Indonesia said it will tighten rules on banks’ foreign-exchange holdings and overseas borrowing to cope with capital inflows that have pushed up inflation and strengthened the rupiah this year. Bank Indonesia will also
reintroduce a 30% cap on lenders’ short-term overseas borrowing to minimize the risk of sudden capital outflows, it said. Banks must set aside 5% of their total foreign-exchange holdings as reserves as of March 2011, from 1% currently, Deputy Governor Budi Mulya said. The reserve requirement will rise to 8% effective June. (Bloomberg)
Thursday, December 30, 2010
Malaysia - South Korea slaps duties on Malaysian plywood
The Korean Trade Commission has imposed anti-dumping duties on the import of Malaysian plywood, ranging from 5% to 38%, for three years. The decision was based on a probe that nine Malaysian plywood exporters were allegedly selling their products below production cost. Malaysian plywood exporters got a temporary relief three months ago when South Korea decided to defer its anti-dumping duties by reversing an earlier ruling to slap punitive duties ranging from 5% to 34%. (StarBiz)
China - Beijing to raise minimum wage 21% in 2011 as inflation quickens
Beijing will raise the minimum wage by 20.8% in 2011, becoming the latest local government to lift pay in a country where inflation is running at the fastest clip in more than two years. The increase to RMB1,160 (USD175) a month from RMB960, the second boost this year, will take effect on 1 Jan 2011, according to a statement from the Beijing Human Resources and Social Security Bureau. The city will also raise pension and unemployment benefits, the agency said. (Bloomberg)
US - Confidence falls on concern over jobs
Confidence among US consumers unexpectedly fell in December, restrained by concern that jobs will remain scarce in 2011. The Conference Board’s confidence index unexpectedly fell to 52.5, lower than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the New York-based research group showed. Another report showed home values dropped more than economists projected. (Bloomberg)
Japan - Consumer prices fall as deflation persists
Japan’s consumer prices fell for a 21st month in November, a sign sustained deflation may prompt the central bank to revise its price projections. Consumer prices excluding fresh food declined 0.5% from a year earlier, the statistics bureau said in Tokyo. That compared with a median 0.6% drop predicted by 28 economists surveyed by Bloomberg News. (Bloomberg)
Taiwan - May raise interest rate to damp inflation, home prices
Taiwan will probably increase borrowing costs for the third time this year to curb gains in property prices and tackle accelerating inflation. Governor Perng Fai-nan will raise the benchmark interest rate by 0.125 percentage point to 1.625%, according to all 14 economists in a survey. Perng boosted the rate by the same amount in June and September from a record-low 1.25%. (Bloomberg)
Thursday, December 23, 2010
ING Funds upbeat on Malaysian economy
ING Funds Bhd is confident of the outlook for Malaysia's macro economy, projecting gross domestic production growth of 7.5 per cent this year and 5 per cent in 2011 driven mainly by strong private consumption and private investment.
In a statement yesterday, it said the country's strong private consumption was reflected in the robust take-up rate for new homes and car sales, while retail sales, electricity sales and even traffic on highways were also healthy.
"In addition, the pump-priming activities under the Economic Transformation Programme and the 10th Malaysia Plan are expected to pick up more aggressively over the next one to two years," said ING Funds chief investment officer Philip Wong.
He said the improved ties between Malaysia and Singapore are expected to bring about long-term foreign direct investments from Singapore and the Middle East to the Iskandar Malaysia economic region.
"This should lead to a re-leveraging process with further creations of employment, income and consumer spending," he said.
On the global economic outlook, ING Funds expects growth to be significantly lower next year with a widening divergence in the performance of emerging versus developed economies, high volatility in markets and rising uncertainty over macro economic issues.
It forecast the world's real GDP growth to be around 3.8 per cent in 2011, compared with a forecast of 4.8 per cent for 2010.
For emerging economies, it has projected GDP expansion at 6.5 per cent for next year (2010 forecast: 8.1 per cent), while in the developed world it expects growth at 1.6 per cent (2010 forecast: 2.2 per cent), widening the economic performance gap between the two further.
It also warned that untested policy prescriptions from governments and central banks - which it termed "test tube policies" - could further contribute to significant market volatility. - Bernama
In a statement yesterday, it said the country's strong private consumption was reflected in the robust take-up rate for new homes and car sales, while retail sales, electricity sales and even traffic on highways were also healthy.
"In addition, the pump-priming activities under the Economic Transformation Programme and the 10th Malaysia Plan are expected to pick up more aggressively over the next one to two years," said ING Funds chief investment officer Philip Wong.
He said the improved ties between Malaysia and Singapore are expected to bring about long-term foreign direct investments from Singapore and the Middle East to the Iskandar Malaysia economic region.
"This should lead to a re-leveraging process with further creations of employment, income and consumer spending," he said.
On the global economic outlook, ING Funds expects growth to be significantly lower next year with a widening divergence in the performance of emerging versus developed economies, high volatility in markets and rising uncertainty over macro economic issues.
It forecast the world's real GDP growth to be around 3.8 per cent in 2011, compared with a forecast of 4.8 per cent for 2010.
For emerging economies, it has projected GDP expansion at 6.5 per cent for next year (2010 forecast: 8.1 per cent), while in the developed world it expects growth at 1.6 per cent (2010 forecast: 2.2 per cent), widening the economic performance gap between the two further.
