Economics & Strategy Weekly
How will Asia cope with $100 oil?
DBS Group Research
Taimur Baig
30
Chief Economist
taimurbaig@dbs.com
Ma Tieying
Economist
matieying@dbs.com
Please direct distribution queries to
Violet Lee +65 68785281 violetleeyh@dbs.com
• Geopolitical risks around the supply of oil are
rising as US ratchets up sanctions on Iran.
• We consider a tail risk scenario for 2019,
under which crude oil averages USD100 for
the year, a 35%yoy shock to oil importers.
• The key stress points in Asia around much
higher oil prices will be India and Indonesia, as
it has been the case this year already.
• Beyond India and Indonesia, sharply higher oil
prices will pose macro challenges across the
board. Inflation will become a problem
everywhere, either in actual manifestation as
the higher import cost is passed through to
the consumer (Philippines) or suppressed
through fiscal subsidies (China).
• Malaysia will be one unambiguous winner in
the bullish commodity price environment.
• If high fuel prices persist, inflation will spill
over from headline to core, forcing many
central banks in Asia to follow the Fed in 2019.
5 October 2018
Looming Iran sanctions will make a challenging
environment worse
Geopolitical risks around the supply of oil are rising as US
ratchets up sanctions on Iran. With continued below-
trend production by Libya and Venezuela, and no major
pick-up in Russia or Saudi Arabia so far, chances are as
Iran’s supply dwindles, the near-term impact would be
further rise in crude oil prices.
Beyond the issue of supply-demand imbalance, the risk
of a military confrontation between Iran and the US (and
the countries’ allies) in the Persian Gulf could rise as well,
fuelling further upside to oil. Most critically, we see no
clear path to resolution in this brewing Iran-US conflict;
we think that the risk of matters worsening is far higher
than some sort of mitigation in the near term.
Against this background, we devote this Weekly to a
scenario under which oil averages USD100 in 2019. This
would constitute a 35%yoy price shock to oil importers, a
dramatic development, give that it would build on top of
a 30%yoy jump in 2018.
In the following sections we look at country-by-country
analyses (implications for growth, inflation, fiscal, current
account, and FX), followed by notes from our macro
strategists on the impact on various asset classes.
The key stress points in Asia around much higher oil
prices will be India and Indonesia, as it already has been
the case this year. But inflation will become a problem
everywhere, either in actual manifestation as the higher
import cost is passed through to the consumer
(Philippines) or suppressed through fiscal subsidies
(China). While fuel is excluded from core inflation
calculations, we have seen a strong pattern in the past
(both in developed and emerging economies) that if high
headline inflation persists for a couple of quarters, it
tends to pull up core inflation as well. Monetary
authorities will have to be cognizant of this eventuality.
Taimur Baig
Refer to important disclosures at the end of the report
Weekly 5 October 2018

China Hong Kong

2019 2019
Baseline $100 oil Baseline $100 oil
Growth (real GDP, % YoY) 6.2 6.1 Growth (real GDP, % YoY) 2.9 2.7
Inflation (average, % YoY) 2.2 2.4 Inflation (average, % YoY) 2.5 2.7
Fiscal balance (% of GDP) -4.0 -4.2 Fiscal balance (% of GDP) 1.7 1.7
Current account (% of GDP) -1.0 -2.0 Current account (% of GDP) 3.0 2.7
Policy rate (eop, %) 4.35 4.35 Exchange rate (eop, per USD) 7.81 7.83
Exchange rate (eop, per USD) 6.75 7.00
Surging oil prices has negligible impact on the services-
Domestic fuel prices are heavily regulated by the Chinese based Hong Kong economy because oil accounts for 1.7%
authorities. The following chart shows the divergent of total imports. Potential repercussions on the current
trend of PPI and CPI despite surging Brent prices, as account is mild. The risk of cost-push inflation is also
producers are not allowed to pass cost increments onto low. In fact, motor fuel, liquefied petroleum gas and
consumers easily. other fuel only account for 0.77% of the whole consumer
price basket.

Source: CEIC, DBS

Upstream industries will be hit much harder than the Source: CEIC, DBS
consumers. Should oil prices hit $100 at some point, the
state will have to vent the upward pressure somehow Samuel Tse
onto the consumer. Yet, the magnitude is likely to be very Chris Leung
mild. Policymakers will unlikely withstand rising cost-
push inflation on the back of weakening domestic
demand and a worsening trade war with the US.

