Slower Philippines, Vietnam, Malaysia and Singapore’s PMI in Dec

Asean manufacturing Purchasing Managers’ Index (PMI) in December slowed slightly by 0.1 points to 50.3 from 50.4 in November. Among the seven Asean countries, Indonesia and Thailand were the countries which registered higher PMIs, while Philippines, Vietnam, Malaysia and Singapore slowed in December. Indonesia’s PMI rose by 0.8 points to 51.2 (50.4 in November), its highest reading since August 2018. Thailand’s manufacturing PMI also rose to 50.3 in December (49.8 in November), above the 50-level mark for the first time since September 2018. However, Singapore’s PMI fell sharply to 46 in December, after reaching a five-month high of 53.8 in November. This was in tandem with lower global manufacturing PMI, which registered a drop in its reading, falling from 52 in November to a 27-month low of 51.5 in December. On a quarterly basis, Asean’s PMI averaged 50.2 in 4Q18, lower than 50.6 in 3Q18, its lowest quarterly average since 3Q17. IHS Markit noted that the slower expansion resulted from slower growth in new orders and a continued decline in export orders amid a fall in foreign demand. If the US and China decide to continue with their trade war following the three-month pause which began on 1 January 2019, we believe this may impact on Asean’s PMI performance, which may be weighed down further.

Separately, in Indonesia, the inflation rate eased in December to 3.1% yoy, after maintaining an inflation rate of 3.2% for two consecutive months since October, its slowest rate since September 2018. Despite the improvement, Indonesia’s CPI remained within Bank Indonesia’s (BI) 2018 target range of 2.5-4.5%. For the full year, headline inflation averaged 3.2% yoy compared to 3.8% in 2017. Slower inflation was mainly due to food prices, which eased to 3.4% yoy from 4.2% in November. BI guided that inflation will remain manageable in 2019, where it is expected to stay within the 2.5-4.5% target corridor. On the monetary policy front, we continue to believe that BI will possibly pause its rate hikes in 1H19, following the six rate hikes totalling 175bps in 2018.

Thailand’s inflation improved for the fourth consecutive month to a ten-month low of 0.4% yoy in December from 0.9% in November. On an annual basis, inflation averaged 1.1% yoy in 2018 (0.7% in 2017). Inflation was weighed by the decline in cost of transport and communication (-0.6%) which was likely due to the recent drop in crude oil prices. Bank of Thailand (BOT) guided that it expects inflation to be slightly lower at 1% projected for 2019, due to lower crude oil prices despite the rise in the monthly electricity rate from January to April 2019 period. At its last monetary policy meeting in December, BOT raised its policy rate for the first time since August 2011 by 25bps to 1.75%. However, in 1H19, we believe that BOT will likely leave policy rate unchanged due to the upcoming elections and a slower GDP growth expected by BOT in 2019 of 4% (4.2% in 2018).

Source: Affin Hwang Research - 4 Jan 2019