Looking at recent Asian trade, North Asian exports appear to be weak, confirming my view that globally, we have not seen much evidence of a stabilisation of growth yet. This was also underscored by news that China’s PMIs dipped below 50 in December, US core durable orders appeared to have peaked in November and European economic data has come out on the soft side as well.
Looking closer at the details, the following points stand out:
- North Asian exports collapsed in December, driven by weakness in South Korea and Singapore. Worryingly, South Korean exports were soggy across the board. In semiconductors, some of the weakness could be driven by falling memory component prices. Volumes appear to have held up.
- That said, policy easing in China, seemingly easing trade war tensions between the US and China and a dovish US Federal Reserve could give emerging market rates and currencies a breather, extending the rally we have seen so far in emerging market FX and local bonds.
- Glimmer of hope? North Asian new export orders stopped falling in the December PMI survey (red line in Exhibit 1), although it must be noted that not all Asian PMI surveys pointed up: Taiwan is falling deeper into contraction territory and Singapore is slowing. For what it is worth, in 2015-16, Asian new export orders did well, bottoming out ahead of actual North Asian exports.
Exhibit 1: Uptick in export orders could presage recovery in actual sales abroad
Source: Haver Analytics, as of 15 January 2019