Tuesday, November 24, 2015

Hong Kong: 2015 CPI inflation forecast revised northwards - Nomura

FXStreet (Delhi) – Research Team at Nomura, has revised up their our 2015 CPI inflation forecast for Hong Kong but they see downside risks to 2016 CPI inflation due to stronger HKD.

Key Quotes

“Headline CPI inflation unexpectedly rose to 2.4% y-o-y in October (Consensus and Nomura: 1.9%) from 2.0% in September. The deceleration of electricity, gas and water price fall (-4.7% y-o-y in October from -10.1% in September) was the main reason and this was owing to the dissipation of the special fuel rebate in electricity, which took effect in August-September 2015. Housing (4.0% y-o-y in October from 3.5% in September) also pushed up the headline index, mainly because of the withdrawal of the government’s relief measures (rates concession).”

“Reflecting higher-than-expected October CPI inflation, we have decided to raise our 2015 CPI inflation forecast to 3.0% from 2.7%. However, we maintain our 2016 forecast of 2.5%, with downside risks owing to a stronger HKD and weaker housing markets.”

“We expect HKD (in trade-weighted terms) to continue to appreciate with the Fed lift-off because of the de facto HKD/USD peg. Also, negative sentiment on the property market from expectations of a Fed lift-off may lower housing accommodation costs.”
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