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CIO Insights 4Q24: In a Sweet Spot

The Value in Bitcoin Volatility

Trump 2.0 – Winners & Losers

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The ASEAN Portfolio

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Trump 2.0 comes with promises of a wider trade war, affecting not just China, but all countries who trade with the US. This need not be a zero-sum narrative at the expense of Asia.

Macro Insights Weekly: Trump’s world and Asia’s playbook

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<p><span style="font-family: arial, helvetica, sans-serif;"><span style="color: #ba372a;"><strong><u>Commentary: </u></strong></span><strong><u><span style="color: #ba372a;">Trump&rsquo;s world and Asia&rsquo;s playbook in the coming years</span><br /><br /></u></strong></span><span style="font-family: arial, helvetica, sans-serif;">Last week&rsquo;s US elections, which delivered an emphatic victory for Donald Trump and the Republican party, have brought in a sense of d&eacute;j&agrave; vu for Asia. Eight years ago, the region&rsquo;s commitment to a global rules-based order and open trade was challenged by the surprising victory of Trump, who came to office with commitments to a trade war. Since then, through Trump and Biden, tariffs, restrictions on tech access, and scrutiny on investments have been ramped up progressively. But most of these were aimed at China, which, while being hurt by these actions, has the wherewithal to counter them to some extent.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;"><strong>Trump 2.0 comes with promises of a wider trade war, affecting not just China, but all countries who trade with the US</strong>. Trump&rsquo;s campaign promises include installing a blanket tariff of 10% to 20% on all imports, with additional tariffs of 60% to 100% on goods brought in from China.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">How would nations deal with this shock if followed through? The playbook is an obvious one, tried and tested over the past eight years:<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">First, divide the cost between supplier and buyer. Trade percolates through factories, traders, whole-sellers, and retailers of sizes large and small. There is plenty of empirical evidence from recent tariff measures that they are absorbed in bits and pieces through the supply chain and the end consumer. In some cases, they lead to near-shoring and on-shoring, although it is not clear if that leads to benefits to US consumers in terms of better prices or jobs. Further supply chain fragmentation, pressure on margin, higher retail prices, are all on the table.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Second, find ways to take Chinese goods to the US without paying the highest tariffs. Solar panels, for instance, find their way to the US via third countries. Another case in point is pharmaceutical drugs. The US may be keen to reduce its dependence on Chinese pharmaceuticals, and buy from elsewhere, India, for instance.&nbsp; Four out of ten prescriptions filled in the US in 2022 were supplied by Indian companies, and Indian companies supplied 47% of all generic prescriptions filed in the US. But where does the bulk of India&rsquo;s active pharmaceutical ingredients come from? China.</span><br /><span style="font-family: arial, helvetica, sans-serif;">Third, invest more in non-US markets. US is the largest economy in the world, but China is not far behind, while the rest of the world offers plenty of opportunities. Asian economies will be compelled to deepen regional integration and improve market ties with Europe, Middle East, Africa, and Latin America. Trump&rsquo;s trade war will reshape the world, but it doesn&rsquo;t have to be a so-called zero-sum narrative at the expense of Asia.<br /><br /><br /></span><span style="font-size: 12pt;"><span style="font-family: arial, helvetica, sans-serif;">To read the full report, click here to <strong><a href="/pdfController.page?pdfpath=/content/article/pdf/AIO/112024/241111_insights_weekly.pdf">Download the PDF</a></strong>.<br /><br /></span></span></p>
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<h4 class="name">Taimur Baig, Ph.D.</h4>
<h5 class="designation">Chief Economist - Global</h5>
<a href="mailto:taimurbaig@dbs.com">taimurbaig@dbs.com</a><br /><br /></div>
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<h4 class="name">Mo Ji, Ph.D.&nbsp;</h4>
<h5 class="designation">Chief China Economist - China &amp; Hong Kong&nbsp;</h5>
<a href="mailto:mojim@dbs.com">mojim@dbs.com</a></div>
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<br /><br />Subscribe&nbsp;<a href="mailto:groupresc@dbs.com?subject=Subscribe_to_Economics_Macro_Strategy_research_materials">here</a>&nbsp;to receive our economics &amp; macro strategy materials.<br />To unsubscribe, please click&nbsp;<a href="mailto:groupresc@dbs.com?subject=Unsubscribe_to_Economics_Macro_Strategy_research_materials">here</a>.</div>
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Southeast Asia has become attractive to investors lately, but so have other emerging economies. Recognising key headwinds, we still see room for substantial regional prosperity in the decade ahead.

