INDONESIA: Solid 2024 With Stronger Domestic & Export Growth

ACGBs (YM -7.0 & XM -7.5) are cheaper after extending weakness induced by US tsys’ heavy close on Friday. This movement aligns with today's Asia-Pac session, where cash US tsys are 1-2bps cheaper, showing a slight steepening bias.

• Cash ACGBs are 7-12bps cheaper, with the 5-year underperforming. The AU-US 10-year yield differential is at -16bps.
• Outside of the previously outlined S&P Global Dec. PMIs, there hasn't been much by way of domestic drivers to flag.
• Swap rates are 6-7bps higher.
• The bills strip is showing -3 to -6 across contracts.
• RBA-dated OIS pricing is flat to 6bps firmer across meetings. A 25bp rate cut is more than fully priced by April (114%), with a February cut at a 57% chance.
• Tomorrow, the local calendar will see Building Approvals data. However, the highlights of the week are likely to be November CPI on Wednesday and retail sales on Thursday.
• November CPI is likely to be watched closely ahead of Q4 data on January 29. It will also include more updates for services components than the October release. Bloomberg consensus is forecasting headline to pickup 0.1pp to 2.2%. Trimmed mean was 3.5% the previous month.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.

Asian stock trends are mixed in the first part of Monday trade. Japan markets have returned after a 3 day break and are tracking lower. The major indices off over 1% at this stage. Electronics are autos are underperforming post the break. The positives have been in tech focused plays, with South Korea and Taiwan outperforming. 

• China and Hong Kong markets have been mixed, but sit weaker at the break, albeit only modestly. The better than expected Caixin services PMI print did little to lift sentiment. Markets are waiting fresh stimulus details, with the PBoC stating it will cut the RRR and interest rates at an appropriate time.
• The CSI 300 is sub 3800, the HSI still under 20000.
• The Taiex is up 2.65% to 23500 in Taiwan, while the Kospi is up over 1.5%. In US trade on Friday the SOX surged over 3%. Positive investment commitments from Microsoft is aiding sentiment in the tech related space.
• Other markets are showing more mixed trends, but aggregate moves remain modest. 

Thai headline CPI inflation ended 2024 within the central bank’s 1-3% corridor – just. December CPI was lower-than-expected with headline at 1.2% y/y up from 0.9%, the highest since May, and core steady at 0.8% y/y, where it has been for four straight months. 

• The Bank of Thailand (BoT) kept rates unchanged in December after cutting them 25bp in October. It reiterated today that it wants to keep its policy rate around neutral to allow for room to react given the heightened level of uncertainty, especially from overseas. Inflation back within the band, if sustained, should give it room to continue resisting government pressure to cut rates before it is ready. It expects growth to improve to 2.9% this year up from 2.7% in 2024. The next rate decision is February 26.
• 2024 inflation was very subdued with headline averaging 0.4% but it did improve over the year starting at -1.1% y/y in January. Underlying inflation averaged 0.6% over the year and rose moderately from its 0.36% low in June to 0.77% in September. BoT is forecasting 2025 inflation at 1.1%.
• Higher fuel prices helped the CPI return to the target band in December and the government expects it to rise further in Q1 due to diesel and food prices, but the increase in the minimum wage is not expected to affect Q1 inflation.
• Food prices were steady in December at 1.3% y/y but rice & cereal picked up to 1.4% from 0.9%, while meat, eggs & milk fell and fruit & veg remained steady but negative.
• Non-food inflation picked up to 1.2% y/y from 0.7% driven by transportation as fuel prices rose.  

Thailand CPI y/y%