汇丰银行-中国-宏观策略-亚太利率：中国这次的钟声不一样-2019.1.22-35页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at:https:/ THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLES REPUBLIC OF CHINA(THE PRC)(EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)Receive CNY5yr NDIRS:Accelerated policy easing Pay INR5yr NDOIS:Fiscal headwinds;slowdown in buybacks Long 10yr MGS:Rebound in oil prices lowers fiscal concerns Our bullish conviction on China has been kept high by incoming data and policy signals.The Peoples Bank of China(PBoC)is easing at an accelerated pace,recently adding a record amount of liquidity via its open market operations,just a day after lowering banks required reserve ratio.Yet,even with monetary easing and some tax cuts,it may be too early to call for a growth rebound.Total social financing growth is still slowing post-deleveraging,and a broad-based relaxation of property measures remains remote.Extrapolating Chinas slowdown to Asia could lead some to expect across-the-board easing.However,assuming that regional growth decelerates,but does not fall off a cliff,it would be more reasonable to expect easing expectations to rise only in selected markets,such as Indonesia,that hiked more aggressively in 2018,and to a certain degree India.For other low-yielding markets,such as Korea and Thailand,we see no value in chasing rates lower.Relative value trades are better plays for example,positioning for 2s5s curve steepening in Thailand relative to Korea.For this month,our key new trades are to pay India rates and receive rates in Singapore.In India,the growing risk of fiscal slippage and a potential slowdown in the central banks bond buyback could push rates higher.For Singapore,the recent underperformance of local rates relative to regional peers has been stark.With muted bank lending activity and a potential peak in the Fed hiking cycle,we see scope for Singapore rates to fall.In addition,Malaysia government bonds have been a laggard amongst EM Asia sovereigns and we see scope for a catch up particularly given the recent rebound in oil prices.Table 1:HSBC market views Country 5-year yield/rate 2s/5s curve Overall conviction China Lower Flattening Bullish Hong Kong Higher Steepening Mildly Bearish Singapore Lower Steepening Mildly Bullish Korea Neutral Neutral Neutral Malaysia Lower Neutral Mildly Bullish Thailand Neutral Steepening Neutral Philippines*Neutral Neutral Neutral India Higher Steepening Neutral Indonesia Lower Neutral Mildly Bullish Australia Neutral Flattening Neutral New Zealand Neutral Neutral Neutral Japan Neutral Neutral Neutral Notes:IRS curve unless otherwise specified.*Government curve.Source:HSBC 22 January 2019 Andr de Silva,CFA Head of Global EM Rates Research The Hongkong and Shanghai Banking Corporation Limited .hk+852 2822 2217 Pin Ru Tan Asia-Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited,Singapore Branch .sg+65 6658 8782 Dayeon Hong Asia Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6569 Himanshu Malik,CFA Asia-Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited .hk+852 3941 7006 Tom Nash,CFA Strategist HSBC Bank Australia Limited .au+61 2 9084 2433 Zoe Fang Associate,Asia-Pacific Rates Strategy The Hongkong and Shanghai Banking Corporation Limited .hk+852 2822 4665 Asia-Pacific Rates FIXED INCOME RATES China chimes are different this time BearishBullish FIXED INCOME RATES 22 January 2019 2 Top trades Table 2.New strategies Entry date Entry level Target Stop Current P&L Rationale Long Malaysia MGS3.733 Jun28 21-Jan-19 4.07%3.9%4.20%4.07%+0bp Rationale:Rebound in oil prices;cheap valuations versus the rest of maturity segment.Risks:Any slippage to fiscal consolidation plan Rec Singapore SGD5yr IRS 21-Jan-19 2.07%1.80%2.20%2.07%+0bp Rationale:Sufficient liquidity in the market.Risks:Currency weakness Pay India 5yr INR ND OIS 21-Jan-19 6.49%7.00%6.30%6.49%+0bp Rationale:Long-dated ND OIS rates need to reflect higher risk premium.Risks:Further policy easing.Pay Rec Hong Kong HKD5yr IRS HKD1yr IRS 21-jan-19 22bp 40bp 10bp 22bp+0bp Rationale:Belly of the curve to underperform with curve steepening&attractive carry at the front-end of the curve.Risks:Lower US rates.Thailand THB5-2yr NDIRS steepener Korea KRW5-2yr NDIRS flattener 21-Jan-19 19bp 40bp 5bp 19bp+0bp Rationale:Thailand curve is unlikely to invert with increasing duration of outstanding bonds.Risks:Lower US rates or sudden switch in monetary policy stance by Bank of Thailand Buy Sell Australia TCV3 Oct28 ACGB2.75 Nov28 17-Jan-19 46.5bp 34bp 52bp 46bp+0bp Rationale:Attractive valuations and supply factors.Risks:Deterioration in state revenue outlook Pay Rec India 5yr INR ND OIS 2yr INR ND OIS 11-Dec-18 8bp 40bp 0bp 17bp+8bp Rationale:Long-dated ND OIS rates need to reflect higher risk premium;intensifying expectations of policy accommodation.Risks:Further policy tightening.Source:HSBC Table 3.Review of positions opened