Key focus and themes

Research evidence excerpt

Key focus and themes

nesian policy making; and 5) renewed US-

Iran uncertainty, which sent oil prices higher, has negative implications for Indonesia’s

weakening fiscal outlook. We will monitor parliament’s discussion on the State Finance

omnibus bill when the next session of parliament opens sometime in August, as well as the

announcement of the 2027 state budget draft to be delivered just before the 17 August

Independence Day.

In Singapore, we believe SGD should continue to outperform amid robust local

fundamentals supporting the MAS’s policy setting of an appreciating S$NEER. It is a much

closer call now, but we believe a temporary pause in the MAS’ FX policy tightening on 27

July is still possible. The policy statement will likely keep open the risk of a further

tightening in FX policy, premised on whether the AI capex cycle will remain robust and

demand-side inflation pressures will pick up further. The reasons for the MAS to remain on

hold for now include: 1) growing uncertainty over the state of the global AI capex

cycle, which could pose downside risks to growth; 2) a downside surprise in core CPI

readings for three consecutive months; and 3) the possibility of a near-term TACO,

which should alleviate supply-side inflation pressures. Nonetheless, we acknowledge

that external developments and growth data outturns have made our call a much closer

one. Specifically, the renewed US-Iran conflict increases upside risk to inflation via higher

imported costs, while signs of strong local economic momentum support a more positive

output gap, raising the risk of second-round inflation effects.

In China, we maintain our short USD/CNH position with a conviction level 3/5, targeting

6.55 (~3.0% gains) by end-October. There are still a few factors limiting USD’s potential