Introducing

Tian Yong Woon

Tian Yong joined Haver Analytics as an Economist in 2023. Previously, Tian Yong worked as an Economist with Deutsche Bank, covering Emerging Asian economies while also writing on thematic issues within the broader Asia region. Prior to his work with Deutsche Bank, he worked as an Economic Analyst with the International Monetary Fund, where he contributed to Article IV consultations with Singapore and Malaysia, and to the regular surveillance of financial stability issues in the Asia Pacific region.

Tian Yong holds a Master of Science in Quantitative Finance from the Singapore Management University, and a Bachelor of Science in Banking and Finance from the University of London.

Publications by Tian Yong Woon

Asia| Aug 12 2024
Economic Letter From Asia: Regional Repricing
In this week's newsletter, we delve into recent developments in Asian financial markets. These developments follow the recent spike in volatility triggered by the Bank of Japan’s (BoJ) July decision and the disappointing July US jobs report. Although some calm has returned to Asian markets, a repricing of assets seems to be underway, as investors reassess investment themes and the economic prospects for Asian economies. Most importantly, the carry trade themes are now shifting. Traditionally cheap funding currencies, such as the yen, are becoming more expensive as interest rates rise. Meanwhile, higher-yielding currencies, like the US dollar, are facing the prospect of reduced yields. Additionally, the technology theme is being reassessed, as evidenced by the significant selling in semiconductor-heavy equity indices for Taiwan and South Korea.

Beyond equity markets, we explore shifts in the relative currency performance of Asian economies. Notably, the Malaysian ringgit has shown a standout performance, with the rupiah having strengthened as well. We then examine the economy-specific factors driving these currency changes, including economic prospects and government measures. Overall, the interplay between global tech demand, monetary policy, and earnings is likely to continue shaping investor preferences in the near term. Investors will need to stay attentive to the key drivers of these themes, including inflation, geopolitical pressures, supply chain issues, and trade frictions.

Asian equities Echoing broader global developments, Asian equity markets have faced turbulence in recent weeks, initially triggered by volatility in Japan following the Bank of Japan’s (BoJ) hawkish July policy decision, and further exacerbated by a disappointing US labour market report for July. Although some stability has returned, volatility remains elevated. Overall, Asian equities initially dropped more than 10% since late July, recovering about half of those losses last week. Delving deeper, the sell-offs were more severe in specific economies and sectors, particularly within semiconductor-heavy indices in South Korea and Taiwan (see Chart 1). This trend reflects a broader reassessment by investors who now question whether semiconductor valuations have become overstretched after a prolonged rally.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Aug 06 2024
Economic Letter From Asia: On the RBA
In this week's newsletter, we focus on Australia in light of the Reserve Bank of Australia's (RBA) decision earlier today. While the RBA has chosen to maintain its current policy rate, as many economists had anticipated, this decision reflects a complex assessment of the Australian economy. On the one hand, inflation remains significantly above the RBA’s target, and any premature easing could risk reigniting price pressures. On the other hand, the household sector continues to show signs of weakness, with flagging consumption growth and lingering issues with housing affordability. As such, an additional rate hike could further strain this sector. Nonetheless, many Australian economists suggest that the balance of risk may lead the RBA to eventually lower its policy rate rather than pursue further tightening. However, the current consensus is for any initial rate cut to likely only occur early next year. In addition to inflation and household sector issues, we also analyse the current state of Australia's labour market, trade dynamics, and overall growth outlook.

The RBA’s August decision The Reserve Bank of Australia (RBA) maintained its policy rate at 4.35%, as widely anticipated. The central bank's decision to keep its stance restrictive, rather than easing, was primarily driven by persistent inflation. The RBA now expects inflation to take longer to return to its target than previously anticipated. Additionally, while growth forecasts for H2 2024 through H1 2026 have been upgraded, a more subdued growth rate is anticipated for H1 of this year. The RBA also highlighted the ongoing uncertainty in Australia’s economic outlook, and acknowledged headwinds via rising unemployment and weak household consumption. Externally, China, Australia’s major trading partner, continues to face economic challenges, with weakened demand impacting commodity prices. On the currency front, the Australian Dollar has shown muted initial reactions to the RBA’s decision, although it has already weakened significantly in recent days due to disappointing inflation data. We will explore these issues in greater detail in the following sections.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Jul 29 2024
Economic Letter From Asia: Ahead of the BoJ Decision
In this week's newsletter, we examine the Bank of Japan's (BoJ) upcoming decision scheduled for Wednesday. Recent shifts in market expectations suggest a marked increase in the likelihood of a BoJ rate hike, as priced in by various financial markets. We have observed that while consumer inflation has remained relatively stable for much of the year, there were some upticks in core inflation in May and June. Additionally, price pressures on the producer side have continued to intensify. This suggests that the BoJ’s “virtuous cycle” between wages and prices may be strengthening. This is particularly evident in the increased inflation among service producers with high labor cost ratios. However, it is important to note that these producer price increases have also been influenced by rising costs in other areas, such as transportation. Lastly, we examine the potential outcomes if the BoJ's monetary policy normalization campaign begins to quicken and leads to a stronger yen. We explore various dimensions of this scenario, focusing particularly on how a stronger yen might affect export growth and tourism.

