Mizuho Bank, Ltd. Asia and Oceania Treasury Department

WEEK AHEAD Tel: 65-6805-2000 Fax: 65-6805-2095

Vishnu Varathan |Lavanya Venkateswaran | Zhu Huani

G3 Asia

Date Country Period Survey* Prior Date Country Period Survey* Prior

20- Apr EZ Feb -- 34.7b 20- 30 Apr PH Feb 3.9% 6.6%

JP Mar -- ¥1108.8b

20- Apr CH Apr 3.85% 4.05%

21- Apr US Mar -6.6% 6.5%

JP Mar F -- -40.8% 21- Apr AU

GE Apr -- -43.1/-49.5 AU

KR Apr -- 10.0%

22- Apr EZ Apr A -- -11.6

22- Apr AU Mar -- -0.4%

23- Apr US Mar 661k 765k KR Mar -- 0.7%

US 18-Apr -- -- MY Mar -- 1.3%

US Apr P 38.5 48.5 TH Mar -- -4.5%

EZ Apr P -- 44.5

JP Apr P -- 44.8 23- Apr SG Mar -- 0.3%

AU Apr P -- 49.7

24- Apr US Apr F 69 71 KR 1Q P -- 2.3%

US Mar P -11.0% 1.2%

JP Feb -- 0.8% 24- Apr SG Mar -- -1.1%

JP Mar -- 0.4%

GE Apr -- 86.1/79.7

U. of Mich. Sentiment

Natl CPI YoY

IFO Business Climate/Expectations

Industrial Production YoY

CPI YoY

CBA Australia PMI Mfg

GDP YoYDurable Goods Orders

All Industry Activity Index MoM

Markit US Manufacturing PMI

Existing Home Sales MoM

New Home Sales

Jibun Bank Japan PMI Mfg

PPI YoY

Markit Eurozone Manufacturing PMI

CPI YoY

Customs Exports YoY

Initial Jobless Claims

EventEvent

Economic Calendar

20-Apr-2020

ECB Current Account SA

Machine Tool Orders YoY

Consumer Confidence

ZEW Current Situation/Expectations

Trade Balance

Westpac Leading Index MoM

Overseas Remittances YoY

RBA Minutes of April Policy Meeting

RBA Governor Lowe Gives Speech in Sydney

1-Year Loan Prime Rate

Exports 20 Days YoY

Week-in-brief: "The Other Side"- The weekend's "half full" moments have been highlighted by the "descent" in the number of new cases and deaths in the worst hit places such as New York and Lombardy; and this has in turn inspired cautious hopes of getting to the "other side".- The other side about getting to the "other side" however is that as the WHO has warned, it is not a case of being completely out of the woods either.- For one, lingering risks of a second wave of infections will require slower, more phased opening up/re-start (compared to the speed of the lockdown).- What's more, risks to jobs and sheer business uncertainty could also impede the path to a V-Shaped rebound. In getting to the other side, the extent balance sheet damage and the knocks to economic confidence knocks on the way out pose material risks.- This is a point that the IMF rightly made in its Spring WEO (World Economic Outlook) last week, though optimism about the other side based on the optical illusion of a V-shaped rebound for 2021 may have gained more prominence than the IMF cares for.- China's Q1 GDP contracting more than expected 6.8% YoY was saved by the "other side" of pick-up in March data; validating hopes that China's resumption of economic activity led by the industrial sector, will lay the ground for a recovery thereafter.- But, the other side of the story is sluggish retail sales suggesting consumption remains cautious if not downbeat, warning of uncertainty hampering the speed of recovery as lockdowns are eased; a damp squib for the demand recovery narrative.- This ties in with a 20bp cut to the 1-yr LPR, reflecting the 20bp cut to 1-yr MLF last week.- Oil sliding back even after global oil producers at the G20 got to the "other side" of the deal to cut 9.7MBpD exposes worries about demand lagging even when the global economy gets to the "other side" of the pandemic as caution dominates. Of course, running out of oil storage capacity in the meantime does not help shore up oil prices (WTI below $18, Brent below $28). - The "other side" may inspire visions of greener grass. But there should be no illusions of demand recovery being a walk in the park either.