The impact of high oil prices will be reflected in larger

import bills. Given that oil accounts for 10% of China’s
total imports, the surge in oil prices (up 50% YoY) has
been the prime driver of import growth (21% YTD YoY) in
2018. The current account balance as a share of GDP
currently standing at 0.5% of GDP will likely dive into the
negative territory in 2019. As a result, growth of foreign
reserve will likely shrink, exerting downward pressure on
the CNY exchange rate.

Page 2
Weekly
India
2019*
Baseline $100 oil
Growth (real GDP, % YoY) 7.8 7.4
Inflation (average, % YoY) 5.0 5.4
Fiscal balance (% of GDP) -3.2 -3.5
Current account (% of GDP) -3.1 -3.6
Policy rate (eop, %) 7.50 8.50
Exchange rate (eop, per USD) 75.0 83.0
*Year ending March 2020
High oil prices are a key Achilles heel for the Indian
economy, complicating the inflation, current account,
fiscal balance and currency outlook. This vulnerability
stems from India’s rising reliance on imported crude, to
meet 83% of its domestic oil demand (vs 78% in past
three years), amplified by a weakening exchange rate.
The outlook for external balances, particularly the
current account, is negative. With every USD1pb move in
the Brent prices adding ~USD2bn to India’s oil imports
bill, high oil prices risk widening the net oil deficit as well
as the current account gap. We estimate that a 10% rise
in crude prices, widens the current account deficit (CAD)
by 0.4-0.5% of GDP. Factoring in the tail risks on oil, the
CAD could widen past 3.5% of GDP next year. Higher
foreign capital will be required to finance this gap, as the
balance of payments risks falling deeper into red.
For CPI inflation, the direct impact of higher crude prices
might be modest given the configuration of the price
basket, but despite this a 10% rise in global crude prices
stands to potentially lift headline CPI inflation by 20-30
ppt, assuming a complete pass-through. The impact will
be higher if we include the second-order pass-through of
high transport costs feeding into manufacturing/ food
costs. On the fiscal end, the government has prudently
held back from either reinstating subsidies or cut taxes to
lower record high domestic fuel prices. Approaching
elections and relative inelasticity of domestic energy
demand, however, suggests the fiscal and external
balances will continue to be tested.
Radhika Rao
5 October 2018
Indonesia
2019
Baseline $100 oil
Growth (real GDP, % YoY) 5.2 4.9
Inflation (average, % YoY) 4.0 4.3
Fiscal balance (% of GDP) -1.9 -2.4
Current account (% of GDP) -2.6 -3.1
Policy rate (eop, %) 6.50 7.00
Exchange rate (eop, per USD) 15250 16500
Currently, Indonesia’s domestic inflation has been
protected from increasing oil prices due to the implicit
below-the-line subsidy. However, if oil prices reach $100
in 2019, the government will finally adjust domestic fuel
prices, at least partially. A full-fledged adjustment of
domestic oil prices will boost inflation by 1ppt, yet we
think that the increase will be implemented gradually
after the election. We pencil in an additional 0.3ppt to
our headline inflation baseline, reaching average inflation
of 4.3%. The higher inflation will erode consumption that
barely reached 5% in the last year.
In addition to the inflation impact, oil trade deficit will
continue to widen. We estimate that the impact will be
close to 0.5% of GDP, resulting in a CAD number that
exceeds the comfortable level of 3% especially given the
tightening outlook on the financial side. Widening trade
deficit that could also induce more outflows can pressure
Rupiah closer to 16.500/USD. We believe that Bank
Indonesia will raise policy rate several times to be ahead
of the curve, facing more pressure to Rupiah due to the
widening CAD and inflation that is close to BI’s upper limit
of 4.5% in our scenario.
On another account, the impact on fiscal balance is a net
positive – 0.5% of GDP – as the impact of additional non-
tax revenues is bigger than possible increase of diesel
subsidy. A $1/bbl increase in oil prices is associated with
increase in government revenues by IDR3tn. As the 2019
budget assumption of oil prices is $70, the additional
non-tax revenues will be around IDR90tn. The impact of
price increase is bigger for diesel compare to gasoline, as
diesel price will feed into logistics costs. We assume
another adjustment of IDR1,500 to diesel subsidy like this
year. All in, under this scenario, GDP growth will slip
below 5%.
Masyita Crystallin
Page 3
Weekly 5 October 2018

