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AECS Equity Research
Economics
Global weekly outlook
M o nda y , J u ly 1 4 , 2 0 14
The major events of note for this week are certainly going to
be Fed chief Janet Yellen’s testimony before US Congress on
Tuesday, with hopes of insight into the central bank’s
monetary policy outlook, and the release of China’s gross
domestic product (GDP) figure for 2Q2014, expected to expand
7.4%, and should continue to perform better in 2H2014.
Figure 1: Portugal bank spooked 2012 flashback
%
6.50
Portugal 10yrs yield
6.00
5.50
5.00
4.50
Unchanged dovish with a mixed bag data in US: Yellen’s
testimony will be of interest for this week’s economic calendar
amid hopes that it will provide some insight into US monetary
policy outlook. Even so, we believe that the status quo of a
dovish stance from the FOMC minutes in the past week has been
priced into the result of the US bond auction, and that the Fed’s
stance will persist for an extended period. Other US economic
data offers a mixed bag. To start with, retail sales data is set to
maintain positive momentum, notably quarter-to-quarter, with a
rise of 0.6% QoQ and 0.5% QoQ for June’s core retail sales. But
housing data is likely to resume its uptrend after construction
suffered under the harsh winter. June’s forecast consensus for
housing starts and building permits are 1,025k and 1,037k,
respectively, rising from May’s 1,001k and 1,005k. But, despite
the four-year high of 19.28 for the Empire manufacturing index,
it is likely to edge lower to 17.0 in June. The Philly Fed business
index is expected to fall from 17.8 to 16.0. Both indices should
remain in resilient territory.
4.00
3.50
3.00
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Sources: Bloomberg, AECS Research
Europe staying on the edge of juncture: Obviously, the Euro
area’s economic data remains unlikely to provide us with a
sufficiently compelling story as June’s consumer price index
(CPI) is expected to merely confirm its flash estimate of 0.5% YoY
and industrial production is set to soften from 0.8% MoM to 0.3%
MoM in June. The lingering low inflation and lackluster economy
will inevitably be prolonged. Also, banking sector concerns have
erupted again after Portuguese banks last week missed to make
their payments on commercial paper. And undoubtedly, the
business sentiment index in Germany will continue worsening
from 29.8 to 28.2 in June (despite their World Cup win).
Although confidence has greatly improved since the zone’s
central bank chairman Mario Draghi promised to do whatever it
takes to solve the crisis in 2012, it seems that deep-rooted
problems remains unresolved.
Chinese economy is set to grow 7.4% in 2Q2014: This growth
(7.4% YoY and 1.8% QoQ) comes with thanks to the weakening
CNY driving net exports higher and a manufacturing sector that
has gradually recovered – the PMI rose above 50 for the first
time since January 2014 to 50.7 in June. Looking beyond
2Q2014 data, we believe China’s economy is likely to perform
better in 2H2014, since historical data suggests that the GDP in
3Q and 4Q usually accounts for around 25% and 30% of total
GDP, which are more significant than the figures for 1Q and 2Q.