In reality, it's still uncertain whether the BoJ will announce a rate hike this Wednesday, though market expectations are increasingly leaning towards a reduction in Japanese Government Bond (JGB) purchases. One key area of interest is how the BoJ plans to reduce its substantial JGB holdings and the subsequent impact on financial market liquidity and yields. While a “virtuous cycle” between wages and prices seems to be strengthening, evidence of such a cycle between wages and consumer spending is lacking. This is possibly because real wages have continued to decline.

Market expectations Recently, there have been marked shifts in market expectations regarding further monetary policy tightening by the Bank of Japan (BoJ). While an additional rate hike by the BoJ, following its March policy tightening, has long been anticipated, market expectations for this move have only recently intensified. This shift in expectations is evident in Japan’s financial markets, as illustrated in Chart 1. Specifically, the yen has experienced a significant rally in anticipation of an imminent BoJ rate hike. Moreover, Japan’s near-term overnight indexed swap (OIS) rates, including the 1-week OIS vs. TONAR rate, have surged, reflecting increased expectations for a rate hike within the coming week. These developments suggest heightened anticipation of the BoJ's upcoming decision, which is expected to be announced on Wednesday.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Jul 22 2024
Economic Letter From Asia: More On China
In this week's newsletter, we return our focus to China, which has recently released its latest economic data and concluded its Third Plenum meeting. While acknowledging disappointing economic indicators, we also recognize China's shift away from pursuing growth for its own sake, moving instead toward prioritizing the quality of its growth. However, we highlight persistent weaknesses in China's property sector, amid continued declines in property prices despite support measures announced earlier this year. Turning to the Third Plenum meeting, which provided limited details and signaled no major policy changes, we emphasize China's renewed emphasis on “Chinese modernization” and "high-quality development". We discuss the country's ongoing challenges, particularly its growing trade surplus with the rest of the world, the resulting trade frictions, and accusations of overcapacity and dumping.

Broadly reviewing our findings, it is evident that China's strategic focus on shifting towards high-quality growth remains steadfast. However, the economy must contend with several challenges. These include uneven growth momentum, escalating debt levels, lingering weaknesses in consumer and business sentiment, potential trade-related actions by other economies, and a fragile property sector. Therefore, we might observe ongoing challenges for the Chinese economy in the near term before growth gains an even footing. It is perhaps in response to these challenges that the central bank decided earlier today to lower several policy rates by 10 basis points each. Namely, the 7-day reverse repo rate now stands at 1.7%, while the one-year loan prime rate (LPR) has been reduced to 3.35% and the five-year LPR to 3.85%.

China’s recent dataflow The latest dataflow from China has been largely disappointing. GDP growth slowed to 4.7% y/y in Q2, marking the slowest pace of growth in five quarters (Chart 1). Monthly data releases revealed more specific setbacks: retail sales growth unexpectedly dropped to 2% y/y in June, and industrial production growth cooled to 5.3%. Looking more broadly, however, it can also be argued that China's slowing economic growth was inevitable, given its stage of development and the challenges it faces, such as an ageing population. This is notwithstanding significant leaps in productivity brought about by technological advances. Furthermore, China has been restructuring its economy, shifting its focus from pursuing high growth rates for their own sake to prioritizing the quality of growth. This includes assessing the sources and drivers of growth, a topic we will explore further below in an upcoming segment.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Jul 16 2024
Economic Letter From Asia: Trade Shifts in ASEAN
In this week's newsletter, we explore shifts in trade patterns across Southeast Asia. Our analysis reveals considerable changes in the region's export landscape, both in terms of destination markets and product composition. Economies like Vietnam and Thailand are now proportionally increasing their exports to the US, whereas Indonesia has seen a marked rise in shipments to China. Further investigation into ASEAN-6 exports highlights a growing dominance of electronic and electrical products, barring Indonesia. This trend reflects both the current upswing in the electronics cycle and deliberate strategies by regional economies to capitalize on heightened global demand, including for semiconductors.