in previous publications Instrument Entry date Entry level Target Stop Current P&L Rationale Rec Pay Offshore China CCS3yr IRS CCS2yr IRS 21-Nov-18 2bp-20bp 10bp 6bp-4bp Rationale:Seasonal pressure on the renminbi.Risks:The end of the global USD rally.Buy JapanJTDB0 Jan19 25-Oct-18 2.85%52bp(annualised)Maturity 2.63%+22bp Rationale:Attractive yield pick-up.Risks:A further increase in US dollar funding costs via xccy basis Long Indonesia IndoGB5.625 May23 3-Oct-18 8.00%7.20%8.50%7.96%+4bp Rationale:BI is near the end of the tightening cycle and rate cuts possible in 2019.Risks:Global risk asset sell-off.Rec Japan USDJPY 3yr basis 27-Sep-18-39bp-55bp-30bp-39bp+0bp Rationale:Increase in Samurai bond related liability hedging.Risks:An indication of departure from ultra-loose monetary policy by the BoJ Rec China CNY5yr NDIRS 18-Apr-18 3.55%2.30%3.00%2.81%+74bp Rationale:Slower economic growth,and more monetary easing.Risk:Large fiscal stimulus.Buy China 10yr CGBs 14-Mar-18 3.86%2.70%3.40%3.14%+72bp Rationale:Slower economic growth and slower pace of financial deleveraging.Risks:Currency weakness or higher US rates.Open:Unrealised P&L:+204bp Closed:Realised P&L*+47bp Aggregate:Total P&L+251bp*Total P&L on closed positions since December 2018.Source:HSBC 3 FIXED INCOME RATES 22 January 2019 EM Asia rates relief,near-term Drip-feed stimulus in China rather than opening the flood gates There are a lot of parallels with 2015/16 to 2018/19 with regards to China.Decembers China PMI manufacturing fell below the 50 key threshold,the first time since July 2016,the yuan in 2018 weakened to levels last seen in 2016 and increasingly there is a counter-cyclical fiscal and monetary policy response this time around,as was evident back then.There are a lot of distinguishing features too though which have ramifications both for China onshore rates and EM in general.Top of the agenda for China authorities in 2019 is to stabilize growth but the degree of stimulus is unlikely to be as potent on growth as previously,as deleveraging measures continue to bite.Premier Li Keqiang has acknowledged that the Chinese economy faces increasing downward pressure but will not resort to flood-like stimulus(CCTV,15 Jan).During 2016 and 2017 potent stimulus and economic rebound in China played a key part in synchronised global growth and corresponding rally in EM Rates(Figure 1).This time around stimulus in China is likely to remain more pragmatic with drip-feed like characteristics.A synchronised global slow-down is more likely,led by a deceleration in DM growth.A multi-year EM Rates rally,which we fully endorsed at the time in 2016-2017 is therefore unlikely to be repeated.Progress on US-China trade talks,China stimulus and the prospect of a Fed policy pause is likely though to continue to be encouraging in the near-term(ie Q1)for EM/Asia high yielders,in particular Indonesia and the laggards,such as Malaysia.Key direction Chinas degree of stimulus is unlikely to be as potent on growth as previously and could result in deceleration on regional growth Our strategic bullish stance in China bonds remains intact Near-term relief in Asia rates,however,provides room to be positive on higher-yielders like Indonesia and laggards such as Malaysia Andr de Silva,CFA Head of Global EM Rates Research The Hongkong and Shanghai Banking Corporation Limited +852 2822 2217 Figure 1.Similarities but also distinctions to 2016 Figure 2.Chinas 7-day repo fixing continues to drop *EM growth include 53 countries according to Refinitiv Datastream data Source:Bloomberg,Refinitiv Datastream,HSBC Source:Bloomberg,HSBC A synchronised global slow-down is more likely 1.02.03.04.05.06.07.08.0Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18%EM GDP growth*(LHS)G3 GDP growth(LHS)0.01.02.03.0%Fed fund rate(LHS)46474950525355China manufacturingPMI(RHS)1.82.02.22.42.62.83.03.23.4Jan-17May-17Sep-17Jan-18May-18Sep-18Jan-19%50-100bp differentiated RRR cut100bp targeted RRR cut50bp targeted RRR cut100bp targeted RRR cut100bp RRR cuts PBoC created TMLFChina 7-day repo fixing(3m moving averge)FIXED INCOME RATES 22 January 2019 4 We do expect the PBoC 7-day repo fixing to drop to 2.20%in 2019(page 3,Figure 2)and again the last time the rate fell below this level was in mid-2015.Granted at the time there were five key lending rate cuts in 2015,as well as five differentiated required reserve ratio cuts over 2015/16.So far there have been four RRR cuts in 2018 and two staged 50bp RRR cuts on 15 January and 25 January in 2019.Even without lending rate cuts in the current cycle there is still plenty of potential for the PBoC to add liquidity and drive rates lower,including the newly introduced Target Medium-term Lending Facility(TMLF).With capital outflow pressure mild compared with 2015 this may not be also at the expense of the yuan(page 6)and it is noticeable that recent strength in the currency