Economist/Strategist
Ratasak Piriyanont
[email protected]
Tel: 662-659-3382
Senior Economist/Strategist
Isara Ordeedolchest
[email protected]
Tel: 662-659-3378
Global Outlook
Figure 1: US economic data
%YoY
15.00
Retail sales %YoY
%YoY
10
Core retail sales %YoY
10.00
5
5.00
0
0.00
-5
-5.00
-10
-10.00
-15
Industrial production %YoY
Capacity utilization rate (RHS)
%
85
80
75
70
-15.00
65
-20
Consensus
Previous
0.6%
0.3%
0.1%
Retail sales % MoM
Core retail sales
0.5%
% MoM
Sources: Bloomberg, AECS Research
60
Consensus
Previous
Industrial production
% MoM
0.3%
0.6%
Capacity utilization
79.3%
79.1%
Figure 2: US economic data
'000
Housing starts
Building permits
Index
50
2,500
Philly fed manf. Index
Empire state manf. Index (RHS)
40
40
30
2,000
Index
50
30
20
20
10
1,500
10
0
0
-10
1,000
-10
-20
-20
-30
500
0
-40
-30
-50
-40
Consensus
Previous
Housing starts
1025k
1001k
Philly Fed index
Consensus
16.0
Previous
17.8
Building permits
1037k
1005k
Empire manf. index
17.0
19.28
Sources: Bloomberg, AECS Research
Figure 3: Euro area economic data
%YoY
CPI %YoY
Index
Core CPI %YoY
%YoY
100.00
5.00
German zew
EU area Zew
Industrial production %YoY (RHS)
80.00
15
10
4.00
60.00
5
40.00
3.00
0
20.00
-5
2.00
0.00
-10
1.00
-20.00
-15
-40.00
0.00
-20
-60.00
-1.00
-80.00
Consensus
Previous
Euro CPI % YoY
0.5%
0.5%
Euro Core CPI % YoY
0.8%
0.8%
-25
Consensus
Previous
Zew German
28.2
29.8
Zew Euro area
n/a
58.4
Sources: Bloomberg, AECS Research
Monday, July 14, 2014
Page 2 of 4
Global Outlook
Figure 4: UK economic data
%YoY
6.00
UK CPI %YoY
UK Core CPI %YoY
'000
150
Claimant count change
%
9
Unemployment
8.5
5.00
100
8
4.00
7.5
50
3.00
7
6.5
2.00
0
6
5.5
1.00
-50
5
0.00
4.5
-100
-1.00
Consensus
Previous
UK CPI % YoY
1.6%
1.5%
UK Core CPI % YoY
1.7%
1.6%
4
Claimant count
change
Unemployment rate
Consensus
Previous
-27.0k
-27.4k
6.5%
6.6%
Sources: Bloomberg, AECS Research
Figure 5: UK economic data
%YoY
China GDP %YoY
%YoY
13.00
25.00
Retail sale %yoy
Retail sale %yoy (6 months moving average)
12.00
20.00
11.00
10.00
15.00
9.00
10.00
8.00
7.00
5.00
6.00
0.00
5.00
Consensus
China GDP % YoY
7.4%
Previous
7.4%
China retail sales
% YoY
Consensus
Previous
12.5%
12.5%
Sources: Bloomberg, AECS Research
Monday, July 14, 2014
Page 3 of 4
AECS Investment Research – Recommendation Definitions
Sector Recommendations
Stock Recommendations
OVERWEIGHT: The industry, as defined by the analyst’s
coverage universe, is expected to outperform the
relevant primary market index by at least 10% over the
next 12 months.
BUY: Expecting positive total returns of 15% or more
over the next 12 months.
NEUTRAL: The industry, as defined by the analyst’s
coverage universe, is expected to perform in line with
the relevant primary market index over the next 12
months.
HOLD: Expecting total returns of not more than -10% to
+10% over the next 3 months.
UNDERWEIGHT: The industry, as defined by the
analyst’s coverage universe, is expected to
underperform the relevant primary market index by 10%
over the next 12 months.
SELL: Expecting negative total returns of 15% or more
over the next 12 months
Disclaimers
The disclosure of survey results from the Thai Institute of Directors Association (IOD) regarding corporate
governance is in accordance with the policy of the Office of the Securities and Exchange Commission of Thailand.
The IOD survey is based on information from a company listed on the Stock Exchange of Thailand and/or the
Market for Alternative Investment as a matter of public record and is accessible by general public investors.
Therefore, the survey result comes from the perspective of a third party. It does not represent an evaluation of
operations neither is it based on inside information.
The survey result given pertains to the date appearing in the IOD’s Corporate Governance Report of Thai Listed
Companies. As a result, the survey may be subject to change after that date. AEC Securities Plc. (AECS) neither
confirms nor certifies the accuracy of such survey results.
The opinions and information contained herein are based on sources believed to be reliable, but AECS does not
guarantee their accuracy, completeness or correctness. This information is not to be construed as an offer,
invitation or solicitation to buy or sell the securities covered in this report. AECS accepts no liability whatsoever for
any direct, indirect or consequential loss arising from any use of this document or its contents.
AEC Securities Public Company Limited
63 Athenee Tower, 17th Floor
Wireless Rd, Lumpini, Patumwan, Bangkok 10330
Tel. 02 659 3376 Fax 02 659 3390
www.aecs.com
Monday, July 14, 2014
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