Macro Insights Weekly: Can trade bail out Asia this year?
- Asia’s trade performance has been impressive lately…
- …with the data underscoring substantial strength beyond base effects
- China’s Jan-April exports were up 30% from the same period two years ago
- For Asia ex-China, the figures are not as dramatic, but they tell a similar story
- Low rates and policy support in the US and EU bode well for Asia’s export demand to sustain
Resurgence of Covid infections and attendant policy stringencies have taken the momentum out of the economies of Japan, Singapore, Taiwan, and Vietnam for the time being. These economies came into 2021 with strong momentum on the back of successful pandemic management and strong external demand. But now what?
With domestic demand likely to stall in varying degrees as authorities keep mobility tight till a threshold of vaccination is achieved and new cases drop, these economies will have to rely on external demand to carry through 2021.
Asia’s trade performance has been impressive lately, with the data underscoring substantial strength beyond base effects. Case in point is China. On one hand, China’s exports numbers, dizzyingly higher than a year ago (+44%, Jan-April, yoy), should be discounted given that trade came to a sudden stop early last year. On the other hand, China’s Jan-April exports are up 30% from two years ago, suggesting that the export growth run-rate is quite strong. For Asia ex-China, the figures are not as dramatic (+17% from 2020 and +10% from 2019), but they tell the same story as well.
Given that Asia is an intricate supply chain, it is hardly surprising to see equal vigour in exports and imports around the continent. Demand for inputs and finished goods in the electronics and pharmaceutical sectors, as well as commodities, is strong across the board. The US ran a trade deficit of USD146bn vis-à-vis Asia in 1Q21, an all-time record, largely on the back of its import demand, which conversely is Asia’s exports demand.
How are Asian exporters feeling? Our measure of GDP-weighted regional manufacturing PMI remains firmly above 50, but the momentum has ebbed a tad in recent months. If interest rates stay low and policy support in the EU and the US remains in place, the consumption-investment driven growth narrative will remain intact, in our view. China’s domestic demand remains unaffected by the pandemic resurgence in the rest of Asia so far, which is another important pull for the region. Domestic demand in many Asian countries may not perk up anytime soon, but export related production and earnings look likely to remain as a useful offsetting factor for growth.
To read the full report, click here to Download the PDF.
Subscribe here to receive our economics & macro strategy materials.
To unsubscribe, please click here.
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong SAR
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.