Asia week ahead: MAS policy review and key data in China, Japan and India
The upcoming week is pivotal, particularly with the Monetary Authority of Singapore (MAS) poised to enhance its monetary policy, reflecting robust economic fundamentals and anticipated GDP growth. Per the full note , the desk expects a modest tightening in the SGD nominal effective exchange rate (NEER) policy band, aiming for a 1.5% annual appreciation. This development underscores confidence in Singapore's economic resilience amidst global challenges, particularly with industrial production and electronics exports reaching new highs. Additionally, critical data from China, Japan, and India will impact market sentiment, especially concerning inflation dynamics that may influence monetary policy strategies in these regions.
What the desk is arguing
The desk anticipates a significant shift in Singapore's monetary policy, which aligns with recent positive economic data. The MAS is likely to implement a modest tightening of the SGD NEER policy band to reinforce the Singapore dollar against external pressures. Per the full note , the third-quarter GDP forecast should highlight continued strengths in industrial production and export-driven growth.
Evidence from recent reports indicates an increase in domestic credit growth and sustained demand from technology sectors, further supporting this view for SGD appreciation. Furthermore, Singapore's position is enhanced by its robust trade balance, amid a challenging external environment.
Where it sits in our coverage
Our consensus targets the SGD at 1.075, with a range between 1.04 and 1.12. Notable firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's call for SGD appreciation aligns closely with jpmorgan's target, suggesting the outlook for SGD is somewhat bullish relative to the broader consensus which reflects a tighter range than other forecasts.
How other firms see it
jpmorgan aligns with our expectation of a more hawkish MAS, whereas bofa remains cautious, signalling potential downward pressure on the SGD. Their differing positions highlight the market's divided sentiment on the SGD's stability amidst varying inflation pressures across Asia.
Key indicators to track include China's inflation data and Japan's producer prices, which serve as critical markers for further FX directionality in the region. For instance, movements in USD/JPY will correlate with the anticipated outcomes of Japan's PPI data next week.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01MAS likely to implement a modest tightening of SGD policy.
- 02Third-quarter GDP growth solidifies Singapore's economic resilience.
- 03Key inflation data from China, Japan, and India may influence sentiment.
- 04Broader regional trends indicate varied inflation responses, crucial for FX movements.
Market implications
Watch key support levels for SGD against the USD as MAS policy decisions come into play, especially if the SGD NEER policy band adjustment sticks. The release of China’s inflation data will also be critical in shaping market dynamics and could serve as an inflection point.
Risks to this view
The call could be invalidated if inflation pressures in India lead to a more aggressive monetary policy stance from the Reserve Bank of India (RBI), or if China's trade deficits suggest weak demand, pressuring the regional currencies more broadly.
Articles Asia week ahead: MAS policy review and key data in China, Japan and India Published 07:11 Asia week ahead China India Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The Monetary Authority of Singapore's policy review headlines the week, with modest tightening expected alongside Singapore’s third-quarter GDP release. Markets will also focus on China’s inflation and trade data, Japan’s producer prices and machine orders, and India’s CPI inflation Deepali Bhargava and Lynn Song Asia Research highlights of the week The Philippines’ inflation battle is far from over A tighter RBI, but not a hawkish one Taiwan’s trade continues to boom as surplus hits another record high Singapore: MAS expected to tighten policy modestly The Monetary Authority of Singapore's review will be the key event to watch. We expect a modest tightening via a 'very slight' increase in the slope of the SGD NEER policy band to around 1.5% annual appreciation, providing additional support for the Singapore dollar amid a challenging external backdrop.
Separately, GDP growth for 3Q should indicate that Singapore growth remains robust, supported by strong industrial production and electronics exports, which continue to reach new highs. Forward indicators continue to remain supportive, suggesting resilient technology demand, while stronger domestic credit growth suggests domestic demand remains strong as well. India: Inflation set to accelerate sharply We expect CPI inflation to accelerate sharply to 5.4%, led by food and fuel prices.
More important for the policy outlook will be whether price pressures are becoming more generalised, especially as the Reserve Bank of India maintains a relatively neutral stance despite mixed guidance on the inflation outlook. China: Inflation edges higher as trade remains strong China will release its September inflation and trade data next week. We expect CPI inflation to edge up to 1.0% year-on-year, driven by higher energy prices.
Trade growth is expected to remain strong, with exports rising 24.8% YoY and imports increasing 21.7% YoY, resulting in a trade surplus of US$118.3bn. Japan: Producer prices and machine orders in focus Japan will release its PPI data and core machine orders next week. The market expects its PPI to remain elevated at 7.6% YoY, while monthly producer prices are forecast to rise 0.5%, suggesting that upstream price pressures remain firm.
Meanwhile, markets expect August core machine orders to rebound by 2.6% month-on-month, with annual growth accelerating to 15.2% YoY, pointing to continued strength in corporate capital expenditure. Key events in Asia next week Singapore Japan India China Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific. She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China. Prior to joining ING, he worked at China Construction Bank International, China Merchants Securities (HK), and Haitong… In this article Asia Research highlights of the week Singapore: MAS expected to tighten policy modestly India: Inflation set to accelerate sharply China: Inflation edges higher as trade remains strong Japan: Producer prices and machine orders in focus
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