Navigating High Winds: Southeast Asia Outlook 2024 – 34

<div style="text-align: justify;">
<p><span style="font-family: arial, helvetica, sans-serif;">Southeast Asia has grown despite headwinds. &nbsp;Over the last three decades, the region withstood shocks from the Asian financial crisis, the SARS pandemic, a global financial crisis, and the Covid-19 pandemic. And it stayed the course.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Southeast Asia grew, even as the China miracle siphoned manufacturing investment and jobs away from the region.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">In recent years, Southeast Asia has become more attractive to investors, but so have India, Mexico, and Eastern European countries.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">This is the right moment for Southeast Asia to leverage its newly improved investment climate and well-established, dynamic sectors.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Much of the world is bracing for lower growth because of higher interest rates, unsustainable government spending levels, trade protectionism, and the potential fallout from the US-China rivalry. But in Southeast Asia, tailwinds should prevail.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Southeast Asia comprises of six major markets and a handful of smaller ones. While there are important links between markets and opportunities to pursue regional approaches, each country&rsquo;s potential must be addressed individually.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">While many economists focus on FDI as the key barometer for confidence in an economy, we assign substantial weight to domestic investment. Most Southeast Asian countries are seeing robust growth of domestic investment, which underscores local confidence in the region&rsquo;s growth prospects relative to alternatives.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Effective government action will play a role in catalysing growth. The China model involves the state setting priorities and bending funding toward them. Execution occurs at the city and provincial levels through state-enabled &ldquo;hyper-competition.&rdquo; Entrepreneurism plays a critical role in fully realizing growth potential.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">We say, let&rsquo;s unfurl the mainsails.<br /><br /></span><br /><span style="font-size: 12pt;"><span style="font-size: 10pt; font-family: arial, helvetica, sans-serif;">To read the full report, click here to&nbsp;<strong><a href="/pdfController.page?pdfpath=/content/article/pdf/AIO/082024/240801_insights_sea_outlook.pdf">Download the PDF</a></strong>.</span><br /></span></p>
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<h4 class="name"><span style="font-family: arial, helvetica, sans-serif;">Taimur Baig, Ph.D.</span></h4>
<h5 class="designation"><span style="font-family: arial, helvetica, sans-serif;">Chief Economist - Global</span></h5>
<span style="font-family: arial, helvetica, sans-serif;"><a href="mailto:taimurbaig@dbs.com">taimurbaig@dbs.com</a></span></div>
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<h4 class="name"><span style="font-family: arial, helvetica, sans-serif;">Radhika Rao</span></h4>
<h5 class="designation"><span style="font-family: arial, helvetica, sans-serif;">Senior Economist &ndash; Eurozone, India, Indonesia</span></h5>
<span style="font-family: arial, helvetica, sans-serif;"><a href="mailto:radhikarao@dbs.com">radhikarao@dbs.com</a></span></div>
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<h4 class="name"><span style="font-family: arial, helvetica, sans-serif;">Ma Tieying, CFA</span></h4>
<h5 class="designation"><span style="font-family: arial, helvetica, sans-serif;">Senior Economist - Japan, South Korea, &amp; Taiwan&nbsp;</span></h5>
<span style="font-family: arial, helvetica, sans-serif;"><a href="mailto:matieying@dbs.com">matieying@dbs.com</a></span></div>
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<h4 class="name"><span style="font-family: arial, helvetica, sans-serif;">Chua Han Teng, CFA</span></h4>
<h5 class="designation"><span style="font-family: arial, helvetica, sans-serif;">Economist - Asean</span></h5>
<span style="font-family: arial, helvetica, sans-serif;"><a href="mailto:hantengchua@dbs.com">hantengchua@dbs.com</a></span></div>
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US, Europe, Japan

US: Fed meeting a non-event 

Webinar: Tuesday, November 19th, 4PM SGT

With Donald Trump&rsquo;s election as the 47th president of the US and the Senate shifting to a Republican majority, a few years of intensifying trade and tech war, and deficit spending lie ahead.

Trump win and the global macro narrative

Given the scope for significant regulatory change in the US following elections, crypto markets should see higher volatility into Nov as sentiment swings with election odds.

Crypto Digest: US politics’ influence on sentiment

Cryptocurrencies offer a new paradigm of decentralized, logic-driven money. Adoption is increasing, given its potential for new applications, but much remains uncertain.

Digital currencies: Perspectives and potential

With the US Fed kickstarting its rate cut cycle with a strong 50bp cut, the focus shifts to Japan and the Eurozone.

Japan & Eurozone: On their own beat

Fed pivots to supporting the labour market 

Volatile global markets and supply shocks have weighed on crypto prices, but ETH ETF outflows are easing.

Crypto Digest: Outflows stabilizing across Ether ETFs

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After record breaking campaign spending and considerable drama, the US presidential elections take place. Is the 2025 US macro outlook heavily dependent on the outcome? We don&rsquo;t think so.