has already occurred despite lower China rates.This combination also provides a good anchor for EM/Asia Rates,at least in the near-term as well as reinforcing our convictions for remaining long 10-year China Government bonds and receiving CNY 5yr ND IRS(China Rates 2019,7 January 2019).Leaders and laggards A comparison of 10-year yield shifts across Asia-Pacific over the past three months indicate that Philippine government bonds have led with a drop of nearly 130bp,followed by Indonesia of circa 80bp(Figure 3).The former is surprising and due to a combination of better-than-expected inflation,a liquidity squeeze in terms of capitulation in light exposure by domestic investors due to outsized sell-off last year in the bond market and pressures on external imbalances easing in part due to a more dovish Fed.The BSP may even cut its reserve requirement ratio(RRR).Whilst yields have already dropped considerably,we see room for bond yields to remain pinned down and therefore advocate a neutral stance on Philippine bonds.For Indonesia,proactive policy by the central bank in terms of sizeable rate hikes and government curbs on imports last year has put the respective market in good stead as external risks have abated.There is also evidence that flows are returning,whether strong appetite at auctions(page 12)and as of 17 January,foreign holdings reached a record high.We retain our recommendation to be long 5yr government bonds given the yield curve flatness and it is becoming clear that Bank Indonesia(BI)has likely reached the end of its tightening cycle.India too has also dropped by around 75bp,initially driven by falling oil prices towards the end of last year,improving inflation,Reserve Bank of India(RBI)OMOs as well the market re-pricing towards a rate cut.We however lower our mildly bullish stance on Indian government securities(Gsec)to neutral and recommend paying 5yr ND OIS due to growing fiscal headwinds and a potential slowdown in the pace of bond buybacks by RBI.Even without lending rate cuts in the current cycle there is still plenty of potential for the PBoC to add liquidity and drive rates lower We see room for bond yields to remain pinned down in Philippines Figure 3.Philippines,India and Indonesia sovereign yields declined the most during past three months Figure 4.Malaysia sovereign yields underperformed vs US Treasuries since October 2018 Source:Bloomberg,HSBC Source:Bloomberg,HSBC -160-140-120-100-80-60-40-200PHPINRIDRHKDCNYSGDAUDTHBKRWNZDJPYMYRLKRbp10Y sovereign bond yield change over the past three months3.83.944.14.24.34.42.52.62.72.82.93.03.13.23.3Jan-18Apr-18Jul-18Oct-18Jan-19Yield(%)Yield(%)10YUS Treasury(LHS)10YMalaysia government bond(RHS)5 FIXED INCOME RATES 22 January 2019 Aside from China bond yields which have dropped around 45bp during the same period,which we have well documented(page 3 and page 9)and there is prospect for a further rally,there is little to distinguish amongst the EM Asia low yielders(e.g.South Korea,Thailand)and Asia DM(Australia and New Zealand).One distinct laggard though has been Malaysia with around just a paltry 5bp drop.Also in comparison to US Treasury yields,Malaysian Government Securities(MGS)have underperformed(page 4,Figure 4).Whilst this is more traditional analysis,there are also reasons to be more constructive on MGS with oil prices picking up again,GBI-EM weightings stabilising and fiscal slippage already factored in.We have therefore turned mildly bullish on Malaysia bonds from previously neutral and recommend investors to go long 10yr MGS.FIXED INCOME RATES 22 January 2019 6 It is looking like early 2016 again.Asian currencies are recovering as Fed concerns and China-related risks ease,and investors use valuation arguments(overvalued USD,undervalued EM assets)to justify their risk appetite.But history often only rhymes rather than repeats the critical differences today are that US rates(the hurdle rate)are much higher,the US economy is in the late stage of its cycle,and Asias exports growth have peaked(maturing tech cycle).These distinctions suggest that the Asian FX rally is probably more fragile in 2019 than it was in 2016.The sharp appreciation in the DXY on the back of the US Presidential election outcome derailed the Asian FX rally in late 2016.This time around,we see three plausible catalysts that could spoil the party.First,the failure of US and China to come to a lasting and meaningful trade agreement.The US thus proceeds to tax half of its imports from China at a 25%tariff rate and USD-RMB could break above 7.00 in that scenario.The second risk is also China-related.If Chinas stimulus measures are not able to shore up growth by say,the middle of the year,some investors may think that the authorities are running out of policy ammunition or that the economys structural debt problems have become too significant.The fears of Chinas“hard landing”from 2H15 c