In today’s briefing:
- HEW: Policy Under Pressure
- China Economics: Policy Confusion Risks Worsening Demand Slump
- Asian Equities: China, Taiwan PE Slightly Stretched; More Upside in Korea; India to Correct More
- Malaysia’s Rubber Industry Struggles To Regain Footing
HEW: Policy Under Pressure
- President Trump’s attempt to fire Governor Cook, potentially gaining a supportive majority on the Fed, raises the risk that US policy overstimulates the economy.
- Policy peers should not be pressured to mirror mistakes. The ECB faces data that keep accumulating hawkish pressures, but others are more susceptible, like the BOK.
- Non-farm payroll data provide the last hope of blocking a Fed rate cut in September. Meanwhile, a rise in EA inflation to 2.1% should help rule out another ECB rate cut.
China Economics: Policy Confusion Risks Worsening Demand Slump
- Transitory factors that drove China’s stronger-than-expected growth in the first half of 2025 are starting to fade, with hits to investment and consumption demand imminent in 2H25.
- But Beijing is in a bind on its policy response: it is rolling out demand-supporting measures but it is also keen to cut excess capacity and enforce public sector frugality.
- The net impact is that economic growth to decelerate significantly in 2H25. More stimulus measures will be dribbled out but its impact will be stymied by conflicting aims and adverse
Asian Equities: China, Taiwan PE Slightly Stretched; More Upside in Korea; India to Correct More
- A look at Asian markets’ PE relative to future EPS growth and PBV relative to future ROE re-establishes the conclusion that Korea and Philippines are cheap, and India is expensive.
- Market buoyancy and EPS estimate downgrades have taken Asia-ex- Japan’s and HK/China’s 12-month forward PE to 15-17% higher than long-term average. So are Korea (6%), Taiwan (21%) and India (26%).
- We’re cautious on India. We’ll watch HK/China’s valuation closely but aren’t too worried about them. Korea’s valuation can expand further. We’ll turn watchful here only after another 10% appreciation.
Malaysia’s Rubber Industry Struggles To Regain Footing
- June output rises MoM, but sharply lower YoY
- Exports declined 17.3%, with glove shipments softening
- Price volatility intensified, underscoring demand uncertainty
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