US Treasuries- UST yields softened led by the long end (bull flattening). This simultaneously projects optimism and pessimism about "the other side". - Optimism has been through the prism of monetary policy support keeping yields lower for longer.- And in particular, ensuring that transmission of low rates acords the curve, helping to anchor long-end yields lower even as with the "descent" in the number of cases and deaths in the worst hit places such as New York and Italy have inspired hopes of gradual lift in containment measures.- As for pessimism, oil has led the way here. Fresh drop in oil prices driven by worries about lingering demand woes have contributed to pulling down longer-end yields and may remain an anchor for now.- And so, as markets dynamically assess the scope for lifting containment measures and how economic recovery may pan out, caution could continue to be the dominant tone, keeping yields anchored; 10Y USTs are likes to be in the 0.56-0.84% range for now.

•Survey results (*) are taken from Bloomberg, as of 9 Apr 2020;

South Korea Q1 GDP: Stalled- South Korea’s Q1 growth is expected to contract from last quarter while on a year-on-year basis, it hasprobably stalled as COVID-19 took a toll on growth.- Whilst economic growth moderated for Jan-Feb, March is expected to see a much sharper slowdown asSouth Korea’s infection increased more than twentyfold in the first week of the month.- Though it has managed to flatten the curve without imposing nation-wide lockdown measures, privateconsumption will still be inevitably dampened evidenced by sharp fall in consumer confidence alongsidetheir spending plan.- Private investment is likely to register a mild growth from last year, led by capex in electronics industry.Investment in construction has probably stayed lacklustre as both building commencement and completedconstruction work continued to slip further.- Government spending will help to backstop growth, though it probably only managed to cushion furtherdownside risk rather than providing a strong boost as the extra budget was only passed in mid-Mar and thepackage is relatively small, at ~0.6% of GDP.- Net exports will probably remain accretive as imports growth moderated in line with exports.- Growth in 1H looks challenging despite stabilizing infection rate within Korea. Problem of inventory shortageamong manufacturers may become more acute in Q2 amid production disruption elsewhere.- With the ruling party's landslide election victory, the second supplementary budget (KRW 7.6tln, ~0.4% ofGDP) is likely a done deal. But its relatively small size will require further monetary policy support.

IMF: The Misguided 'V'

- The IMF's Spring World Economic Outlook, "The Great Lockdown" was grim in characterizing theprojected downturn in 2020 as the worst since "The Great Depression" of the 1930s. Yet anmisguided (and unintended) take-away for markets has been a V-shaped recovery.- Global growth being knocked back to show a 3% contraction in sharp contrast to Jan update for2.9% growth was meant to convey a "severe" downturn.- And the baseline is that as the "pandemic fades in the second half of 2020 and containment effortscan be gradually unwound", the global economy grows 5.8% in 2021 "as economic activitynormalizes, helped by policy support".- Even then, the IMF warns that there is "extreme uncertainty around the global growth forecast".- Specifically, the IMF warns that the "economic fallout depends on factors that interact in ways thatare hard to predict ... (and that) risks of a worse outcome predominate".- And so despite the simplistic optics of a V-shaped rebound, the 5.8% growth rebound in 2021being forecast needs to be appreciated in the context of being motivated by an extremely low baseand flattered by initial but likely unsustainable pent-up demand.- And in any case, the combined revisions to 2020 and 2021 are considerably negative;suggesting that the recovery from the coronavirus will fall short of a bona fide 'V'.