We also delve deeper into Vietnam, where gains stem from global supply chain shifts and deepening economic integration with China, its geographical neighbour. Our focus then shifts to Indonesia, emphasizing its unique reliance on commodity exports within the ASEAN-6, particularly in its trade relations with China. Lastly, we examine labour and productivity dynamics within the ASEAN-6. We discuss potential challenges arising from rising labour costs, which could impact regional competitiveness. Conversely, we also highlight substantial productivity advances in Vietnam, which contrast with slower progress seen in peers such as Thailand.

Trade shifts by export destination and product The global trade landscape continues to evolve, even in Southeast Asia. Chart 1 illustrates how the trade destination mix among Southeast Asian economies has undergone significant changes compared to the pre-pandemic era. For one, economies such as Thailand and Vietnam have experienced a substantial increase in their share of exports to the US since late 2019. Equally noteworthy, Indonesia has seen a surge in its exports to China during this period. Interestingly, Vietnam and Singapore have also shown an uptick in their share of exports to China, albeit to a lesser degree. These trends challenge, at least for ASEAN-6 economies, narratives of trade diversification away from China. Moreover, the importance of exports to the EU and Japan has declined for the region in recent years.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Jul 08 2024
Economic Letter From Asia: Chinese Contexts
In this week's newsletter, we delve into recent developments in China ahead of anticipated economic support measures from the Third Plenum meetings. The economic backdrop in China remains mixed, with cautious signals from forward-looking indicators. On monetary policy, we explore possible reasons behind unchanged policy rates this year, including the central bank’s views toward a depreciating yuan and banks' interest margins. We also look at potential reforms by the central bank, which would more closely align with practices seen in developed markets and enhance its liquidity management tools. Turning to the property sector, persistent challenges are evident despite recent government efforts to provide support. Sentiment remains subdued, reflecting sluggish sales and uncertain market conditions. We also assess the fiscal implications at the local government level, where declining revenues from land sales and high indebtedness pose significant pressures.

Growth Latest data present a mixed picture about China’s economy. In May, retail sales outperformed expectations, growing by 3.7% y/y, yet industrial production disappointed with a slowdown to 5.6% growth, as depicted in Chart 1. The deceleration in industrial output was driven by a slowdown in the manufacturing sector, with mining providing only partial offsets. Furthermore, growth in fixed asset investment unexpectedly slowed to 4% y/y ytd, largely due to a further sharp decline in real estate investment. Recent data highlight the uneven growth across China's sectors, with persistent pockets of weakness despite the government's recent efforts to implement support measures.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Jul 01 2024
Economic Letter From Asia: The Macro on Microchips
In this week's newsletter, we analyze recent developments in advanced Asian economies, highlighting their gains from the upswing in the global tech cycle. Robust demand for AI-related semiconductor products and equipment continues to drive this upswing, bolstering overall economic growth. Additionally, we explore the geopolitical dynamics influencing the semiconductor industry. This includes US efforts to strengthen its onshore chip manufacturing capabilities and China's proactive measures to secure chipmaking equipment, possibly in anticipation of future export restrictions.

Shifting focus from semiconductors, we delve into domestic issues within these advanced Asian economies. Specifically, we address concerns such as the growth of household debt in South Korea and Taiwan. Central banks in these regions are actively addressing these concerns through measures aimed at controlling excessive debt accumulation. Meanwhile, Japan's household sector has shown promising signs of improvement recently.

Developments in Advanced Asia Taiwan’s electronics sector has lately demonstrated strong growth, largely thanks to the current upswing in the global tech cycle. Chart 1 highlights a significant acceleration in the industrial production of semiconductor-related products, such as electronic parts and components, which surged by nearly 30% y/y in May. Moreover, production of other electronic goods, including computers, saw a substantial increase of 31.8% over the same period. Forward-looking indicators such as electronics export orders also point towards robust demand in the near future, having grown 9.2% m/m. Setting aside cyclical considerations, the trajectory of Taiwan’s semiconductor sector is deeply intertwined with global geopolitics. For instance, the US government is actively advancing onshore advanced chip manufacturing capabilities through initiatives like the CHIPS Act. This includes substantial funding to incentivize Taiwan’s TSMC, a global leader in chip production, to establish manufacturing facilities for highly advanced two-nanometer chips within the US. This strategic endeavour seeks to counter the trend of offshoring crucial chip production capacity away from the US in recent decades.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Jun 24 2024
Economic Letter From Asia: Inside India
In this week's newsletter, we delve into post-election dynamics in India. Initial market reactions to the election outcome were negative but swiftly reversed, underscoring India's promise as both a high-growth economy and attractive investment destination. In the short term, sentiment indicators signal ongoing growth in India’s pivotal sectors of services and manufacturing. Furthermore, India continues to be projected as the fastest-growing major economy this year by both the World Bank and the International Monetary Fund. Looking ahead, India is poised to leverage its demographic promise via its youthful workforce, a stark contrast to other major economies grappling with rapidly aging populations.

