Halister News

(Bloomberg) -- China July industrial production, retail sales and fixed assets investment are scheduled for release at 10am local time.

• July industrial production y/y est. 6.2% vs prev. 6.2%
• July retail sales y/y est. 10.5% vs prev. 10.6%*
• July fixed assets ex-rural YTD y/y est. 8.9% vs prev. 9.0%

(Bloomberg) -- South Korean and Taiwanese pension funds and life-insurance companies may increase overseas investments by $50b to $55b as domestic rates remain low, according to Bank of America Merrill Lynch.

• The outflows will build “depreciation pressures” on the won and the Taiwan dollar, the bank’s fixed income and currency strategist Ronald Man said in an interview
• The funds may flow to Southeast Asia mkts such as Indonesia given the yield differentials, Man said
• Yield inversion between Korea’s 10-year govt. bond and UST is unprecedented, and may remain so by 10 bps for year
  • China is buying Korean bonds to diversify from assets denominated in USD and EUR, which is spurring domestic life insurers to venture abroad
  • When USD/KRW trades below 1,100, policymakers could encourage outflow as FX considerations would play a bigger role
• Sees BOK on hold for rest of year, although market is pricing in at least 50% chance of a cut by year end
• Forecasts USD/KRW to rise to 1,250 by year end on expectations of rising USD/CNY and a Fed hike in Dec. Predicts 10-yr yield at 1.4% by year end
• NOTE: Yields of 10-yr Korea Treasury Bond has been trading persistently below that of comparable Treasury since July 8; now trades at 1.413%; KRW falls 0.2% today at 1,101.47 per dollar
• The Taiwanese government is under pressure to lift the 45% cap on pension funds’ overseas allocation, and could raise it by 10 percentage points: Man
  • Pension funds for Taiwan’s military, teachers and civil servants are expected to be insolvent by 2019, 2027 and 2031 respectively, Man says, citing what the Ministry of Civil Service said in 2013
• Taiwan’s yield curve will flatten on abundant liquidity, with Man expecting the central bank to cut interest rate twice in 3Q and 4Q by 25 bps in total, to fight deflation and help with household debt
  • Lifers and banks would keep buying Taiwan govt bonds at long-end
• Sees USD/TWD at 35 by yr-end, and a potential USD/CNY rally to 7 would also pressure TWD
• NOTE: 10-yr benchmark debt in Taiwan has seen yield fall from more than 1% in Jan. to ~0.68%; TWD closed at 31.326 per dollar on Thursday

See {NSN OBRP8BBE5TS0 } for the Government Web Content - Latin America press release.

See {NSN OBRMEVBE07I8 } for the Government Web Content - Latin America press release.