Bangko Sentral ng Pilipinas delivers an off-cycle 50bp rate cut- BSP cut its poilcy rate by 50bp on 16 April following which, the policy rate stands at 2.75%, the deposit rate at 2.25% and the lending rate at 3.25%. Notwithstanding the shift to a policy corridor framework in 2016, the policy rate is likely at its historical low.- BSP also announced that loans granted to MSMEs “shall be counted as part of banks’ compliance with reserve requirements” in a bid to boost lending to the more vulnerable SME sector.- Even with rates at these levels, we do not think that the BSP is done easing. For one, the BSP in recent communication has been clear about its concerns around growth; two, apart from the policy rate, the Monetary Board gave the Governor the authority to lower the Reserve Requirement Ratio (RRR) by 400bp for 2020; only a 200bp cut has been implemented so far. We believe the remaining 200bp in RRR cuts will likely be delivered sooner rather than later as the gorwht outlook remains weak. - Furthermore, past rate cuts have only been reflected in market rates to a small extent. Indeed, the lagged transmission of monetary policy was acknowledged as much in the official policy statement.

70

75

80

85

90

95

100

105

110

115

120

2015 2016 2017 2018 2019 2020

South Korea: Consumer sentiment index

Source: CEIC, Mizuho Bank-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2016 2017 2018 2019 2020

South Korea: Industrial Production: sub-index of mfg sector (%YoY, 3mma)

Chemical Electronics Motor vehicle

Petroleum Total mfg

Sources: CEIC, Mizuho Bank

Reserve Bank of India: Inter-Meeting Irrigation- The RBI has been jolted into fresh policy action in the face of emerging evidence of spots of moreadverse than anticipated macroeconomic and financial deterioration.- After the “bazooka” move on 27th March, constituting 75bp (90bp) of repo (reverse repo) cut and ~ 3.2% ofGDP worth of liquidity injections (via additional INR1trln of TLTROs, 100bp CRR, and increasing MSF to 3%) thequestion is, “What else?”.- Especially given the irony of “systemic liquidity surplus” in the system (accentuated by sustainedgovernment spending) requiring the RBI to remove an average INR4.36trln during March 27 - April 14 ofliquidity via LAF operation.- So merely flooding an inundated system is clearly not the answer.- Instead the RBI quite rightly aims to channel liquidity/credit to where it is most needed. In other words, this ismore about irrigation than it is naked pump-priming.- To fix which the RBI is explicitly targeting small and med-sized enterprises (SMSEs), NBFCs, and micro-finance institutions (MFIs), which are most constrained in terms of access to liquidity.- And to that end, a more finely tuned INR500bn “TLTRO 2.0” facility (targeted at small and mid-sized firms,NBFXs, MFIs) has been announced, and will be complemented by the 25bps cut in LAF fixed reverse reporate to mobilize and channel liquidity/credit appropriately.

Forex Rate Bond Yield (%)

% Chg^ Week Forecast 17-Apr 2-yr Chg (bp)^

USD/JPY -0.86% 106.00 ~ 110.50 USD 0.202 -2.3

EUR/USD -0.57% 1.060 ~ 1.115 GER -0.732 -3.4

USD/SGD 0.72% 1.4000 ~ 1.4550 JPY -0.161 4.2

USD/THB -0.35% 32.10 ~ 34.00 SGD 0.552 -4.1

USD/MYR 1.39% 4.250 ~ 4.420 AUD 0.211 -0.3

USD/IDR -2.61% 14,800 ~ 16,500 GBP 0.075 6.5

JPY/SGD 1.37% 1.267 ~ 1.373 Stock Market

AUD/USD 0.27% 0.590 ~ 0.660

USD/INR 0.15% 75.0 ~ 77.2

USD/PHP 0.71% 50.1 ~ 51.6

^ Changes are on weekly basis

-5.51.008-0.114 Flattening32.565

0.358 Nikkei (JP)

0.111

0.018

-415

0.002

-5.1 Flattening0.846

1.3224

0.6366

4.3698

Close

50.905

76.40

15465

0.060

1.86

0.91

19,897.26

ASX (AU)

SENSEX (IN)

SET (TH)

S&P 500 (US)

5,487.54

4,634.82

5,789.97

2,614.60

1.38 31,588.72

1.68

2.05

1,407.34 3.67

2,888.30

1,239.24

FTSE STI (SG)

-0.16

-0.31

PSEI (PH)