Malaysia Philippines

2019 2019
Baseline $100 oil Baseline $100 oil
Growth (real GDP, % YoY) 4.5 4.9 Growth (real GDP, % YoY) 6.7 6.0
Inflation (average, % YoY) 2.5 3.1 Inflation (average, % YoY) 5.5 5.9
Fiscal balance (% of GDP) -3.0 -2.8 Fiscal balance (% of GDP) -3.0 -3.2
Current account (% of GDP) 3.5 5.1 Current account (% of GDP) -1.4 -3.0
Policy rate (eop, %) 3.25 3.50 Policy rate (eop, %) 5.50 6.00
Exchange rate (eop, per USD) 4.16 4.18 Exchange rate (eop, per USD) 56.5 60.0

Higher oil prices are in general positive for Malaysia given
that it is a net oil exporter. Net oil exports (excluding LNG)
registered MYR8.7bn (0.6% of nominal GDP) in 2017.
Higher oil prices should reasonably bring about higher
production output from the mining industry and
contribute directly to overall GDP growth.
We expect better outcome from the external balance as
well. When oil last rose above USD100/bbl in 2010/11,
Malaysia’s current account to GDP ratio registered about
11%, albeit the upside could be limited by
correspondingly higher imports on refined petroleum
products. Moreover, the removal of the fuel subsidy in
Dec14 also means that high oil prices will be positive for
the fiscal balance. Petroleum related tax revenue
accounts for about 9% of overall tax revenue. This will
help narrow the fiscal gap arising from GST removal.
But as fuel subsidy has been removed, the inflationary
impact of high oil prices will be more direct. A 10% rise in
oil prices is expected to lift inflation by 0.2ppt. We expect
Bank Negara to adopt a slightly tighter monetary policy
stance to anchor inflation expectation. Expect another
25bps hikes in the OPR to 3.50% by end 2019 when
inflation rise above 3%.
Oil price scenario of $100 can boost inflation by 0.4ppt,
reaching a number of 5.9%, above the BSP’s upper limit.
Inflation has been high in recent years due to higher
commodity prices – way exceeding the BSP upper limit of
4%. Oil imports account for more than 10% of total
imports, hence have a big impact on trade. This year
alone (until July), there was an additional USD14bn of
imports which were mostly due to oil price increases.
Current account deficit is likely to reach 3% - already
considering the weaker remittances which was the case
in recent years.
Given that the Philippines economy is currently
overheating, BSP will likely raise rate further by at least
another 75bps to contain inflation in our baseline
scenario. If oil goes to $100, there could be another 5-bps
upside to the policy cycle. Widening trade deficit and
possibly weaker consumption due to lower purchasing
power, will adversely impact growth. Under this
scenario, GDP growth in 2019 will only reach 6%
compared to 6.7% in our baseline.
Masyita Crystallin

Irvin Seah

Page 4
Weekly 5 October 2018

Singapore South Korea

2019 2019
Baseline $100 oil Baseline $100 oil
Growth (real GDP, % YoY) 2.7 2.6 Growth (real GDP, % YoY) 2.9 2.2
Inflation (average, % YoY) 1.8 2.7 Inflation (average, % YoY) 1.8 2.7
Fiscal balance (% of GDP) 1.0 -0.1 Fiscal balance (% of GDP) 0.5 0.4
Current account (% of GDP) 19.0 17.0 Current account (% of GDP) 5.0 4.0
Exchange rate (eop, per USD) 1.38 1.40 Policy rate (eop, %) 2.00 2.00
Exchange rate (eop, per USD) 1160 1190
Although Singapore is a net oil importer, with a deficit of
SGD9.7bn (2.1% of nominal GDP), its oil and gas sector Higher oil prices will boost inflation, erode real incomes
(accounting for 5-6% of GDP), together with other and cut GDP growth for South Korea. The impact will be
supporting services, are expected to benefit from the significant and immediate, given the country’s heavy
higher oil price. Though oil imports may affect the reliance on energy imports and adoption of a floating fuel
external balance, Singapore has one of the highest pricing mechanism. We estimate that a 10% rise in crude
current account position in the region (+18.8% of GDP) oil prices (in KRW terms) will boost headline CPI by 0.3%.
and the impact will also be offset by increase in refined Inflation would easily exceed the Bank of Korea’s 2%
petroleum exports. target next year, should oil prices rise to USD100/bbl.

