Weekly: Interim relief
- Some further (but modest) weakness in the USD can be expected in the near term
- We think conditions have aligned for somewhat higher US interest rates
- Improvement in risk sentiments has not followed through in the offshore Chinese USD credit market
From the ECB cutting deposit rates and promising more QE, hints of an “interim” China-US trade deal, mild improvement in sentiment over Iran, and some reduction in the chance of a hard Brexit, the markets have had room to breathe this week, making for a fairly constructive September so far.
Beyond these headline commanding developments, however, are four secular sources of difficulties for the global economy. The malaise presently observed in energy, industrial metals, auto, and electronics sectors reflect slowing demand in China, structural decline in conventional energy usage, and change in consumption trend (e.g. lengthening of phone upgrade cycles, preference for ride hailing instead of owning). Regardless of trade deals and ebbing of political risks, the pressure on sales and earnings will remain for many companies, in our view.
Amidst signs of stimulus efficacy and demand stabilisation in China, it is important keep in mind that Chinese companies have a wall maturity in 4Q and next year, necessitating orderly dollar funding conditions. It is striking that despite worldwide fixed income rallies, cost of dollar funding has not eased lately. Global investor sentiments may not be focused on China credit risks at this juncture, but it won’t take much for this so start commanding news headlines in the coming months
To read the full report, click here to Download the PDF.
The information herein is published by DBS Bank Ltd and PT Bank DBS Indonesia (collectively, the “DBS Group”). It is based on information obtained from sources believed to be reliable, but the Group 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. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation & the particular needs of any specific addressee. The information herein is published for the information of addressees only & is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Group, 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 Group 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 Group & its associates, their directors, officers and/or employees may have positions or other interests in, & may effect transactions in securities mentioned herein & may also perform or seek to perform broking, investment banking & other banking or financial services for these companies. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Sources for all charts & tables are CEIC & Bloomberg unless otherwise specified.
DBS Bank Ltd., 12 Marina Blvd, Marina Bay Financial Center 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.
PT Bank DBS Indonesia, DBS Bank Tower, 33rd floor, Ciputra World 1, Jalan Prof. Dr. Satrio Kav 3-5, Jakarta, 12940, Indonesia. Tel: 62-21-2988-4000. Company Registration No. 09.03.1.64.96422