It also warned that untested policy prescriptions from governments and central banks - which it termed "test tube policies" - could further contribute to significant market volatility. - Bernama
Monday, December 20, 2010
Hong Kong Unemployment Rate Drops to 4.1%
Hong Kong’s unemployment rate fell to 4.1% in the three months ended Nov. 30, as strength in the local economy spurred job growth, the Census and Statistics Department said Thursday.
The seasonally adjusted jobless rate fell from 4.2% in the August-October period, and was in line with the median 4.1% forecast of 10 economists surveyed earlier by Dow Jones Newswires.
The city’s jobless rate peaked at 5.5% in June-August 2009 period following the financial crisis, before it started to decline. It had been unchanged at 4.2% in the previous three three-month periods between June and October this year.(Wall Street Journal Asia)
The seasonally adjusted jobless rate fell from 4.2% in the August-October period, and was in line with the median 4.1% forecast of 10 economists surveyed earlier by Dow Jones Newswires.
The city’s jobless rate peaked at 5.5% in June-August 2009 period following the financial crisis, before it started to decline. It had been unchanged at 4.2% in the previous three three-month periods between June and October this year.(Wall Street Journal Asia)
Friday, December 17, 2010
Foreign interest in high-end KL condos set to grow
FOREIGN interest in high-end condominiums in Kuala Lumpur will accelerate next year with the impact from Economic Transformation Programme's Greater Kuala Lumpur plan, property market players said.
The economic crisis in the past two years had seen a dip in foreign interest leading to a 30 per cent drop in prices.
"Going forward, we expect a return in buyer interest from Singapore, Hong Kong, Indonesia and more recently from the Middle East," said Eric Y.H. Ooi, organising chairman of the forthcoming Fourth Malaysian Property Summit at a briefing yesterday.
Prices of these high-end units in the city centre, ranging from RM1 million and RM2 million, have caught up with previous peak levels.
Foreign ownership to local ownership, which was at 30:70 per cent ratio, is expected to increase.
"Come 2011 we will be able to see whether foreign interest will be better than the past two years or to the peak in 2007/2008 when it was 50:50 per cent ratio," Ooi said, adding that there had been drop in interest from European investors.
Ooi, who is also managing director of Knight Frank Malaysia, described the Malaysian property market scene as probably one of the most attractive in the region with fewer number of ownership restrictions.
Foreign investors are attracted to the higher yield from these high rise investments at 5 per cent compared to landed properties, which provide between 2 to 3 per cent yield.
He said it would be interesting to see the property market scene when the second-tier Chinese investors from the mainland are allowed to purchase overseas properties. Already there has been a spike of Chinese interest in properties elsewhere in Australia and Singapore.
Past president of the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia James Wong expects the inflow of foreign buyers to increase in 2012 with the implementation of the ETP.
"With the Greater KL and billions of ringgit in the MRT (mass rail transit) and LRT projects, we can expect to see an influx of expatriate population as seen during the last boom when the Petronas Twin Towers was taking shape," Wong said.
He added that unlike China and Singapore, Malaysia is not expected to see property asset bubble in the foreseeable future.
Wong also expects non-performing loans ratio (NPLs) to go up in the first quarter of 2011 although not at alarming rates.
He attributed it to the 5 to 10 per cent easy down payment scheme to purchase properties.
The Fourth Malaysian Property Summit organised by PEPS will be held at the Sime Darby Convention Centre in Kuala Lumpur on January 18.
It will have an overview of the property market performance and outlook for the office market, retail market, industrial market, high end condominium and REITs.
PEPS president Choy Yue Kwong said the property summit is also relevant to those who wonder whether it is the right time to sell their properties for alternative investments or right time to buy or invest or do nothing and wait for property prices to appreciate further. (Business Times)
The economic crisis in the past two years had seen a dip in foreign interest leading to a 30 per cent drop in prices.
"Going forward, we expect a return in buyer interest from Singapore, Hong Kong, Indonesia and more recently from the Middle East," said Eric Y.H. Ooi, organising chairman of the forthcoming Fourth Malaysian Property Summit at a briefing yesterday.
Prices of these high-end units in the city centre, ranging from RM1 million and RM2 million, have caught up with previous peak levels.
Foreign ownership to local ownership, which was at 30:70 per cent ratio, is expected to increase.
"Come 2011 we will be able to see whether foreign interest will be better than the past two years or to the peak in 2007/2008 when it was 50:50 per cent ratio," Ooi said, adding that there had been drop in interest from European investors.
Ooi, who is also managing director of Knight Frank Malaysia, described the Malaysian property market scene as probably one of the most attractive in the region with fewer number of ownership restrictions.
Foreign investors are attracted to the higher yield from these high rise investments at 5 per cent compared to landed properties, which provide between 2 to 3 per cent yield.
He said it would be interesting to see the property market scene when the second-tier Chinese investors from the mainland are allowed to purchase overseas properties. Already there has been a spike of Chinese interest in properties elsewhere in Australia and Singapore.
Past president of the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia James Wong expects the inflow of foreign buyers to increase in 2012 with the implementation of the ETP.
"With the Greater KL and billions of ringgit in the MRT (mass rail transit) and LRT projects, we can expect to see an influx of expatriate population as seen during the last boom when the Petronas Twin Towers was taking shape," Wong said.