Impact on the economy will be mostly felt in terms of
inflation. Every 10% increase in oil prices will likely add
about 0.3ppt to the headline CPI inflation. And there is
marginal upside risk considering the upward adjustments
made in utility tariffs in recent years. However, with a
record budget surplus of SGD9.6bn in FY17, the
government is in a strong fiscal position to introduce
offset measures to curb against the price impact on
consumer spending via a small deficit.
A surge in oil prices will likely strengthen the case of BOK
rate hikes. Following an explicit inflation targeting
framework, the BOK raised the benchmark rate by 25bps
and 75bps respectively during the oil price rally in 2008
and 2011. Nonetheless, policy response would be more
prudent this time. The output gap, domestic demand and
labour market conditions are relatively weak during the
current cycle, which should help to contain the second-
round inflation effect of oil price increase.

From monetary policy perspective, the MAS will likely
continue to maintain an exchange rate policy stance of a
gradual appreciation of SGD NEER to mitigate against the
inflation risk. This should likely help to keep the SGD
resilient against the USD.
Irvin Seah
The stress on external balance will be manageable. The
current account is expected to decline by USD7.2bn on
the annual basis (0.4% of GDP), for every USD10/bbl rise
in crude oil prices. A swing into deficit is very unlikely
even if oil prices shoot up to USD100/bbl. A small decline
in current account surplus, coupled with a rise in portfolio
investment outflows (due to deterioration in growth-
inflation dynamics), would mean moderate deprecation
pressure on the KRW.

