Bank Of East Asia Ltd. · HKEX:23
Bank Of East Asia — The Bank of East Asia — Investor Presentation (June 2021)
11 slides from Bank Of East Asia's investor presentation, Jun 25, 2021
Slide 1: The Rising Risk of Inflation
The Rising Risk of Inflation Inflation has been accelerating lately, fuelled by a pickup in global demand and supply shortages. Biden’s massive stimulus programme will only exacerbate this process. Economic Research Department 25 June 2021 Prepared by The Bank of East Asia, Limited 由東亞銀⾏有限公司編寫
Slide 2: Global inflation is rising faster than expected
Global inflation is rising faster than expected Recent uptick in inflation Driven in part by surging commodity prices Global inflation rate Global commodity prices 180 6 OECD CPI US CPI 5 150 yearly change (%) Index (2019=100) 5 4 120 3.3 3 90 2 60 Agricultural raw materials 1 30 Food 0 Metals & min
Slide 3: Becoming a concern for China
Becoming a concern for China Inflation expectations driving Commodity prices will eventually translate into rising property prices higher consumer prices China property prices China’s price indices 10 9 155 ↑5% year-on-year in May 8 150 yearly change (%) 6 Index (2015=100) 145 4 140 2 0.9 0 135 -2 1
Slide 4: Inflation expected to stay elevated this year
Inflation expected to stay elevated this year Supply bottlenecks & increased economic activity translate into spiraling freight rates Deflationary Inflationary pressure pressure Freight cost indices ↑30% to 60% in 1Q 400 Harpex index Baltic exchange dry index Index (1/2020=100) Shanghai containerise
Slide 5: Biden’s stimulus package risks prolonging inflationary pressures
Biden’s stimulus package risks prolonging inflationary pressures Biden’s bold budget includes outsized spending for The Fed insists the price surge is transitory, but the the next decade… market thinks otherwise Proposed US spending in next 10 years What do fund managers consider the biggest tail ri
Slide 6: The Fed has been timid about when to tighten its loose policies
The Fed has been timid about when to tighten its loose policies High public debt makes it difficult for the Fed to raise interest rates The Fed is not determined to reduce its balance sheet Federal debt held by public US Fed's policy and capital market movements 130 Projection 117 1000 8 Quantitativ
Slide 7: On balance, risk tilted towards bear market scenario in the medium term
On balance, risk tilted towards bear market scenario in the medium term Optimistic Scenario: Baseline Scenario: Bear Market Scenario: 1. Biden significantly downscales his 1. Fed raises rates very gradually 1. Biden retains his stimulus plan; and stimulus plan; and 2. Fed delays taking action 2. Fed
Slide 8: In event of a bear market, even HK & China may be vulnerable
In event of a bear market, even HK & China may be vulnerable Possible impact on Hong Kong Possible impact on Mainland China Economy Economy • Vulnerable to property market • With increased debt servicing costs, correction. the highly leveraged property and • Private consumption and exports financial
Slide 9: But China has more tools & headroom to act decisively
But China has more tools & headroom to act decisively China has plenty of room to address the threats of high global inflation Possible policy tools for China • As a closed economy, China is less directly • Various monetary tools, including open affected by the US monetary policies than many market
Slide 10: Disclaimer
Disclaimer This document is prepared by The Bank of East Asia, Limited (“BEA”) for customer reference only. Other than disclosures relating to BEA, the content is based on information available to the public and reasonably believed to be reliable, but has not been independently verified. Any project
Slide 11: For further information please contact Economic Research Department
For further information please contact Economic Research Department Celia Lam Annie Wong Mary Kwan LAMCYH1@hkbea.com WONGAYK@hkbea.com KWANMHT@hkbea.com 3609 1542 3609 1534 3609 1543
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