He added that unlike China and Singapore, Malaysia is not expected to see property asset bubble in the foreseeable future.
Wong also expects non-performing loans ratio (NPLs) to go up in the first quarter of 2011 although not at alarming rates.
He attributed it to the 5 to 10 per cent easy down payment scheme to purchase properties.
The Fourth Malaysian Property Summit organised by PEPS will be held at the Sime Darby Convention Centre in Kuala Lumpur on January 18.
It will have an overview of the property market performance and outlook for the office market, retail market, industrial market, high end condominium and REITs.
PEPS president Choy Yue Kwong said the property summit is also relevant to those who wonder whether it is the right time to sell their properties for alternative investments or right time to buy or invest or do nothing and wait for property prices to appreciate further. (Business Times)
China faces exchange rate dilemma - c.bank chief
SHANGHAI: China faces a dilemma in managing its currency, since appreciation would benefit importers but anger exporters, central bank chief Zhou Xiaochuan said in comments reported on Friday, Dec 17.
As with all policy decisions, including whether to raise interest rates, the trick for the People's Bank of China was to try to strike a balance between competing interests, he was cited as saying by the Shanghai Securities News, an official newspaper.
"Most central banks face a dilemma in their monetary policy, hoping to use limited tools to satisfy all of the demands from groups with different interests," Zhou was quoted as saying.
"Take the exchange rate. When the exchange rate rises, exporters will perhaps complain. Importers might say it is good. They will be able to sell things for a bit less and so expand their market. There will always be a trade-off," he said.
Zhou gave no indication of what the balance might be on currency policy, though recent history points to a gradual rise in the yuan against the dollar as a middle course.
Since ending a de facto peg in June, the central bank has let the yuan climb just 2.4 percent against the dollar. Investors expect the pace to be even slower next year, with offshore forwards pricing in just 2.2 percent appreciation over the next 12 months.
The central bank is believed to be a relatively strong roponent of yuan appreciation in Chinese policy making circles, while the Commerce Ministry is seen as a major opponent because of its focus on supporting exporters. - Reuters
As with all policy decisions, including whether to raise interest rates, the trick for the People's Bank of China was to try to strike a balance between competing interests, he was cited as saying by the Shanghai Securities News, an official newspaper.
"Most central banks face a dilemma in their monetary policy, hoping to use limited tools to satisfy all of the demands from groups with different interests," Zhou was quoted as saying.
"Take the exchange rate. When the exchange rate rises, exporters will perhaps complain. Importers might say it is good. They will be able to sell things for a bit less and so expand their market. There will always be a trade-off," he said.
Zhou gave no indication of what the balance might be on currency policy, though recent history points to a gradual rise in the yuan against the dollar as a middle course.
Since ending a de facto peg in June, the central bank has let the yuan climb just 2.4 percent against the dollar. Investors expect the pace to be even slower next year, with offshore forwards pricing in just 2.2 percent appreciation over the next 12 months.
The central bank is believed to be a relatively strong roponent of yuan appreciation in Chinese policy making circles, while the Commerce Ministry is seen as a major opponent because of its focus on supporting exporters. - Reuters
Friday, December 10, 2010
Australia Headed for Jobs Record, Intensifying Wage Pressures
Employment in Australia is headed for the biggest annual increase on record, boosting prospects of an acceleration in wage gains that forces the central bank to resume raising interest rates.
Payrolls soared by 366,000 in the first 11 months of this year to 11.4 million, the most since records began in 1978 and 27,000 more than the previous high in 2006. The jobs data released yesterday contrasted with a report last week showing growth in the third quarter was the slowest since the end of 2008.
“Labor statistics are probably the best guide to current conditions in the economy,” said Paul Bloxham, chief economist at HSBC Holdings Plc in Sydney and a former central bank official. “One only needs to look back to the last time inflation got above the target band to find that the best real- time indicator of what was going on was the labor market.”
The Reserve Bank of Australia could enter 2011 with an economy nearing full employment, which may help tip what policy makers have called a “finely balanced” debate in favor of those urging tighter policy. Governor Glenn Stevens has espoused preemptive moves, including a Nov. 2. rate boost, saying central bankers rarely regret lifting borrowing costs too soon.
“We expect that the unemployment rate will fall further in the next few months,” Bloxham said. “As a result, rates will need to rise further, and we expect multiple hikes next year.”
Rate Expectations
Investors are betting there is a 58 percent chance the central bank will raise rates by a quarter percentage point in May, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. That’s the first month next year in which rate-increase expectations are greater than 50-50.
In a Dec. 7 statement, Stevens said that “after the significant decline last year, growth in wages has picked up somewhat, as had been expected. Some further increase is likely over the coming year.”
Payrolls gained 54,600 in November from a month earlier, the statistics bureau said in Sydney yesterday, more than double the median forecast for a 20,000 increase in a Bloomberg survey of 26 economists. The jobless rate fell to 5.2 percent from 5.4 percent.
The Australian dollar was little changed today, trading at 98.29 U.S. cents at 12:28 in Sydney. Last month, the currency reached parity with its U.S. counterpart. Australia’s S&P/ASX 200 Index of stocks was little changed at 4,738.8 after closing yesterday at the highest level in about a month.
