Asia Daily Update

North Asia:
** China: anti-corruption drive hitting the financial sector
** S Korea: Inflation remains low, unchanged on month prior

CHINA: The WSJ reports that China’s two-year anti-corruption drive is now hitting the financial sector. According to the WSJ, the president of China Minsheng Banking Corp has resigned citing ‘personal reasons’. Anti-corruption officials are questioning him regarding his ties to a former top Chinese Communist Party official, Ling Jihua, who is also being investigated for graft.

Meanwhile, the Bank of Beijing said that a board member is being investigated over ‘possible serious violations’ of party discipline.
Free-trade zones in Tianjin, Fujian and Guangdong, as well as expansion for the FTZ in Shanghai are due to be announced shortly according to China Securities Journal. Tianjin plans to allow the parallel import of cars, while Fujian is to focus on cooperation with Taiwan.

S KOREA: CPI inflation for January held steady at 0.8% YoY unchanged on the month prior. With the ECB engaging in QE, the BoK is under pressure to further trim interest rates to limit gains in the KRW. However, at the prior meeting the BoK said that interest rates are already supportive of the economy, suggesting no further rate cuts. The BoK releases minutes to the Jan 15 meeting at 3pm today (SIN/HK).

South/Southeast Asia:
** India: RBI could cut a 2nd time in less than three weeks
** Singapore: SGD NEER holds steady at -0.9% vs mid-point

INDIA: RBI is the focus tonight with the market pricing in another 25bp cut to 7.50% while the latest Bloomberg survey has only 20% of economist looking for another cut. RBI surprised on 15 January as it lowered rates in an unscheduled meeting. We lean on the side of another cut in less than three weeks on the view that RBI may be inclined to front-load its rate easing to help aid the economy. This is due to a few factors, including 1) sharp drop in inflation which is expected to remain low. RBI expects oil prices to stay depressed this year; and 2) positive developments on the fiscal front – even though the deficit for the current fiscal year 2014-2015 is expected to exceed the 4.1% target reiterated in July’s budget last year, it is expected to stabilize below the 4.5% level of the previous fiscal year. On RBI policy, we look for another 100bp worth of rate cuts this year to 6.75%.

- RBI Governor Rajan said in an article yesterday that RBI should focus on keeping inflation low and stable, ensuring optimal conditions for growth. He said India’s current account deficit situation is likely to persist in the foreseeable future, implying a continued need for net foreign financing. He emphasized once again the need to maintain fiscal discipline. He added that the government should consider “whether India needs more institutions to control deficits and monitor the quality of its budgets is a question worth of discussion.”

- For USD-INR, it remained relatively stable yesterday between 61.75-62.00. We’d look for a move out of the 61.00-62.50 range for a clearer direction.

SINGAPORE: We get January PMI and PMI electronics tonight, with consensus at 49.8 and 50.4 respectively vs 49.6 and 50.5 respectively in December. Overall, the outlook for manufacturing remains benign, with few signs of a strong recovery as yet, particularly in electronics which is traditionally the key driver.

- For USD-SGD, it held within the 1.3510-1.3560 range yesterday and closed slightly lower at 1.3520. For the SGD NEER, we estimate it is holding steady at -0.9% vs the mid-point for USD-SGD at 1.3510, USD-MYR at 3.6310, and USD-CNY at 6.2600.