Turning to monetary policy, we note that while the central bank has kept policy rates unchanged in recent months, there is mounting pressure within its decision-making committee to consider rate cuts. On inflation, recent trends show a gradual disinflation driven by easing price pressures in non-core items, despite persistently high food price inflation. Shifting to currency markets, we note once more the Indian rupee’s resilience, which has been supported by central bank intervention and robust foreign reserves.

Market reactions to elections Indian equities plunged and bond yields surged on June 4th, following indications that Prime Minister Modi’s political party (BJP) would secure a smaller parliamentary majority than initially predicted. Among the initial market concerns was some apprehension that the BJP would need to depend on potentially fragile alliances with other parties to advance its reform agenda, a departure from its previous independent governance. However, initial apprehensions eased quickly as Indian equities rebounded and yields retraced, as evidenced in Chart 1. One of the key recent drivers behind rallies in Indian equity markets was the significantly higher involvement of retail investors, particularly in the options markets. This surge in participation has been partly spurred by regulatory measures aimed at enhancing market accessibility for individuals. Additionally, optimism about the longer-term outlook for the Indian economy has also contributed to the equity market rallies.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Jun 04 2024
Economic Letter From Asia: Trading Places
In this week's newsletter, we explore shifting trade patterns between China and the rest of the world. These shifts reflect changes stemming from the pandemic and, more importantly, from geopolitical pressures and supply chain dynamics. While China's export dependency on Western economies like the US and the EU has decreased, it remains substantial. Additionally, certain product categories, notably transportation equipment, have gained ground in China's export portfolio. In addition to this, we delve into China's rapid development in the electric vehicle (EV) sector, both domestically and internationally. This includes achieving high retail penetration domestically and experiencing rapid export growth abroad. However, concerns have been raised by several governments regarding overcapacity issues resulting from China's escalating EV exports, leading to discussions of possible retaliation via e.g. increased tariffs to address these concerns.

Expanding our scope, government concerns regarding overcapacity extend beyond EVs to other goods, such as steel products and cement, among others. Additionally, we examine China's trade relationships with its Asian neighbors, noting a diminished share of advanced Asian economies in China’s aggregate trade, while relationships with Southeast Asian nations and India have strengthened. Lastly, we delve into China's burgeoning bilateral trade ties with Vietnam, driven by deepening supply chain integration and Vietnam's reliance on China-sourced parts for its electronics exports. These developments underscore the intricate and evolving dynamics shaping China's trade landscape.

Shifts in China’s export composition In recent years, China's export landscape has undergone significant shifts, primarily influenced by the rearrangement of supply chain dynamics stemming from the pandemic and, more recently, heightened geopolitical factors. Chart 1 illustrates this transformation, depicting a decline in China's export share to Western economies like the US and the EU compared to pre-pandemic levels. Conversely, there has been an uptick in China's export share to Asian economies such as India and those in Southeast Asia. The relative significance of product categories within China's export mix has also undergone notable shifts. Specifically, China has witnessed a substantial increase in the export share of transportation equipment, plastics, rubbers, and basic metals. This surge can be attributed to an increase of exports of specific products, such as electric vehicles (EVs), a trend we will delve into further below.
by:Tian Yong Woon
|in:Economy in Brief
Asia| May 29 2024
Economic Letter From Asia: Japan’s Balance of Payments
In this week's newsletter, we assess the recent trends and factors shaping Japan's balance of payments. Notably, Japan has witnessed a substantial improvement in its current account surplus in recent months, with an improved goods balance a primary driver. We attribute Japan's improved goods balance in part to a favorable trend in its terms of trade, although we also acknowledge the rise in export volumes for certain key products. Additionally, we highlight Japan's significant net primary income flows, which have played a crucial role in bolstering its current account balance. These substantial primary income flows are arguably a consequence of Japan's long-standing accumulation of overseas assets through both direct and portfolio investments.

This discussion naturally leads us to Japan's substantial net international investment position, which stands as the largest globally. Upon closer examination, we observe a pronounced shift within Japan's investment portfolio, with direct investment holdings progressively displacing its portfolio investment holdings in relative significance. Lastly, we explore recent patterns in Japan's outbound direct investment flows, with a pronounced increase in investments directed towards the US. In contrast, investments into China and the European Union have experienced a downturn in recent times.