Full-Time Jobs
The employment report showed the number of full-time jobs advanced 55,100 in November and part-time employment was little changed, slipping by 400. Australia’s participation rate, which measures the labor force as a percentage of the population over 15 years old, increased to a record 66.1 percent in November from 65.9 percent a month earlier, it showed.
The data are “consistent with a very tight labor market” and there is a risk unemployment will fall quickly through 5 percent, a level that in the past has been accompanied by accelerating wage pressure, said Stephen Roberts, a senior economist at Nomura Australia Ltd.
“The RBA will return to hiking the cash rate earlier than the market is currently allowing,” Roberts said, predicting a quarter-point increase to 5 percent in March. The RBA’s next meeting on borrowing costs is scheduled for Feb. 1.
Employment is escalating as energy and resources companies increase investment and hiring to meet demand from China.
Resources Boom
Yesterday’s report showed unemployment fell to 4.5 percent in Western Australia, site of Chevron Corp.’s A$43 billion ($42 billion) Gorgon liquefied natural gas project, and 5.5 percent in Queensland, where BG Group Plc will begin building a $15 billion LNG venture, generating 5,000 construction jobs.
BG, Chevron, Royal Dutch Shell Plc and ConocoPhillips are among energy companies investing about A$200 billion in proposed LNG projects in Australia.
The hiring surge threatens to boost inflation, which the central bank aims to keep in a range of 2 percent to 3 percent. The consumer price index in the third quarter rose 2.8 percent from a year earlier, a government report showed Oct. 27.
The central bank has raised its overnight cash rate target seven times since October 2009, in contrast with the U.S. Federal Reserve’s policy of a benchmark rate near zero since December 2008. That divergence has contributed to a 10 percent increase in the local dollar versus the U.S. currency this year.
‘Modest’ Move
Assistant RBA Governor Philip Lowe, in a speech two days ago in Sydney, said policy makers’ most recent rate increase was an “early and modest adjustment” aimed at averting “uncomfortably high” inflation and avoiding a “more substantial increase in interest rates later on.”
Australian wages rose 3.5 percent in the third quarter from a year earlier, the most in a year, as salaries in private industry outpaced government pay gains for the first time since the start of the global financial crisis.
Nomura’s Roberts said the RBA would be “rather uncomfortable” with wage inflation rising to 4.5 percent, a level that might be reached next year on the current trajectory. (Bloomberg)
Payrolls soared by 366,000 in the first 11 months of this year to 11.4 million, the most since records began in 1978 and 27,000 more than the previous high in 2006. The jobs data released yesterday contrasted with a report last week showing growth in the third quarter was the slowest since the end of 2008.
“Labor statistics are probably the best guide to current conditions in the economy,” said Paul Bloxham, chief economist at HSBC Holdings Plc in Sydney and a former central bank official. “One only needs to look back to the last time inflation got above the target band to find that the best real- time indicator of what was going on was the labor market.”
The Reserve Bank of Australia could enter 2011 with an economy nearing full employment, which may help tip what policy makers have called a “finely balanced” debate in favor of those urging tighter policy. Governor Glenn Stevens has espoused preemptive moves, including a Nov. 2. rate boost, saying central bankers rarely regret lifting borrowing costs too soon.
“We expect that the unemployment rate will fall further in the next few months,” Bloxham said. “As a result, rates will need to rise further, and we expect multiple hikes next year.”
Rate Expectations
Investors are betting there is a 58 percent chance the central bank will raise rates by a quarter percentage point in May, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. That’s the first month next year in which rate-increase expectations are greater than 50-50.
In a Dec. 7 statement, Stevens said that “after the significant decline last year, growth in wages has picked up somewhat, as had been expected. Some further increase is likely over the coming year.”
Payrolls gained 54,600 in November from a month earlier, the statistics bureau said in Sydney yesterday, more than double the median forecast for a 20,000 increase in a Bloomberg survey of 26 economists. The jobless rate fell to 5.2 percent from 5.4 percent.
The Australian dollar was little changed today, trading at 98.29 U.S. cents at 12:28 in Sydney. Last month, the currency reached parity with its U.S. counterpart. Australia’s S&P/ASX 200 Index of stocks was little changed at 4,738.8 after closing yesterday at the highest level in about a month.
Full-Time Jobs
The employment report showed the number of full-time jobs advanced 55,100 in November and part-time employment was little changed, slipping by 400. Australia’s participation rate, which measures the labor force as a percentage of the population over 15 years old, increased to a record 66.1 percent in November from 65.9 percent a month earlier, it showed.
The data are “consistent with a very tight labor market” and there is a risk unemployment will fall quickly through 5 percent, a level that in the past has been accompanied by accelerating wage pressure, said Stephen Roberts, a senior economist at Nomura Australia Ltd.
“The RBA will return to hiking the cash rate earlier than the market is currently allowing,” Roberts said, predicting a quarter-point increase to 5 percent in March. The RBA’s next meeting on borrowing costs is scheduled for Feb. 1.
Employment is escalating as energy and resources companies increase investment and hiring to meet demand from China.
Resources Boom
Yesterday’s report showed unemployment fell to 4.5 percent in Western Australia, site of Chevron Corp.’s A$43 billion ($42 billion) Gorgon liquefied natural gas project, and 5.5 percent in Queensland, where BG Group Plc will begin building a $15 billion LNG venture, generating 5,000 construction jobs.