Ma Tieying

Page 5
Weekly
Taiwan
2019
Baseline $100 oil
Growth (real GDP, % YoY) 2.2 1.7
Inflation (average, % YoY) 1.0 1.6
Fiscal balance (% of GDP) -0.3 -0.5
Current account (% of GDP) 13.4 12.2
Policy rate (eop, %) 1.50 1.375
Fuel prices are floating in Taiwan, despite the partial
subsidies provided by the state-owned Chinese
Petroleum Corporation (CPC). The CPC adjusts domestic
retail fuel prices by 80% of the changes in wholesale
prices, which are calculated based on the weighted
average of Brent and Dubai oil prices (in TWD terms).
Normally, a 10% rise in global oil prices will push up
Taiwan’s CPI inflation by 0.2ppt. Thanks to a high
comparison base, we estimate that inflation will rise but
remain below the 2% mark in 2019 under the scenario
of oil price spike to USD100/bbl.
A surge in oil prices will also depress Taiwan’s GDP
growth. The business sector will face a profit squeeze due
to higher upstream costs. The household sector could
withstand higher inflation in the near term thanks to the
pickup in wage growth this year (about 2.5% YoY). But the
support from the labour market would start to fade if
corporate profits were to remain weak for several
quarters. We reckon that GDP growth may fall below 2%
in 2019 if oil prices stay at USD100/bbl.
Taiwan’s central bank (CBC) will face a dilemma on
monetary policy. The CBC raised rates by 25bps during
the global oil price rally in both 2008 and 2011. Back then,
GDP growth was running above potential and the output
gap was positive. During the domestic fuel price hike in
2012, the CBC refrained from monetary tightening as
higher inflation (together with weaker global demand)
triggered a significant growth slowdown. We think the
CBC is more likely to follow the 2012 path and opt for a
neutral policy this time.
Ma Tieying
5 October 2018
Thailand
2019
Baseline $100 oil
Growth (real GDP, % YoY) 4.0 3.8
Inflation (average, % YoY) 1.5 1.8
Fiscal balance (% of GDP) -2.8 -3.2
Current account (% of GDP) 9.0 8.0
Policy rate (eop, %) 2.00 2.50
Exchange rate (eop, per USD) 33.2 35.0
The Thai economy is dependent on the global crude
supply, with its own domestic crude production
sufficient to only meet about a quarter of its total
demand. The net oil deficit has narrowed in the past
three years as global prices fell, but the current account
math is unlikely to turn dire as the economy continues to
enjoy strong trade surpluses (~10% of GDP), led by higher
non-oil export shipments and tourism receipts.
Rising oil prices has prompted the government to
partially reinstate the diesel subsidy scheme this year,
tapping the support of its national oil fund. This has
happened in the past (2008, 2011 etc.) to alleviate the
impact of a surge in prices on consumers and
manufacturers. Under the present arrangement, retail
diesel prices will be subsidised to keep prices below
THB30/litre, as the oil fund set aside THB6bn for this
measure. This arrangement is likely to remain in place
until late 2018, if crude prices (Dubai crude is used as the
official benchmark) hold below USD85/bbl. Official
remarks, however, suggested that if the tail risk of oil
prices surging towards USD100/bbl materialises the
government might allow a bigger pass-through into retail
prices, in light of rising burden on the oil fund as well and
as fiscal balances. Rationalisation of these subsidies will
be negative for inflation and growth prospects.
The Thai baht’s outperformance this year has been
laudable, but we don’t see it bucking global USD trends
into 2019. Given the lingering risk from China-US trade
wars and the Fed Funds Rate, in addition to a surge in oi
prices, that continues to rise above the BOT policy rate,
the baht is likely join rest of the region in ending the year
weaker. Rising inflationary risks might also prompt
measured rate hikes by the Thai central bank next year.
Radhika Rao
Page 6
Weekly
Strategy
Rising oil & interest rates
With oil prices pushing higher, the impact on USD rates
has to be considered. We look briefly at two periods (1Y
ending mid-2008 where oil prices pushed sharply higher
and the past 5 years) to see how rates and oil interact.
The intuition is that higher oil prices should translate into
elevated inflation expectations, thereby pushing US
yields up. However, the reality is not quite so simple.
Correlation does not imply causation and there are many
other factors to consider even as we try to isolate the
impact of oil on rates. It is true that the WTI’s correlation
with inflation expectation (5Y breakeven) is high (0.6 for
one-year ending mid-2008, 0.9 since 2014). However,
the correlation between 10Y US yields and WTI did not
hold as well. To be sure, this figure is positive in recent
years. However, the period in 2007/08 saw 10Y yields
fall even as oil prices push to a record USD145/bbl in
mid-2008.
5 October 2018
The negative correlation between yields and oil prices in
2007/2008 is largely due to the Fed cutting rates even as
oil prices were climbing relentlessly. This lead to
downward pressure on yields across all tenors, more than
offsetting the rise in inflation expectations caused by high
oil prices. In the coming quarters, it makes more sense for
us to assume that the US economy continues to hold up
well and that the Fed will deliver on rate hikes as
forecasted. At the very least, even if there is no
passthrough from short-term USD rates to longer-term
ones, the level of the UST curve should not be heading
lower. Therefore, we should be reasonably confident that
higher oil prices should translate into higher inflation
expectations and higher UST yields. Taking a correlation
of 0.6, a 33% jump in WTI price to USD100/bbl could
push inflation expectations (5Y breakeven) and 10Y
yields up by approximately 30bps.
In Asia, inflation expectations are much more difficult to
quantify (inflation-linked bonds are not common). We
have calculated the 10Y local currency yield-WTI
correlations in the table above. The figures for 2007/08
are probably distorted by market turmoil in the leadup to
the global financial crisis. Falling US yields also provided
some measure of support. The correlation figures over
the past five years may be more instructive. Correlations
are positive (with the exception of China). However, we
suspect that the nuances of each economy may not be
adequately reflected in the figures. Correlations in net
oil importers (Indonesia, India) are high as expected. It
probably does not help that the market is concerned
about current account deficits amidst a strong USD
environment. Developed economies with sizable
surpluses should have low correlation (Korea, Taiwan).
We would argue that the figures are probably too high for
Malaysia (oil exporter) and Thailand (sizable current
account surplus).
Eugene Leow
Page 7
Weekly 5 October 2018

