Asia Daily Update

North Asia:
** China: China Europe International Exchange gives European investors indirect access into Chinese market
** China: April industrial profits rose 2.6% y/y from -0.4% in March

CHINA: Deutsche Boerse, the Shanghai Stock Exchange and the China Financial Futures Exchange announced yesterday a new joint venture named China Europe International Exchange. The newly created Exchange gives investors outside China indirect access to the Chinese market by allowing them to trade CNY-denominated instruments based on Chinese underlyings. For example, fund managers can buy licenses to launch ETFs based on Chinese indicies and denominated in CNY. It will be incorporated in Frankfurt and operations are to commence in Q4 this year with an initial offering of cash market products.

In terms of ownership, Deutsche Boerse and the Shanghai Stock Exchange will hold 40% each and the remainder by the China Financial Futures Exchange. This also marks China’s 2nd mutual access program following the Shanghai-HK Stock Connect launched in November 2014. It brings China further down the road of financial and capital market liberalization and internationalization of the CNY.

- In terms of data, April industrial profits released yesterday gained for the first time since September 2014, it rose 2.6% y/y from -0.4% in March. On a YTD basis, industrial profits declined by 1.3%, narrower than the -2.7% recorded in March. The figures remain modest compared to the double digits growth seen between 2012 and mid-2014 and reflects the broader economic slowdown story.

- PBoC’s annual report released yesterday suggested that China can keep its economic growth at around 7% in 2015. At the same time, it sees M2 growth coming in at 12%. This is slightly higher than the average of 11.3% seen in the first four months of this year. Nevertheless, M2 growth is expected to continue to moderate compared to the average of around 14.4% between 2011-2013.

South/Southeast Asia:
** India: A softer than expected Q1 GDP tomorrow could prod RBI to cut again
** Singapore: SGD NEER stable at +0.1% above mid-point

INDIA: There’s nothing on the calendar today. The focus is on Q1 GDP tomorrow with consensus looking for slightly softer growth of 7.2% y/y from 7.5% in Q4. This will bring growth for fiscal year 2014-15 to 7.3% vs the earlier estimate of 7.4%. The outlook may also remain modest near term given the weak tone for exports. Ironically, with inflation moderating, it could nudge RBI to consider lowering again as soon as the next meeting on 2 June. If the upcoming monsoon season is not abruptly affected by lower rainfalls and keep food prices in check, our overall bias is for RBI to lower rates by another 50-75bp this year from the current 7.50% level. The latest Bloomberg survey has around 70% of economists looking for a 25bp cut.

SINGAPORE: USD-SGD held steady yesterday between 1.3470-1.3550 and closed just a touch higher around 1.3510. For the SGD NEER, we estimate it is unchanged from yesterday at +0.1% above the mid-point. The +/-2% range around the mid-point is seen at 1.3250-1.3790, ceteris paribus.