Asia Daily Update

North Asia
** China: Speculation that PBoC Gov Zhou will be replaced soon
** Taiwan: CBC to announce interest rates

CHINA: The Wall Street Journal said yesterday party boss Xi Jinping is considering replacing Zhou, citing unidentified officials. The China Times this month published an opinion piece on prospects for ex-securities regulator Guo Shuqing taking the job. A survey by Bloomberg show a narrow majority expect Guo Shuging to take the job, with the bulk of the remainder tipping PBoC Deputy Governor Yi Gang. Zhou has been a major proponent of capital account and FX liberalization reforms. His replacement might signal internal disagreement over the scope and pace of such reforms.

At any rate, China is facing economic headwinds and some political leaders will inevitably be less enthused over structural reforms like capital account liberalization during periods of potential economic stress, regardless of the underlying economics of the issue.

TAIWAN: Taiwan’s central bank, CBC, announces interest rates at 0800 GMT and will likely keep interest rates on hold at 1.875%. However, inflation is trending higher and growth has been improving. The economy should get a boost from the brisk sales of the just released Apple iPhone 6. We think the CBC could lift interest rates modestly in Q1 next year.

South/Southeast Asia
** Singapore: August industrial production data tomorrow to show moderate improvement
** Philippines: Trade balance swung to deficit in July on stronger than expected imports
** India: Market expects RBI to leave key rates unchanged next week while enjoying price stability

SINGPAORE: There was no major data release overnight. The next focus will be on August industrial production data due out tomorrow at 0530GMT. The market expects industrial production to improve by 4.9% y/y, up from 3.3% the month prior, on the back of strong biomedical sector. The electronics sector contraction momentum is likely to continue but may ease from -2.9% y/y previously.

PHILIPPINES: July imports remained unchanged from a year earlier, better than market expectations of 6% decline and a revised -1.4% in the previous month. The exports reported earlier remained robust at 12.4% y/y growth, supported by strong electronics sector and mineral ore exports. The trade balance swung to a narrow deficit of USD 33mn from a revised USD 625mn in June on the back of stronger than expected imports.

INDIA: The next focus is on RBI rate decision next Tuesday. The market expects RBI to hold key rates unchanged at 8%. RBI Governor Rajan has raised rates three times in the past year and stayed committed to rein in inflationary pressures. Inflation is moderating in recent months, with CPI and WPI inflation falling below 8% and 4% y/y respectively in August 2014, near the five-year low. RBI targets a CPI inflation rate of 8% by January 2015 and 6% by January 2016. Rajan told the press in a bankers' conference recently that inflation is moderating in recent months and is in line with RBI’s forecast. Other macro indicators are improving but RBI will still remain focused and committed to maintain price and exchange rate stability.