Investors will be keeping a close watch this week on US-China trade tensions, which escalated last week after US President Donald Trump said via series of tweets on Aug 1 that he is imposing another round of tariffs on Chinese goods, sending global markets tumbling.
“Trump’s latest threat to impose more tariffs on Chinese goods is set to maintain the risk-off mood at the start of the new week. Signs of potential retaliatory measures out of China in the near term will hurt market sentiment further and dampen demand for risk assets, including the ringgit, amid heightened concerns over intensifying US-China tensions,” Han Tan, a market analyst at FXTM, says in a report last Friday.
Trump said he would impose a 10% tariff on a further US$300 billion worth of Chinese goods, effective Sept 1. In response, a spokesman from China’s foreign ministry said at a daily press briefing last Friday that the country would have to take countermeasures if the US is committed to putting more tariffs on Chinese goods, Reuters reported.
While China does not want a trade war with the US, it is not afraid of fighting one, the spokesman, Hua Chunying, said.
“[Trump’s move] is another negative for the ongoing trade talks — the next round of high-level meetings in the US is scheduled from September — and may provoke a China response from the Beidaihe meeting, which is currently underway,” says UOB Global Economics & Markets Research in an outlook report last Friday. Beidaihe, a seaside resort town in northeast China, is the venue of an annual informal gathering and “catch-up” of the country’s past and current senior officials.
At home, Bank Negara Malaysia will release its latest international reserves data on Wednesday.
The Department of Statistics Malaysia (DOSM) will announce the Industrial Production Index (IPI) data for June on Friday. In May, the IPI — a measure of factory output from the manufacturing, electricity generation and mining sectors — rose 4% year on year, beating a Reuters forecast of 3.5% growth and matching the expansion pace of the previous month.
The DOSM will also release June manufacturing statistics on Friday.
Sunday is Hari Raya Haji, hence, the following the day (Aug 12) will be a public holiday.
The trial of former prime minister Datuk Seri Najib Razak, in relation to the misappropriation of funds from SRC International Sdn Bhd, continues from Monday to Friday. Joanna Yu, the former relationship liaison manager for Najib’s personal bank accounts at AmBank Group, will again take the stand this week.
Singapore markets will be closed on Friday as the country celebrates its 54th national day.
Over in China, eyes will be on July trade data, out on Thursday, for clues as to how the trade tensions with the US have affected the world’s second largest economy. In June, China’s US dollar-denominated exports fell 1.3% y-o-y while imports fell 7.3%, but the export contractions were not as deep as economists had expected. Economists polled by Reuters had expected June exports to have declined 2% y-o-y and imports to have contracted 4.5%.
Other key data out in China this week include foreign reserves (Wednesday) and the July CPI and Producer Price Index (both on Friday). China will release preliminary current account balance data for the second quarter on Friday.
Over in the US, there will be data on 2Q mortgage delinquencies and the Mortgage Bankers Association’s mortgage foreclosures this week. The final July reading of the US services Purchasing Managers’ Index (PMI) — a private survey conducted by IHS Markit — will be out on Aug 5, while final June data on wholesale inventories will be out on Aug 8, as will June consumer credit data. The UK will release preliminary 2Q gross domestic product data on Aug 9.
Indonesia and the Philippines are expected to announce their second-quarter GDP data on Monday and Thursday respectively. Economists polled by Bloomberg see Indonesia’s 2Q2019 economic growth slowing slightly to 5.05% y-o-y from 5.07% in 1Q2019. As for the Philippines, one of the fastest growing economies in Asia, growth is seen at a faster pace of 5.9% y-o-y in 2Q from 5.6% in 1Q.
The Philippines’ central bank has a monetary policy decision on Thursday, a day after the release of the country’s June trade data. The overnight borrowing rate is currently at 4.5%. UOB expects the central bank to stand pat on the rate, but the general expectation is that it may be cut by 25 basis points.
Thailand, too, will make a monetary policy decision on Wednesday. The Bank of Thailand is largely seen holding the benchmark interest rate at 1.75%. Australian markets will be closed for a bank holiday on Monday.
Back home, companies with annual general meetings this week include Atlan Holdings Bhd (Monday) and ELK-Desa Resources Bhd (Thursday).