Monthly: Slowing growth; buoyant markets

Markets are discounting weak data and rallying on expectations of easing geo-political risks and dovish monetary policy. But volatility could spike if the durability of dovish policy is questioned.
Taimur Baig, Irvin Seah22 Feb 2019
  • Economics: Our Nowcast models suggest sustained slowdown in China, India, and Singapore in 1H2019
  • FX: We expect USD strength to last through 3Q
  • Rates: Investors have picked up the dovish policy cue, driving a surge of inflows into EM debt
  • Credit: Credit valuations are turning gradually to the expensive side
  • Equities: We believe there is still upside potential while pausing
Photo credit: AFP Photo

Economics: Weak data, strong markets

We have updated our GDP Nowcasting models for China, India, and Singapore with high frequency data available through the middle of February. As designed, the models now are making calls on 1Q2019 and generating forecasts for 2Q2019. Key observations:


With real GDP growth slowing in each successive quarter in 2018, and the 2019 data available so far offering little evidence of the slowdown being arrested despite some stimulus measures in place, our model is estimating sustained slowdown in 1H2019. While loans are bottoming out, industrial production, domestic sales, and trade show no sign of a turnaround yet. We see 1Q growth at 6.3% and 2Q at 6.1%. If further fiscal stimulus and liquidity injection take place, and sentiments improve around a resolution in trade wars, then there is a modest chance that growth could surprise on the upside. For the time being though, the hard data remain a source of consideration concern.

1For details on the methodology and data used in the Nowcasting exercise, see here


India’s growth momentum has also slowed lately, although it is still better than the particularly weak patch experienced in 2017. Like China, auto and retail sales have been poor lately, along with trade. Tourism is strong, and credit growth has picked up, which may help growth stabilize going forward. The impact of increased government spending ahead of the general elections in 2Q may help as well.


Singapore’s production has not been as weak as China or India, but credit, tourism, and sales have been disappointing. Our Nowcast points to around 2% growth in 1H2019.

Taken together, these estimates are consistent with the global data narrative of further slowing of growth momentum in 1H19. Data out of EM and DM alike are showing similar trend. Markets are however discounting the stream of weak data on consumption, investment, and trade, and rallying on expectations of easing geo-political risks and trade tensions, and dovish monetary policy. The positive sentiment is likely to last a few months, but then volatility could spike if commodities rebound, markets heat up, and the durability of dovish policy is questioned. Already, oil has marketed a decisive bottom, with the WTI up by 25% this year (albeit at a still-reasonable level of USD56). Our strategists see recently-cheap assets already close to being fully valued. The market swoon of late 2018 seem rather distant already.

Taimur Baig

To read the full report, click here to Download the PDF.

Taimur Baig, Ph.D.

Chief Economist - G3 & Asia

Irvin Seah

Executive Director

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