Asia/Pacific Weekly Preview

China – 4Q08 GDP (Jan 22): China will release 4Q08 GDP report coupled with a batch of macro indicators. The significant deceleration observed across almost all economic indicators probably slashed overall headline growth in 4Q to around 6.3 percent (vs. +9 percent in 3Q), the lowest since late 1990s. This implies 9 percent growth for full year 2008, down from the recently revised 13 percent in 2007 and below 10 percent for the first time in six years. On the nflation front, we believe that disinflation continued in December across both upstream and downstream. Whilst industrial output growth will likely decline further on destocking ahead of global slump and shipment contraction; retail sales and fixed investment growth probably remained relatively resilient.

Hong Kong – Unemployment for October-December (Jan 19) and CPI for December (Jan 22): More layoffs, especially in the financial sector, likely lifted the jobless rate further in December to 4 percent by our forecast, from 3.8 percent in September to November. Meanwhile, we expect to see further disinflation amidst weak consumer demand in December. We forecast headline inflation of 2.8 percent, down from 3.1 percent in November.

Korea – 4Q08 GDP (Jan 22): Korea will likely register the first negative YoY growth since the IMF crisis in 4Q08 (our forecast at -2.8 percent). Latest macro data had been exceptionally downbeat across almost all fronts apart from moderating inflation, improving current account balance and stabilizing Won. We expect net export contribution turned negative since deceleration magnitude had been more evident in export than in import. Shrinking production activities and waning corporate profitability should have shed facility investment growth to a 4Y low; whereas growth in private consumption would likely weaken further as concerns on recession, liquidity tightness and financial market volatility continued to weigh on sentiment.

Malaysia – Inflation (Jan 21) and monetary policy (Jan 21): The Government has implemented seven fuel price cuts since the fuel price hike in Jun-08 as commodity prices decelerated at a more-than- expected pace. As such, we expect December inflation to ease further and come below 5 percent YoY. At the same time, the economy faces aggravated risks to growth as its three-legged growth model of trade, fiscal pump-priming and commodity resources is giving way. We expect the Central Bank to cut by 50bps in the upcoming meeting.

Singapore – 4Q08 GDP (Jan 21): Sectors with high external linkages (such as manufacturing) have been the first to weaken amid global macro softness. Phase II of the slowdown where external linkages spill over to the “inner core” of the economy, such as the relatively more domestic-demand related services industry, is also growing more intense. The slowdown in the property price cycle, softening of demand and delay in launches should also cause the real estate capex cushion to taper off. We expect the economy to contract 2.6 percent YoY in 4Q08 (vs. -0.3 percent YoY in 3Q08).

Taiwan – Export orders and IP for December (Jan 23): The incredibly disastrous December trade report from last week implied continual weakness in export order received as well as industrial production for the corresponding month. We would not be surprised if December YoY contraction deepens further to beyond 30 percent . Our forecasts for December IP and export order received are at -40 percent and -35 percent respectively (versus. -28.4 percent and -28.5 percent in November). In terms of industry, we see more downside on the tech sectors ascribed to its high correlation with the global economic cycle.