DBS Annual Chartbook: 2019 in 64 charts
- The market is pricing a dovish Fed in 2019, but the US economy and labour market remain strong
- We expect across-the-board USD strength to continue at least through the first half of the year
- China worries notwithstanding, ongoing spread widening may usher in value seeking credit investors
- On equities, we see signs of emerging value on the back of this year’s sharp selloff in EM Asia
- A key risk is that China-US trade skirmish becomes broader, dragging the world economy down
• External funding conditions will be tight even with low oil prices as G3 central bank liquidity tightens and Fed rate hikes continue
• The market has begun to price in a dovish Fed in 2019, but US economic momentum, especially its labour market, remains strong
• Rates: The US economy and markets will have to correct considerably before a Fed relent takes place
• FX: We expect across-the-board USD strength to continue at least through the first half of the year
• Credit: China worries notwithstanding, ongoing spread widening may well usher in value seeking investors in Asian credit
• Equities: We see signs of emerging value on the back of this year’s sharp selloff. Relative value of EM over DM could be a major investment theme next year
• China’s sustained economic slowdown, a wall of debt maturity of its corporates, a range of policy support, and further RMB weakness will likely dominate headlines
• Faced with a challenging election, slowing growth momentum, narrow fiscal room, and lingering financial sector stress, India will likely see a dovish RBI
• Within ASEAN, the quantum of rate hikes will decrease as growth worries surface. Fiscal policy may take a more pro-active role, except for Malaysia. Electronics exports will likely weaken, affecting growth
• A key risk for next year is that China-US trade skirmish becomes broader, dragging the world economy and politics down with it.
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