This article first appeared in The Edge Malaysia Weekly on January 9, 2023 - January 15, 2023
China is set to reopen its borders to international travellers from Jan 8, after a three-year lockdown. The country ended its strict “zero Covid” controls in early December, following a series of protests that started in November.
While China’s reopening has been much talked about as a potential catalyst for global economic growth this year, a surge in Covid-19 cases in the world’s second largest economy has now raised concerns over the global outlook.
“The boost by China’s reopening is highly uncertain, as there are various factors that may limit the return of inbound Chinese tourists, especially in the near term (such as flight availability, expensive air fares and country-specific measures on Chinese travellers),” says UOB Group Global Economics & Markets Research in a report.
China is also expected to release economic data this week that includes the Consumer Price Index (CPI) and Producer Price Index (PPI) on Jan 12, as well as trade data (Jan 13) and money supply (Jan 11).
Bloomberg estimated that China’s CPI for December would accelerate to 1.8% year on year from 1.6% a month earlier.
On its trade numbers, China’s exports are expected to decline further by 12% y-o-y from an 8.9% drop in November, while its imports are estimated to fall by 10% y-o-y in December.
Australia and India will report their CPI numbers on Jan 11 and 12 respectively.
The US is expected to release its December CPI data on Jan 12, estimated at a lower 6.6% y-o-y increase compared to a 7.1% jump recorded in November. The CPI numbers will set the tone for the Federal Reserve’s monetary policy for 2023.
The US stock market tumbled last week as fears of a recession and further rate hike by the Fed spooked investors. S&P Global Market Intelligence says in a report: “The latest Fed minutes from the December Federal Open Market Committee (FOMC) meeting reinforced the US central bank’s commitment to targeting inflation and suggested that the Fed continued to view inflation as concerning, despite the recent easing of inflationary pressures. The upcoming CPI release will therefore be of interest, especially if the data should surprise on the downside, as hinted at by the S&P Global Flash US Composite PMI.
“The degree to which risk assets may positively respond to softening inflation indications appears more ambiguous now, post the caution from Fed officials on market rallies hindering the inflation-targeting operations.”
In the US corporate earnings season, a total of 142 companies will release their quarterly earnings between Jan 9 and 13, of which only nine are S&P 500 listed firms. Of these nine firms, attention will be on the six major US banks, which will be the first batch of US banks to report their earnings on Jan 13, ahead of the long weekend, as US markets will be closed for Martin Luther King, Jr, Day on Jan 16.
The Department of Statistics Malaysia is expected to release November industrial production data on Jan 11.
The Bank of Korea will be the first major Asian central bank to make a monetary policy decision in 2023 when it hold its Monetary Policy Board Meeting on Jan 13. UOB Group says the current elevated inflation environment would warrant another 25 basis point rate hike to bring the seven-day repo rate to 3.5% at the meeting. BoK has raised interest rates by 275bps to 3.25% since August 2021.
At the courts, the Opening of the Legal Year at the Putrajaya International Convention Centre on Jan 9 will be attended by all judges of the High Court, Court of Appeal and Federal Court, as well as the attorney-general and Malaysian Bar president.
On Jan 11, the Federal Court will hear an application by lawyer Mohd Khairul Azam Abdul Aziz challenging the legality of a royal pardon granted to Prime Minister Datuk Seri Anwar Ibrahim in 2018. The lawyer filed the suit in February 2020, seeking a declaration that the royal pardon bestowed on Anwar, following his sodomy conviction involving Mohd Saiful Bukhari Azlan, be declared null and void.
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