Japan’s current account Japan’s current account surplus has surged since early 2023, surpassing 25 trillion yen ($160 billion) in March 2024 on a rolling 12-month basis (Chart 1). A significant portion of this improvement stems from the easing of its goods trade deficit, which decreased to about 3.6 trillion yen ($23 billion) over the period. Concurrently, Japan’s net primary income has remained the primary driver behind the economy’s overall current account surplus, hovering around 35 trillion yen ($220 billion) in recent months. This unique characteristic distinguishes Japan from many other Asian economies, where goods and services exports typically play a more dominant role in current account inflows.
by:Tian Yong Woon
|in:Economy in Brief
Asia| May 20 2024
Economic Letter From Asia: Know the (FDI) flows
In this week's letter, we look at direct investment flows across Asian economies. We find that there has been a discernible decline in foreign direct investment (FDI) across several economies in the region in recent quarters. This dip in investment activity can be attributed to various factors, including shifts in investor sentiment towards the recipient economies.

Additionally, we explore outbound direct investment flows from these economies. Hong Kong remains the primary intermediary for mainland China's investment flows, underscoring its crucial role in facilitating cross-border investments. Conversely, Japan, boasting the world’s largest stock of net international assets, maintains a strong preference for the United States as its favored investment destination. This preference underscores the enduring ties and strategic partnerships between the two nations.

Finally we shift our focus to scrutinize specific economies in Southeast Asia, where we observe a noteworthy recovery in FDI inflows following the pandemic. We find that investor interest in pivotal themes such as the energy transition and the digital economy has played a vital role in propelling these flows. We note, nevertheless a slight retracement in these flows in 2023.

China Foreign direct investment (FDI) in China has plunged in recent months, based on the standard measure adopted by the Ministry of Commerce. Monthly actual utilized FDI has consistently shown double-digit year-on-year declines throughout the year so far, with the contraction worsening to 38.2% in March (Chart 1). Additionally, China’s direct investment liability flow plunged to under 300 billion yuan in 2023, from 1.25 trillion in 2022. Analysts attribute China’s FDI declines to various factors, including domestic growth risks and ongoing tensions with other countries, such as the United States. However, the impact on growth may be nuanced, as business investment within China is predominantly domestically sourced. The outlook on China’s broader economy however, remains uncertain, with April’s economic data presenting a mixed picture. Specifically, growth in retail sales and fixed asset investment slowed further in April, while industrial production logged an unexpected growth rebound.
by:Tian Yong Woon
|in:Economy in Brief
Asia| May 13 2024
Economic Letter From Asia: Beyond the Fed
In this week's letter, we examine monetary developments in Asia. In particular, we take stock of the latest decisions by central banks in the region and delve into the possible motivations behind them. We find that while the Fed's policy trajectory remains a key policy focus, their recent actions have also been driven by domestic factors. Furthermore, we also find their policy priorities to be wide-ranging, with some aiming for currency stability, while inflation remains the focal point for others.

In Japan, recent bouts of yen appreciation have fueled speculation about potential currency intervention by the authorities. Also, the Bank of Japan’s latest summary of opinions indicates an unexpected shift from some members towards a more hawkish stance. In South Korea, persistently high inflation and potential improvements to Q2 GDP growth serve as reasons for the central bank to keep rates higher for longer. In Indonesia, the central bank’s recent surprise rate hike has drawn attention to its focus on currency stability and its broad range of policy tools. In Thailand, the central bank remains committed to maintaining its policy rates, despite ongoing governmental pressure for looser policy. Finally, in Malaysia, we acknowledge the central bank's consistent approach to policy rates and explore recent developments concerning the ringgit.

Japan The yen experienced sudden bouts of appreciation in early May, with the USD/JPY exchange rate having fallen by about 3% through May 2-3 (Chart 1). The moves spurred speculation that Japanese authorities had stepped in to support the yen following its prolonged spell of weakening this year. To infer possible episodes of currency market intervention, some market participants have turned to analyzing the Bank of Japan’s (BoJ) daily current account data for clues. Specifically, market participants looked at the BoJ’s daily net receipt of funds and contrasted them with broker-estimated figures to estimate possible currency intervention activity. Regardless, and despite its sporadic moves, the yen seems to have resumed its previous trend toward weakening. This has been fueled in part by the still-wide yield differentials between Japan and other major economies.
by:Tian Yong Woon
|in:Economy in Brief