NJA: Further signs of slowdown in China

Barclays notes:

China reports real activity data for June (Wednesday) for which we expect further weakness with some signs of stabilisation at lower levels. IP is expected to have slid to 6.0% y/y (consensus: 6.0%) from 6.1% in May, while FAI growth (YTD) would likely have slowed to 11% from 11.4% (consensus: 11.2%). We estimate that Q2 GDP growth was 6.7% y/y (consensus: 6.8%), from 7.0% in Q1, which would mark some pickup in sequential momentum after a weak Q1. 

Separately, we expect China's June export growth to turn positive on better new orders (Monday; Barclays: +1.5%y/y; consensus: 1.0%; last: -2.5%), while the import contraction should narrow (Barclays: -15%y/y; consensus: 15.5%; last: -17.6%). The trade balance is expected to narrow slightly, to USD56.0bn (consensus: USD56.7bn) from USD59.5bn. With heightened volatility in the stock market, we see the authorities keeping USDCNY fixings stable in the near-term and possibly delay any band widening intentions to avoid exacerbating negative sentiment and capital outflows. 

In Indonesia, we expect the trade surplus (Wednesday; Barclays: USD491bn; last: USD955bn) due to a m/m increase in imports related to stocking ahead of the Ramadan festive period. However, on a y/y basis, exports and imports will likely remain negative (-18.5% and -23.1%, respectively) on weaker commodity prices. Bank Indonesia's MPC meets on Tuesday. In view of inflation continuing to trend well above BI's target range of 3-5% in Q2 and Q3, and to avoid on the IDR, we expect BI to keep policy rates on hold.