KLCI (MY)

% Chg

Chg^Close*

0.007 2.5

-12.3-0.4781.0875 -0.0062

10-yr

1.4231 0.010

107.54 -0.930

0.300

0.642

JKSE (ID)

5.07

Flattening

Curve

Flattening

3.04

Flattening

2,874.56

EuroStoxx (EU)

Flattening

0.1

Chg (bp)^

-7.7

100.0

102.0

104.0

106.0

108.0

110.0

112.0

114.0

2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr

Daily USD/JPY

0.520

0.550

0.580

0.610

0.640

0.670

0.700

2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr

Daily AUD/USD

1.050

1.070

1.090

1.110

1.130

1.150

1.170

2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr

Daily EUR/USD

1.340

1.370

1.400

1.430

1.460

1.490

2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr

Daily USD/SGD

FX Theme: Optimism on re-opening of economy may be fragile- Market has remained somewhat cautious this week with IMF slashing growth forecast across the globe and OPEC+ production cut deal largely failed to convince the market.- Whilst China's growth figure showed that activities have picked up slightly in March, advanced economies are unlikely to get any reprieve as PMIs due this week will probably point to further weakness.- As more countries may start to draw up guideliens to re-open the economy, it might still take a while before countries officially start to relax those lockdown rules if the spread fails to slow as expected amidst concern on 'second wave' infection.- As a result, the greenback is likely to be continually supported given limited risk appetite.- Asian central banks are expected to look for ways to further support the economy, led by potentially more rate cuts from the PBoC following its latest medium-term lending facility.- However this may not be enough to provide a strong boost to AxJ FX if high frequency indicators point to further weaknesses.- As such, high-beta currencies such as IDR may face some pullback risk especially if new cases of COVID-19 fail to stabilize.

JPY: Supported- USD/JPY stabilized at around mid-107 as the case that countries have successfully flattenedthe curve is not particularly convicing with daily new infection picking up again for threeconsecutive days.- Though the outline of plans to re-open the economy lent some support to market sentiment, thismay not take place in near future as several countries extend lockdown until early May.- More importantly, economic activities will not rebound immediately to the pre-COVID-19level as consumer-related services have been hit hard amidst surging unemployment.- As such, the upside of USD/JPY is probably capped at 110 as there is limited positivecatalyst to boost risk appetite.

EUR: Vulnerable to downside- As some European countries start to gradually relax their lockdown measures, their success inslowing spread may be further tested in the coming weeks as they are still vulnerable to 'secondwave' of infection.- With yield spread between core Eurozone members and their Southern neighbourswidening further, concerns of the solidarity of the single currency zone and debt sustainability ofsome member economies are likely to linger.- PMI readings due next week are likely to point to further signs of softening growth innear term as lockdown measures are expected to dampen consumption substantially.- Net long position on the currency climbed up marginally to the highest level since mid-2018 asinvestors expect a return of risk appetite will soften the greenback and lend some support toEUR.- Nontheless for this week, we expect EUR/USD to stay at around 1.09 with support at mid-1.07.

SGD: Weaker on volatile risk sentiment- USD/SGD weakened last week in line with most regional peers as investors' risk apettite waned slightly following the peaking of COVID-19 cases globally and increasingly poor economic data. - Domestically, the number of COVID-19 cases are rising with the most recent one day high in the number of cases at above 700. - The circuit breaker measures will continue until 4 May with the possibility of extension should domestic transmission reman high. - As such, we expect USD/SGD we continue to expect USD/SGD to edge higher through the week as risk sentiment remains volatile.

AUD: Gains to remain capped- AUD/USD was volatile through most of last week. Although AUD started the week on strong footing, it lost ground mid-week as risk sentiment soured. - RBA slowly tapered its bond purchases amount through last week, with Friday (17 April) recording the lowest amount in purchases since QE began. - WIth China's GDP growth contracting by 6.8% YoY and commodity prices still volatile, we expect gains in the AUD to remain capped. -Furthermore, the domestic growth picture remains one of weakness.

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