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HSBC SEE AN ODD, AND ENTICING THING IN ASIAN EXPORT DATA

Asian exporters are doing well, shipment volumes from mainland China and EM Asia in general are at record highs, Fred Neumann, chief Asia economist at HSBC flags in a Friday note.

"Fair enough", you might say, tariffs are coming, and importers are getting inventory before they arrive, but, notes Neumann, the funny thing is there isn't much evidence of front-loading on the U.S. side.

Retail inventories are up, but only back to previous peaks, and, again based on HSBC's sums, U.S. inventory-to-sales ratios have barely budged "suggesting that retailers are running lean inventories at the moment"

So what's happening? Where's all the stuff going?

He has a few possible theories:

- It's a data problem. Some of the inventory data is outdated, so maybe it'll sort itself out. However, second-tier data doesn't show much of a change in June either.

- The goods are in bonded warehouses at which importers don't pay tariffs until the stuff is distributed, and so they're waiting until just before tariffs hit to move them.

That's an attractive theory and there has been a spike of imports into bonded warehouses of goods brought in from mainland China, however these amount to less than 4% of total purchases from mainland China, so it can't be the whole answer.

- Or, maybe, and HSBC call this "an enticing prospect" U.S. inventories haven’t swelled as much as one might have thought due to rising – or at least surprisingly robust – demand in the U.S..

That would mean Asian economies wont see 'payback' from front loading. Maybe, though Neumann cautions, "it would be a stretch, to assume that sky-high tariffs wouldn’t put a big dent into Asian shipments at some point."

(Alun John)

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