Sri Lanka’s rice harvest will likely be affected by the ongoing drought
• Food inflation should rise significantly during the summer; we expect some impact in the winter, too
• If the El Niño effect materialises, headline inflation could rise to...
Sri Lanka’s public and external-debt ratios are relatively high by emerging-market standards
• LKR depreciation has been a major factor in keeping the public-debt ratio elevated
• Cautious fiscal policy and a stable exchange rate could keep the ...
2013 GDP surprises on the upside, and inflation continues to fall, justifying CBSL’s status quo on rates
• Q4 GDP increase in contrast to weakness in proxy growth indicators
• No change likely in policy rate until Q3-2014 the earliest
• The T-...
No change in monetary policy in February
• Economic data shows signs of improvement, inflation is still benign
• CBSL is likely to remain on hold unless economic data shows significant weakness
• T-bond market response is muted; we remain Neut...
We expect a marginal improvement in growth in 2014 to 7.0% (from an expected 6.8% in 2013)
• The credit cycle may take some time to turn
• The CBSL is on hold for now – low private-credit growth/inflation could trigger a further rate cut
• The L...
We see growth improving across the region, despite recent financial-market distress. Fretting over the growth outlook because of portfolio outflows is missing the point, in our view. We think more optimism is in order, as simultaneous growth in majo...
Sri Lanka is set to consolidate its strong H1-2013 performance (average GDP growth of 6.4%) in H2. We maintain our full-year growth forecast of 6.5%, despite the central bank‟s more optimistic projection of 7.5% premised on the global recovery in H2...
To paraphrase Mark Twain, the reports of the death of EM bond markets have been greatly exaggerated. Increased global allocations to local EM bond markets have been not cyclical but primarily structural in nature, reflecting these markets’ rising ec...
• Stable FX reserves offset the impact of Moody’s sovereign outlook revision on Sri Lankan markets
• Steady growth and lower inflation underpin our constructive outlook on Sri Lanka
• Inflation is likely to pick up in Q4, but the absence of furthe...
• CBSL has lowered policy rates by 50bps each on growth concerns; likely to remain stable until Q1-2014
• IMF cautions that inflation is still a risk but its pace is not “unduly worrying”
• T-bond yields to remain range-bound on supply concerns; ...
Muted recovery, fiscal consolidation and C/A improvement are the common themes for South Asia
• Within this, the outlook for the BDT is most positive, while the PKR is expected to slide further
• Political uncertainty is a key risk for the region,...
• The global economy is recovering, despite the weakness in the West. It will be difficult for the US to achieve more than 2% GDP growth this year; fiscal tightening and policy uncertainty will cast shadows on the turnaround in the housing and energ...
Demand and supply dynamics are favourable in South Korea, Malaysia, the Philippines and Taiwan
• Foreign demand to remain strong in 2013, particularly as RMFs shift focus back to Asia from CEMEA
• Buy 10Y (LB236A) THB bonds, as curve is steep and...
Top 3 data/events
• Euro area – Eurostat business surveys to improve, but from low level
• Sri Lanka – CBSL expected to maintain policy rates
• Australia – Trade likely remained in deficit for an eleventh straight month
• Market focus
The economy is stronger heading into 2013; we forecast GDP growth at 7.2%, CPI inflation at 7.5%
• Government maintains fiscal consolidation, cuts the budget deficit target to 5.8% of GDP in 2013
• Easing inflation and policy rates amid balanced d...
Local-currency emerging bond markets have seen ever greater levels of foreign demand as global investors flee from the ongoing European sovereign crisis and continue to allocate to fixed income securities. From less than USD 150bn in March 2009, for...
• Asia is still partly insulated from the West – in much of the region, domestic demand has grown more strongly than exports in 2012. However, Asia has been slowing in recent months. We expect growth to turn up in H1-2013, and we forecast better gro...
• Central bank kept rates on hold at 13 June meeting, citing a slowdown in credit growth as the key reason
• We raise our inflation estimate to 7.2% from 6.7%; growth concerns outweigh inflation
• We remain optimistic on the LKR in the medium ter...
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The world economy is in transition. Global growth rates are picking up, but transition means elevated risks and volatility.
In terms of global implications, all eyes will be on the US and China, with the US normalising monetary policy and China rebalancing its economy.
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