BG, Chevron, Royal Dutch Shell Plc and ConocoPhillips are among energy companies investing about A$200 billion in proposed LNG projects in Australia.
The hiring surge threatens to boost inflation, which the central bank aims to keep in a range of 2 percent to 3 percent. The consumer price index in the third quarter rose 2.8 percent from a year earlier, a government report showed Oct. 27.
The central bank has raised its overnight cash rate target seven times since October 2009, in contrast with the U.S. Federal Reserve’s policy of a benchmark rate near zero since December 2008. That divergence has contributed to a 10 percent increase in the local dollar versus the U.S. currency this year.
‘Modest’ Move
Assistant RBA Governor Philip Lowe, in a speech two days ago in Sydney, said policy makers’ most recent rate increase was an “early and modest adjustment” aimed at averting “uncomfortably high” inflation and avoiding a “more substantial increase in interest rates later on.”
Australian wages rose 3.5 percent in the third quarter from a year earlier, the most in a year, as salaries in private industry outpaced government pay gains for the first time since the start of the global financial crisis.
Nomura’s Roberts said the RBA would be “rather uncomfortable” with wage inflation rising to 4.5 percent, a level that might be reached next year on the current trajectory. (Bloomberg)
China Posts Trade Surplus of $22.9 Billion, Exceeding Forecast
China’s November trade surplus was $22.9 billion, the customs bureau said today, exceeding the median forecast for $21.2 billion in a Bloomberg News survey of 30 economists.
Exports rose 35 percent from a year earlier, more than the median estimate for a 24 percent gain. Imports grew 38 percent, more than the median forecast for a 24.5 percent advance. (Bloomberg)
Exports rose 35 percent from a year earlier, more than the median estimate for a 24 percent gain. Imports grew 38 percent, more than the median forecast for a 24.5 percent advance. (Bloomberg)
Thursday, December 9, 2010
Inflation expected to accelerate next year
KUALA LUMPUR: The latest round of subsidy rationalisation may not increase the inflation rate this year but continued rationalisation could push rates higher in 2011.
The subsidy cuts add pressure to the consumer price index (CPI), according to CIMB Research in a report released on Monday.
Although the direct impact on the CPI appears manageable, one should also be mindful of the indirect spillover effects, it added.
Last Friday, the government increased the price of RON95 by five sen to RM1.90/litre, while diesel price was also raised by five sen to RM1.80/litre. Sugar price rose by 20 sen to RM2.10/kg, and LPG price went up five sen to RM1.90/kg.
“We estimate the combined price hikes will result in a 0.2% point rise in the headline inflation (fuel price adds 0.18% pt, sugar +0.03% pt and LPG +0.01% pt).
“During the previous price hike in July, the CPI increased by 1.9%-2.1% in July-August. We maintain our 2010 inflation estimate of 1.7%. Continued rationalisation of subsidies could add to the inflation upside for 2011. As such, we also raise our CPI forecast higher to 3% from 2.5% previously,” said the report.
When contacted, CIMB head economist Lee Heng Guie reiterated that the impact would be more next year.
“We will have a new base to work on. The government is expected to review every six months while rationalisation is expected to continue,” he said, adding the inflation rate was expected to hover between 2.5% and 3% next year.
On whether the latest hike would have any impact on retail, especially those from the food and beverage and transportation sectors, Lee said retailers would have to think how much they can absorb and pass through.
“We have yet to hear from any associations this time around. During the last price hike, those involved also did not raise their prices,” he said
GD Express Carrier Bhd (GDEX) executive deputy chairman Teong Teck Lean said most companies involved in the logistics, transportation and delivery services currently enjoyed fleet discounts under the subsidised fuel system.
He said the impact of any reduction in or removal of subsidies would depend on the nature of each company’s business, as those operating container lorries or general transportation of goods had different cost structures than those in the express delivery or courier business.
He said for GDEX, the bigger cost was in terms of manpower and its tracking systems, adding that any increase in fuel prices will not be too severe on its operations.
Teong explained that as the company’s services involved deliveries to multiple destinations and not a single journey, the cost factor could be distributed among all its customers, and hence all the parties would incur a marginal increase.
“If you compare us with a transporter delivering to just one customer or one destination, any increase in fuel price would make its operations more expensive.
“But for our industry, we have the economies of scale, the more we deliver, the lower the cost. For example, assuming there is a 15% hike in fuel price, our surcharge could be around 3% to 5%, which would not impact our customers too severely,” he said.
CIMB Research’s economic update said the price adjustments were inevitable due to the rise in commodity prices where crude oil price has risen by 17.9% or US$13.60/bbl (RM42.70) since July to US$89.20/bbl currently, while the price of raw sugar has soared by US$13.90/lbs to US$29.50/lbs since June.
However, the report said interest rates are not expected to rise in the near future but it expects Bank Negara Malaysia (BNM) to resume normalising rates once the economy gains momentum in 2H11.
In its report, RHB Research Institute also came to the conclusion that the latest hike’s impact would be manageable but inflation would likely trend up next year due to the government’s gradual move to reduce subsidies every six months. This in turn would lead to higher retail fuel and food prices.
RHB Research also said that rising global commodity prices due to monetary easing in developed countries would likely result in higher food prices and inflation.
