1.3508-1.3544 on Wed. This morning, SGD NEER
CNY 1-Yr Wking Capital 5.31% - 5.58% slipped to 1.75% above the midpoint, from 1.8% on Wed.
Until the key US nonfarm payroll report is out of the way
this Fri, the trade-weighted S$ is expected to continue to
Stock Indices (as at 04 Aug 2010)
Closing % chg hover within 1.5-2.0% range above the parity, which implies
Singapore Straits Times 3001.87 -0.43 USD/SGD range of 1.3490-1.3565 for now.
Kuala Lumpur Composite 1362.74 -0.08
Jakarta Composite 2983.25 +0.32 n RMB firmed slightly to 6.7722/USD on Wed, from Tue close
Bangkok SET 867.34 +0.33 of 6.7730, the eighth consecutive session of gains for the
Philippines Composite 3503.49 +0.56
Chinese currency against a background of broad USD
Taiwan TAIEX 7972.66 +0.19
Seoul Composite 1789.26 -0.07 weakness in recent weeks. In addition, PBoC set the RMB
Hong Kong Hang Seng 21549.88 +0.43 central parity rate at a record low of 6.7715 on Wed morning
Shanghai SE Composite IX 2638.52 +0.44 compared to 6.7722 Tue. US Treasury Sec Geithner said on
Mumbai Sensex 30 18217.44 +0.57 Thur that the RMB is only now beginning the process of
appreciation, and "what matters is" how far and fast China
Key Events let it move. On the NDF market, prices continued to reflect
Date Event a muted appreciation pace for the RMB, at just 1.4% over
the next 12 months, vs. 1.5% the day earlier. This morning,
the RMB central parity was set at sharply weaker at 6.7783/
USD, vs. record low of 6.7715 set on Wed, suggesting that
the authorities are intent on keeping the RMB more "flexible".
 Asian Markets
Thursday, 05 August 2010
p2

n Asian shares ended mixed Wed with risk taking activities
pared back slightly with conflicting signals out of equity
and US Treasury markets. Nikkei 225 ended down 2.1% at
9,489.3 while Kospi edged down 0.1%. Hang Seng Index
rose 0.4% and Shanghai Composite managed to reversed
all its intraday losses of as much as 1.4% to end higher 0.4%
in the last hour of trading. Taiex rose 0.2%. In other markets,
STI was off 0.4%, KLCI fell 0.1% while Jakarta Composite
rose 0.3% with BI leaving its key interest rate unchanged at
yesterday's meeting. Philippine index rose 0.6%, and SET
climbed 0.3%.
n Overnight, US equity markets closed higher on Wed, after
trading in a narrow range for most of the day, as better-
than-expected ISM non-manufacturing report and ADP
payroll calmed investors' nerves somewhat ahead of Friday's
key nonfarm payroll report. The Dow rose 44 points, or 0.4%.
The S&P 500 index gained nearly 7 points, or 0.6%, and
the Nasdaq composite added 20 points, or 0.9%.
n China's banking regulator told lenders in Jun to conduct a
new round of stress tests to gauge the impact of residential
property prices falling 50-60% in the hardest-hit markets,
Bloomberg reported Thur. Stress tests carried out in the past
year assumed home-price declines of as much as 30%.
Results from previous stress tests show that the NPL ratio
among Chinese banks would rise by 2.2%pt if home prices
drop 30% and interest rates rise by 108bps, and pretax
profits would fall 20%, according to Bloomberg.
n Chinese government think tank State Information Center
said on Wed that China's economy would cool further this
quarter as fiscal pump-priming starts to fade and the
restocking cycle draws to a close. Annual gross domestic
product growth will slow to 9.2 percent from 10.3 percent
in the second quarter and 11.9 percent in the first, it said in
a report published in official media.
n In a new sign that shows China may be concerned about a
rise in speculative inflows, the country's currency regulator
said Wed it will step up its investigations of cases involving
such inflows and strengthen punishments for infractions.
n Bank Indonesia on Wed left its interest rate at a record-
low 6.5% for the 12th month, as expected, as the central
bank indicated that the decision was in line with inflation
expectations, and that core inflation remained low. BI has
said it will leave rates unchanged all year if inflation meets
its end-2010 target range of 4-6%, as it seeks to spur lending
and growth.
n Thai FinMin Korn said on Wed Thai economy could expand
7-8% this year vs. official forecasts of 6% (MoF) to 7.5%
(BoT), due to surprise strength of exports performance and
despite political difficulties earlier.
n Singapore remains the third most expensive office location
in the Asia Pacific region, according to the latest report by
Colliers International. Singapore was in third spot, posting
annual gross rents of about US$58 per square foot in the
second quarter. Tokyo retained the top spot at US$101 per
square foot while Hong Kong ranked second at US$89 per
square foot.

Economic Indicators
Local Time Indicators Mth Actual UOB Forecast Mkt Forecast Previous
04/08
1030 HK Purchasing Manager Index Jul 51.3 - - 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 - 1.27 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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