Impact of higher oil prices on Asia equities

The market cap composition of Asia suggests that about
14% of the region’s market cap is exposed to the energy
and materials sector which should benefit from rising oil
prices. Cyclical sectors make up 39% of the total market
cap which means they are likely to be negatively affected
by rising oil prices. For industrial cyclical sectors, the
sensitivity on earnings is related to higher input costs and
material costs, thereby affecting margins, while top-line
revenue growth for consumer cyclical sectors could be
impacted by squeeze in purchasing power. Interest-rate-
sensitive sectors account for 30% of market cap.
The likely threat of central banks having to raise rates due
to inflationary pressure should raise concerns on the
financial sector. That said, the balance of both positive
and negative exposure should mean Asia countries will
likely suffer from higher oil prices when looking at sector
exposure by market cap. Among Asia countries. Thailand
has the highest exposure benefiting from higher oil
prices, while Singapore, Philippines, Hong Kong and
China have the lowest exposure.
Market weights by economic-sensitive sectors
Macro headwinds will affect Indonesia, Philippines and
India the most. While market exposure is part of the
analysis, the macro headwinds of rising current account
deficit (rising import bills) and high inflation as a result of
higher oil price will likely pressure markets on a broad
macro basis, leading to weakened currencies, risk
aversion and fund outflows. This is especially applicable
for Indonesia, Philippines and India.
Oil & gas-related stocks are prime beneficiaries, airlines
are losers. E&P (exploration and production) players
which have greater sensitivity to oil prices remain the
preferred proxies to ride the upward trend of oil prices.
In our earnings models, we have assumed Brent oil to
average US$70-75/bbl in 2018 and US$75-80/bbl in 2019.
Our forecast earnings will have to be raised if high oil
prices are sustained above US$85/bbl. We estimate that
every US$1/bbl increase in crude oil price could lift
earnings by about 2-3% for some of the companies in our
coverage. Sustained high oil prices will also lead to capex
expansion in 2019 and beyond, and filter through the
value chain. The spotlight shall then turn to Oilfield
Service Providers.

Interest rates Global price The sharp increase in oil price is negative for airlines, as
sensitive Cyclicals Defensive sensitive jet fuel costs account for 25-45% of operating costs (more
Singapore 47% 32% 18% 3% so for low cost carriers), though the impact on individual
Malaysia 32% 15% 40% 13% airlines would depend on how well and far they have
Indonesia 35% 14% 38% 14% hedged. Yield-to-fare pass on typically requires time lag.
Thailand 23% 26% 19% 32% Meanwhile, the Chinese carriers do not hedge any of
Philippines 34% 29% 32% 5% their fuel requirements, but they do have significant
Hong Kong 35% 34% 24% 7% pricing power on their domestic routes to offset some of
China 39% 51% 3% 7% the higher fuel costs.
Korea 12% 59% 15% 13%
Taiwan 18% 53% 12% 18%
India 25% 27% 23% 25%
Asia exJ 30% 39% 20% 14% Joanne Goh
Source: Thomson Reuters, DBS

Page 8
Weekly 5 October 2018

Highlights of the week:

Singapore: Opportunity from the trade war
India: Tide to turn in favour of banks vs non-banks
Taiwan chart book: policy remains neutral

Page 9
Weekly 5 October 2018

Key Forecasts

GDP growth, % YoY CPI inflation, % YoY, ave

2016 2017 2018f 2019f 2016 2017 2018f 2019f
China 6.7 6.9 6.6 6.2 2.0 1.6 2.1 2.2
Hong Kong 2.0 3.8 3.3 2.9 2.4 1.7 2.0 2.5
India* 8.0 7.1 6.7 7.4 4.9 4.5 3.6 4.7
Indonesia 5.0 5.1 5.0 5.2 3.5 3.8 3.6 4.0
Malaysia 4.2 5.9 4.7 4.5 2.1 3.9 1.3 2.5
Philippines** 6.9 6.7 6.7 6.7 1.3 2.9 6.0 5.5
Singapore 2.0 3.6 3.0 2.7 -0.5 0.6 0.7 1.8
South Korea 2.9 3.1 2.9 2.9 1.0 1.9 1.5 1.8
Taiwan 1.4 2.9 2.7 2.2 1.4 0.6 1.3 1.0
Thailand 3.2 3.9 4.5 4.0 0.2 0.7 1.3 1.5
Vietnam 6.2 6.8 6.4 6.6 2.7 3.5 3.6 3.8
Eurozone 1.8 2.5 2.2 2.2 0.2 1.5 1.4 1.4
Japan 0.9 1.7 1.1 0.9 -0.1 0.5 0.8 1.0
United States*** 1.5 2.3 3.0 2.5 1.3 2.1 2.5 2.0
* refers to year ending March ** new CPI series *** eop for CPI inflation