“However, this will likely be mitigated by a slowdown in demand. In this respect, we expect inflation to rise to an average rate of 2.2% in 2011, from +1.7% estimated for 2010.
“In tandem with rising inflation and a sustained economic growth, albeit at a more moderate pace in 2011, we believe BNM will likely resume its policy normalisation in 2011, after taking a pause in the last two meetings. However, the timing will depend on how soon the global economy stabilises.
“Hence, we expect the overnight policy rate to be raised by 50-75 basis points in 2H11 to bring it to a more neutral level of 3.25%-3.5%,” the report said, adding that the central bank ought to introduce measures to curb rising household debts which rose to 77.9% of GDP at end of July this year.
(The Edge Financial Daily, December 8, 2010)
The subsidy cuts add pressure to the consumer price index (CPI), according to CIMB Research in a report released on Monday.
Although the direct impact on the CPI appears manageable, one should also be mindful of the indirect spillover effects, it added.
Last Friday, the government increased the price of RON95 by five sen to RM1.90/litre, while diesel price was also raised by five sen to RM1.80/litre. Sugar price rose by 20 sen to RM2.10/kg, and LPG price went up five sen to RM1.90/kg.
“We estimate the combined price hikes will result in a 0.2% point rise in the headline inflation (fuel price adds 0.18% pt, sugar +0.03% pt and LPG +0.01% pt).
“During the previous price hike in July, the CPI increased by 1.9%-2.1% in July-August. We maintain our 2010 inflation estimate of 1.7%. Continued rationalisation of subsidies could add to the inflation upside for 2011. As such, we also raise our CPI forecast higher to 3% from 2.5% previously,” said the report.
When contacted, CIMB head economist Lee Heng Guie reiterated that the impact would be more next year.
“We will have a new base to work on. The government is expected to review every six months while rationalisation is expected to continue,” he said, adding the inflation rate was expected to hover between 2.5% and 3% next year.
On whether the latest hike would have any impact on retail, especially those from the food and beverage and transportation sectors, Lee said retailers would have to think how much they can absorb and pass through.
“We have yet to hear from any associations this time around. During the last price hike, those involved also did not raise their prices,” he said
GD Express Carrier Bhd (GDEX) executive deputy chairman Teong Teck Lean said most companies involved in the logistics, transportation and delivery services currently enjoyed fleet discounts under the subsidised fuel system.
He said the impact of any reduction in or removal of subsidies would depend on the nature of each company’s business, as those operating container lorries or general transportation of goods had different cost structures than those in the express delivery or courier business.
He said for GDEX, the bigger cost was in terms of manpower and its tracking systems, adding that any increase in fuel prices will not be too severe on its operations.
Teong explained that as the company’s services involved deliveries to multiple destinations and not a single journey, the cost factor could be distributed among all its customers, and hence all the parties would incur a marginal increase.
“If you compare us with a transporter delivering to just one customer or one destination, any increase in fuel price would make its operations more expensive.
“But for our industry, we have the economies of scale, the more we deliver, the lower the cost. For example, assuming there is a 15% hike in fuel price, our surcharge could be around 3% to 5%, which would not impact our customers too severely,” he said.
CIMB Research’s economic update said the price adjustments were inevitable due to the rise in commodity prices where crude oil price has risen by 17.9% or US$13.60/bbl (RM42.70) since July to US$89.20/bbl currently, while the price of raw sugar has soared by US$13.90/lbs to US$29.50/lbs since June.
However, the report said interest rates are not expected to rise in the near future but it expects Bank Negara Malaysia (BNM) to resume normalising rates once the economy gains momentum in 2H11.
In its report, RHB Research Institute also came to the conclusion that the latest hike’s impact would be manageable but inflation would likely trend up next year due to the government’s gradual move to reduce subsidies every six months. This in turn would lead to higher retail fuel and food prices.
RHB Research also said that rising global commodity prices due to monetary easing in developed countries would likely result in higher food prices and inflation.
“However, this will likely be mitigated by a slowdown in demand. In this respect, we expect inflation to rise to an average rate of 2.2% in 2011, from +1.7% estimated for 2010.
“In tandem with rising inflation and a sustained economic growth, albeit at a more moderate pace in 2011, we believe BNM will likely resume its policy normalisation in 2011, after taking a pause in the last two meetings. However, the timing will depend on how soon the global economy stabilises.
“Hence, we expect the overnight policy rate to be raised by 50-75 basis points in 2H11 to bring it to a more neutral level of 3.25%-3.5%,” the report said, adding that the central bank ought to introduce measures to curb rising household debts which rose to 77.9% of GDP at end of July this year.
(The Edge Financial Daily, December 8, 2010)
Monday, December 6, 2010
Global economy in another super-cycle (Business Times)
THE world economy is in a super-cycle. This is a period of historically high global growth, lasting a generation or more. There are many factors driving this, including rising trade, high rates of investment, rapid urbanisation and technological innovation. Super cycles are also characterised by the emergence of economies enjoying rapid growth, such as China, India and Indonesia now.
The world economy has twice enjoyed super-cycles before. The first, from 1870 to 1913, saw a significant pick-up in global growth, with the world growing on average each year by 2.7 per cent a full 1 per cent higher than previously seen. That cycle was led by the emergence of the US and saw increased trade and greater use of technologies from the industrial revolution.