Macro Insights Weekly: US elections and the 2025 macro narrative

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<p><span style="font-family: arial, helvetica, sans-serif;"><strong><u><span style="color: #ba372a;">Commentary: US elections and the 2025 macro narrative</span><br /><br /></u></strong></span><span style="font-family: arial, helvetica, sans-serif;">After record breaking spending and considerable drama, the US presidential elections take place on Tuesday, November 5. Along with picking a President and Vice President, Americans will also vote for a range of other bodies, including the US Senate, House, state governorships, and state legislatures.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">This is a coin-toss election, with polls suggesting leads and lags within the margin-of-error. But <strong>given the vagaries of the electoral college system, the ultimate verdict need not be narrow. All seven swing states could end of up going in one direction, however narrowly, thus giving the winner the veneer of a landslide</strong>. Regardless of the outcome of the elections, the US will remain a deeply divided nation on its choice of leadership. Lack of consensus on immigration, tax policy, entitlements, public debt, immigration, education, healthcare, and foreign policy will remain the hallmark of the US under either Harris or Trump.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">The elections are taking place at calm economic times, unlike four years ago when pandemic related distortion and uncertainty clouded the horizon. This time, the economy is maintaining strong growth momentum despite a multi-year monetary policy tightening cycle. High rates have not dented the asset markets, which have been buoyed by strong corporate and household balance sheets, a major investment cycle around AI, and substantial fiscal support. Goods inflation has dissipated, while numerous geopolitical risks have come and gone without hurting domestic activities or sentiment.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">The president taking office on January 20 next year will not be able to rest easy though, as <strong>behind the cyclical comfort lies major structural challenges</strong>. The fiscal situation, characterised by net public debt amounting to over 100% of GDP and USD1trln+ in annual interest payments, is increasingly untenable. <strong>Foreign investors&rsquo; inclination to hold US treasury as the world&rsquo;s premier AAA-rated asset runs deep, but it is not unconditional</strong>. Stubborn services inflation, lack of fiscal consolidation, weaponisation of the USD, all are a source of rising discomfort, something that would need to be addressed sooner than later.&nbsp;&nbsp;<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">The US, over the past eight years, have made a decisive switch from promoting free trade to resorting to increasingly protectionist policies. <strong>Tariffs against China in particular, and the rest of the world in general, would rise under Trump, but they won&rsquo;t be reduced under Harris either</strong>. Restriction on China&rsquo;s access to high tech continues to be ratcheted up, with those who trade with China also facing scrutiny; we expect no relent to this dynamic under either president in the coming years.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">On USD and rates, would the outlook be different under the marginally more rules-based policy of Harris as opposed to the transactional and mercurial Trump? Perhaps one can make the case that Trump&rsquo;s policies of tax cuts and tariffs would be more inflationary; but it is also not the case that Harris has major anti-inflation plans in her arsenal. Are rates likely to be higher as fiscal issues are left unaddressed? We think that&rsquo;s true for both.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Social cleavages run deep along partisan lines in the US.&nbsp; But having assessed the last two electoral cycles, we suspect that lack of clarity on economic policies is bipartisan.&nbsp;</span><br /><span style="font-size: 12pt; font-family: arial, helvetica, sans-serif;"><br /><br />To read the full report, click here to <strong><a href="/pdfController.page?pdfpath=/content/article/pdf/AIO/112024/241104_insights_weekly.pdf">Download the PDF</a></strong>.<br /></span></p>
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<h4 class="name">Taimur Baig, Ph.D.</h4>
<h5 class="designation">Chief Economist - Global</h5>
<a href="mailto:taimurbaig@dbs.com">taimurbaig@dbs.com</a></div>
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<h4 class="name">Nathan Chow&nbsp;</h4>
<h5 class="designation">Senior Economist and Strategist - China &amp; Hong Kong&nbsp;</h5>
<a href="mailto:nathanchow@dbs.com">nathanchow@dbs.com</a></div>
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Asia

Research Library

Consumption sentiment saw signs of stabilization on stimulus measures.

China: Signs of stabilisation on decisive stimulus

China plans robust stimulus to offset risks from property market routs, trade tensions, and weak domestic demand.

China 2025 Macro outlook: Stimulus to offset weak demand and trade war

CNY6trn debt quota is added for debt swap program in the next three years.

China: NPC unveils new stimulus; keeps some powder dry

At the half-way mark through the year, we take stock of the fiscal run-rate

India: On-track fiscal consolidation, capex catch-up

New government seeks to counter cyclical headwinds.

Indonesia: Growth speed-bump, cabinet affirms continuity

Hong Kong's economy growth slowed from 3.2% YoY in 2Q to 1.8% in 3Q as low-base effect faded.

Hong Kong SAR: Faltering growth momentum

Malaysia: Higher inflation and upside OPR risk from Budget 2025 policies

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CIO Insights 4Q24: In a Sweet Spot

The Value in Bitcoin Volatility

Trump 2.0 – Winners & Losers

Credit: Soft-Landing Until Proven Otherw

The ASEAN Portfolio

CIO Industry Guide: August 2024

US, Europe, Japan

Macro Insights Weekly: Trump’s world and Asia’s playbook

Navigating High Winds: Southeast Asia Outlook 2024 – 34

US: Fed meeting a non-event

Webinar: Tuesday, November 19th, 4PM SGT

Trump win and the global macro narrative

Crypto Digest: US politics’ influence on sentiment

Digital currencies: Perspectives and potential

Japan & Eurozone: On their own beat

Asia

Macro Insights Weekly: US elections and the 2025 macro narrative

Navigating High Winds: Southeast Asia Outlook 2024 – 34

Research Library

China: Signs of stabilisation on decisive stimulus

China 2025 Macro outlook: Stimulus to offset weak demand and trade war

China: NPC unveils new stimulus; keeps some powder dry

India: On-track fiscal consolidation, capex catch-up

Indonesia: Growth speed-bump, cabinet affirms continuity

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