Policy interest rates, eop

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
China* 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35
India 6.00 6.25 6.50 7.00 7.00 7.25 7.50 7.50
Indonesia 4.25 4.75 5.75 6.00 6.25 6.50 6.50 6.50
Malaysia 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25
Philippines 3.00 3.50 4.50 5.00 5.25 5.50 5.50 5.50
Singapore** 1.40 1.65 1.90 2.15 2.15 2.40 2.40 2.65
South Korea 1.50 1.50 1.50 1.50 1.50 1.75 1.75 2.00
Taiwan 1.38 1.38 1.38 1.38 1.38 1.38 1.38 1.50
Thailand 1.50 1.50 1.50 1.50 1.75 2.00 2.00 2.00
Vietnam*** 6.25 6.25 6.25 6.25 6.50 6.50 6.75 6.75
Eurozone 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Japan -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10
United States 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50
* 1-yr lending rate; ** 3M SOR ; *** prime rate

Exchange rates, eop

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
China 6.28 6.62 6.87 6.95 6.90 6.85 6.80 6.75
Hong Kong 7.85 7.85 7.83 7.85 7.84 7.83 7.82 7.81
India 65.2 68.5 72.5 73.0 73.5 74.0 74.5 75.0
Indonesia 13728 14330 14901 15050 15100 15150 15200 15250
Malaysia 3.86 4.04 4.14 4.24 4.22 4.20 4.18 4.16
Philippines 52.2 53.4 54.0 54.5 55.0 55.5 56.0 56.5
Singapore 1.31 1.36 1.37 1.42 1.41 1.40 1.39 1.38
South Korea 1064 1115 1110 1200 1190 1180 1170 1160
Thailand 31.2 33.0 32.3 34.0 33.8 33.6 33.4 33.2
Vietnam 22775 22938 23320 23350 23400 23450 23500 23550
Australia 0.77 0.74 0.72 0.68 0.69 0.70 0.71 0.72
Eurozone 1.23 1.17 1.16 1.12 1.13 1.14 1.15 1.16
Japan 106 111 114 115 114 113 112 111
United Kingdom 1.40 1.32 1.30 1.25 1.26 1.27 1.28 1.29
Australia, Eurozone and United Kingdom are direct quotes

Page 10
Weekly 5 October 2018

Group Research
Economics & Strategy

Taimur Baig, Ph.D.

Chief Economist - G3 & Asia
+65 6878-9548 taimurbaig@dbs.com

Nathan Chow Ma Tieying

Strategist - China & Hong Kong Economist - Japan, South Korea, & Taiwan
+852 3668-5693 nathanchow@dbs.com +65 6878-2408 matieying@dbs.com

Masyita Crystallin Radhika Rao

Economist – Indonesia & Philippines Economist - Eurozone & India
masyita@dbs.com +65 6878-5282 radhikarao@dbs.com

Joanne Goh Irvin Seah

Regional equity strategist Economist - Singapore, Malaysia, & Vietnam
+65 6878-5233 joannegohsc@dbs.com +65 6878-6727 irvinseah@dbs.com

Neel Gopalakrishnan Samuel Tse

Credit Strategist Economist - China & Hong Kong
+65 68782072 neelg@dbs.com +852 3668-5694 samueltse@dbs.com

Eugene Leow Duncan Tan

Rates Strategist - G3 & Asia FX and Rates Strategist - Asean
+65 6878-2842 eugeneleow@dbs.com +65 6878-2140 duncantan@dbs.com

Chris Leung Philip Wee

Economist - China & Hong Kong FX Strategist - G3 & Asia
+852 3668-5694 chrisleung@dbs.com +65 6878-4033 philipwee@dbs.com

Sources: Data for all charts and tables are from CEIC, Bloomberg and DBS Group Research (forecasts and transformations).

Disclaimer:
The information herein is published by DBS Bank Ltd (the “Company”). It is based on information obtained from sources believed to be reliable, but the Company
does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions
expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation
& the particular needs of any specific addressee. The information herein is published for the information of addressees only & is not to be taken in substitution for
the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals
connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from
any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further c ommunication thereof, even if the
Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy
or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company & its associates, their directors,
officers and/or employees may have positions or other interests in, & may effect transactions in securities mentioned herein & may also perform or seek to perform
broking, investment banking & other banking or financial services for these companies. The information herein is not intended for distribution to, or use by, any
person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Sources for all charts & tables are CEIC &
Bloomberg unless otherwise specified. DBS Bank Ltd., 12 Marina Blvd, Marina Bay Financial Center Tower 3, Singapore 018982. Tel: 65-6878-8888. Company
Registration No. 196800306E.

Page 11