The second super-cycle, from 1945 to the early 1970s, saw growth averaging 5 per cent and was characterised by the post-war reconstruction and catch-up across large parts of the globe. It saw the emergence both of a large middle class in the West and of exporting nations across Asia, led by Japan.
We may now be in another super-cycle, with aspects similar to those seen in the first two super-cycles. For people in Asia and across the emerging world the idea of strong growth may not sound unusual. But for many in the West, the thought of a super-cycle may sound strange, given the present problems confronting the world economy. Yet the reality is the world economy now is over US$62 trillion (RM195.3 trillion), about twice the size it was a decade ago, and it has already exceeded its pre-recession peak.
Over the last two years, its rebound has been driven by policy stimulus in the West and by stronger growth in the East. Indeed, emerging economies, which are one-third of the world economy, currently account for two-thirds of its growth. This trend looks set to continue. By 2030, the world economy could grow to US$308 trillion (RM960.75 trillion). Excluding inflation that would equate to US$129 trillion (RM406.35 trillion) in real terms, or in today’s prices, and to US$143 trillion (RM450.45 trillion) keeping prices constant but allowing for some emerging-market currency appreciation. The projections would imply a real growth rate of 3.5 per cent for the period between 2000, when the super-cycle started, and 2030, or 3.9 per cent from now to 2030. That would be a significant step-up compared with 2.8 per cent between 1973 and 2000.
What is remarkable is not only the likely scale of this expansion but the fact that these forecasts are based on projections for growth that some might even think are too cautious! For instance, China is expected to grow on average 6.9 per cent per annum over the period to 2030, and India by 9.3 per cent. By 2030, India may have become the world’s third largest economy. Moreover, Indonesia, currently the 28th largest economy may have moved to 5th largest in twenty years, having enjoyed nearly 7 per cent average growth over that period.
There are always risks that could impact global growth. The first super-cycle ended with the outbreak of the First World War, the second with the oil shocks of the early seventies. Hopefully, the world today is better placed to address such risks, thanks to the emergence of international decision making bodies and policy fora such as the G20.
It is important to stress that a super-cycle does not mean that growth will be continuously strong over the whole period. For the last three or four years we have been amongst the most pessimistic about US growth. I am still cautious. Despite the benefits of quantitative easing, the US economy will still struggle in the year-ahead, growing below trend. Likewise, Europe and Japan face a sluggish near-term outlook where growth will be modest.
All this makes it even more remarkable if Asia can drive more of its own growth. That is, after all, what the world needs. Next year, China sees the first year of its twelfth five-year plan. That should help growth. But, even allowing for this, the Chinese and other central banks across Asia will be tightening policy to cap inflation. In turn, this should allow growth to be more sustainable, but at rates either close to, or even below, those seen this year.
So, even in a super-cycle, there can be challenges for policymakers. Just as it is important to focus on near-term challenges, it is also vital to keep sight of longer-term opportunities. During the super-cycle, we believe that China can displace the US as the world’s largest economy by 2020, far sooner than many expect.
Whilst such forecasts give a scale of the outlook, it is the story behind what is happening that is as important.There is the scale of the economies that are growing. As emerging economies grow they will exert greater influence on the world economy.
Then there is the impact from the growth of new trade corridors. Close to 85 per cent of the world’s population are becoming increasingly inter-connected through trade, allowing an unprecedented number of people to contribute to the global economy. Cash and financial resources will be critical drivers of growth, given the need for investment, particularly in infrastructure.
Then there is what I call perspiration, with more people working and spending, and inspiration, with greater use of innovation and technology. The countries that will succeed will be those with the cash, the commodities and the creativity.
In recent years I have described what was happening as the New World Order, reflecting a shift in the balance of economic and financial power from the West to the East. While still valid, a super-cycle better reflects what is happening. It is still possible for the West to do well in this environment, particularly if economies there are creative yet it is Asia that appears to be the clear winner.
Dr Gerard Lyons is group head of global research and chief economist at Standard Chartered Bank
Read more: Global economy in another super-cycle
The world economy has twice enjoyed super-cycles before. The first, from 1870 to 1913, saw a significant pick-up in global growth, with the world growing on average each year by 2.7 per cent a full 1 per cent higher than previously seen. That cycle was led by the emergence of the US and saw increased trade and greater use of technologies from the industrial revolution.
The second super-cycle, from 1945 to the early 1970s, saw growth averaging 5 per cent and was characterised by the post-war reconstruction and catch-up across large parts of the globe. It saw the emergence both of a large middle class in the West and of exporting nations across Asia, led by Japan.
We may now be in another super-cycle, with aspects similar to those seen in the first two super-cycles. For people in Asia and across the emerging world the idea of strong growth may not sound unusual. But for many in the West, the thought of a super-cycle may sound strange, given the present problems confronting the world economy. Yet the reality is the world economy now is over US$62 trillion (RM195.3 trillion), about twice the size it was a decade ago, and it has already exceeded its pre-recession peak.
Over the last two years, its rebound has been driven by policy stimulus in the West and by stronger growth in the East. Indeed, emerging economies, which are one-third of the world economy, currently account for two-thirds of its growth. This trend looks set to continue. By 2030, the world economy could grow to US$308 trillion (RM960.75 trillion). Excluding inflation that would equate to US$129 trillion (RM406.35 trillion) in real terms, or in today’s prices, and to US$143 trillion (RM450.45 trillion) keeping prices constant but allowing for some emerging-market currency appreciation. The projections would imply a real growth rate of 3.5 per cent for the period between 2000, when the super-cycle started, and 2030, or 3.9 per cent from now to 2030. That would be a significant step-up compared with 2.8 per cent between 1973 and 2000.
