China grows slowest since 1992 but economic activities improve

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China grows slowest since 1992 but economic activities improve

Against the dollar, Thai baht on the previous trading day closed weaker at 30.82, compared to 30.70 last week.

Adversely affected by US-China retaliatory tariffs imposed, China’s grew only 6.2% year-on-year in Q2, 2019, down from 6.4% in Q1, 2019. This pace is the slowest since Q1, 1992, China’s earliest quarterly data on record. Nonetheless, China’s June economic activities, inclusive of industrial production, fixed asset investment, and retail sales, all improved and topped expectations. Moreover, China’s exports and imports over the first half of 2019 grew by 0.1% and -4.3%, respectively, while -1.3% and -7.3%%, respectively, as of June. Compared to the first half of 2018, they grew 12.8% and 19.9%, respectively. Against the US in particular, China’s exports worsened by 8.1%, while imports deteriorated by 29.9% over January-June 2019.

After Fed Chair Powell’s testimony, Chicago Fed President Evans, one of the dovish FOMC voting members, saw two needed 25bp rate cuts by the end of 2019 where he was markedly concerned about persistently subdued inflation.

Amid more dovishness of ECB and BoJ, industrial production, recently reported as of May, of both the euro area and Japan remained sluggish compared to the previous year, but improved compared to the previous month.

As the UK is getting closer to know who will be the new Conservative leader and likely new PM, despite increases of no-deal Brexit likelihood, UK Chancellor of the Exchequer Philip Hammond warned Johnson of uncontrollable no-deal Brexit and also reminded him of MPs to capably block such UK’s disorganized withdrawal from the EU.

Owing to baht under pressures of strengthening and speculations amid rising global uncertainties during early May - early July, the BoT launched additional measures, including 1) reduction of daily outstanding balance of Non-Resident Baht Account (NRBA) and NRBA for Securities (NRBS), from THB 300 to 200 million, to take effect on 22 July, and 2) non-resident holding debt securities required to report names of beneficiaries. Beforehand, the BoT started to reduce short-dated bond issuances since the beginning of July. At least in a short run, these could possibly limit flows weighing on baht appreciation and speculations.

Interesting economic data to be released this week after China’s data include the follows. US: retail sales, industrial production, building permits, consumer sentiment, and Fed officials’ speeches. Euro area (and Germany): ZEW economic sentiment index, inflation. Japan: exports, inflation.

Moving around 30.89-30.93 this morning, USDTHB could be between this week 30.65-31.15 and 30.86-30.96 today.


US 10-year treasury yield: largest weekly rise in three months

Thai benchmark government bond yield (LB28DA, 9.4 years) on the previous trading day was 1.99%, +4.13 bps. Meantime, the latest closed Thai and US 10-year bond yields were 2.03%, +3 bps, and 2.12%, -1 bps, respectively.

As markets perceived Fed Chair Powell’s testimony and the recent FOMC meeting minutes as higher likelihood of rate cuts, US treasury 10-year yield over the week rose by 8 bps, largest in three months. The previous huge weekly climb was 9 bps, during the last week of March, following a briefly negative 10-year-3-month spread. This could reflect that investors were less concerned about a probable upcoming recession since they expected that the Fed likely to cut rates soon would help retain US economic expansion.

On US yield curve inversion, US 10-year-3-month treasury spread has been negative for 42 days consecutively, but decreasingly lately, 10-year: 2.12% v 3-month: 2.14%, thus spread: -2 bps on the previous trading day, progressing from -4 bps. Meanwhile, 10-year-2-year treasury spread was still well positive, +28 bps.

Thai benchmark government bond yield (LB28DA, 9.4 years) could be between 1.95-2.03 this week and 1.98-2.00% today.


Sources: Bangkokbiznews, BBC, Bloomberg, CNBC, CNN, Financial Times,, Reuters, South China Morning Post