What is remarkable is not only the likely scale of this expansion but the fact that these forecasts are based on projections for growth that some might even think are too cautious! For instance, China is expected to grow on average 6.9 per cent per annum over the period to 2030, and India by 9.3 per cent. By 2030, India may have become the world’s third largest economy. Moreover, Indonesia, currently the 28th largest economy may have moved to 5th largest in twenty years, having enjoyed nearly 7 per cent average growth over that period.
There are always risks that could impact global growth. The first super-cycle ended with the outbreak of the First World War, the second with the oil shocks of the early seventies. Hopefully, the world today is better placed to address such risks, thanks to the emergence of international decision making bodies and policy fora such as the G20.
It is important to stress that a super-cycle does not mean that growth will be continuously strong over the whole period. For the last three or four years we have been amongst the most pessimistic about US growth. I am still cautious. Despite the benefits of quantitative easing, the US economy will still struggle in the year-ahead, growing below trend. Likewise, Europe and Japan face a sluggish near-term outlook where growth will be modest.
All this makes it even more remarkable if Asia can drive more of its own growth. That is, after all, what the world needs. Next year, China sees the first year of its twelfth five-year plan. That should help growth. But, even allowing for this, the Chinese and other central banks across Asia will be tightening policy to cap inflation. In turn, this should allow growth to be more sustainable, but at rates either close to, or even below, those seen this year.
So, even in a super-cycle, there can be challenges for policymakers. Just as it is important to focus on near-term challenges, it is also vital to keep sight of longer-term opportunities. During the super-cycle, we believe that China can displace the US as the world’s largest economy by 2020, far sooner than many expect.
Whilst such forecasts give a scale of the outlook, it is the story behind what is happening that is as important.There is the scale of the economies that are growing. As emerging economies grow they will exert greater influence on the world economy.
Then there is the impact from the growth of new trade corridors. Close to 85 per cent of the world’s population are becoming increasingly inter-connected through trade, allowing an unprecedented number of people to contribute to the global economy. Cash and financial resources will be critical drivers of growth, given the need for investment, particularly in infrastructure.
Then there is what I call perspiration, with more people working and spending, and inspiration, with greater use of innovation and technology. The countries that will succeed will be those with the cash, the commodities and the creativity.
In recent years I have described what was happening as the New World Order, reflecting a shift in the balance of economic and financial power from the West to the East. While still valid, a super-cycle better reflects what is happening. It is still possible for the West to do well in this environment, particularly if economies there are creative yet it is Asia that appears to be the clear winner.
Dr Gerard Lyons is group head of global research and chief economist at Standard Chartered Bank
Read more: Global economy in another super-cycle
Wednesday, December 1, 2010
Australia economy grows meagre 0.2% in 3Q
Australia's economy grew by a meagre 0.2% in the third quarter as a drag from exports and inventories pulled it short of already modest expectations, sending the local dollar sliding half a U.S. cent.
Gross domestic product would have contracted if not for a solid contribution from the farm sector, according to a Reuters report on Wednesday, Dec 1.
Annual growth was also lower than expected at 2.7 percent after downward revisions to the past.
Yet analysts remain optimistic that Australia is still on track for its 20th straight year without a recession as Chinese and Indian demand for resources fuels a boom in trade and mining investment that should keep growth brisk. - Reuters
Gross domestic product would have contracted if not for a solid contribution from the farm sector, according to a Reuters report on Wednesday, Dec 1.
Annual growth was also lower than expected at 2.7 percent after downward revisions to the past.
Yet analysts remain optimistic that Australia is still on track for its 20th straight year without a recession as Chinese and Indian demand for resources fuels a boom in trade and mining investment that should keep growth brisk. - Reuters
Asean faces risks of lower growth (Source: Star Online)
Lower global economic growth and gross development product (GDP) will be among the biggest risks facing Asean countries in 2011, says Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah.
“One of the biggest risks for Asean next year is that relating to (global economic) growth and GDP. We need to monitor the situation in the European Union as growth there is currently fragile. This is also the case in the United States,” he said at a press conference yesterday.
“The lower growth rate and GDP will (also) affect the world,” Husni said.
Philippines Secretary of Finance Cesar Purisima said Asean countries needed to look for opportunities in light of the challenges ahead.
“The challenge is to be able to ignite intra Asean and Asia trade. Funds need to be directed towards productive purposes rather than speculative purposes,” he said.
The seminar, themed “Discovering Tomorrow’s Asean,” was co-organised by the Finance Ministry and Securities Commission. Finance ministers from the respective Asean countries, as well as 500 regional and international capital market players, investors and intermediaries, atten the event.
Husni said the finance ministers had collectively affirmed that Asean as an asset class is a reality with huge potential.
“Member countries remained committed to Asean economic transformation and regulatory changes to reduce regulatory friction and the cost of doing business.”
He also said private sector participation and involvement in the Asean economic integration agenda was critical for sustainable and inclusive growth in the region.
“While the International Monetary Fund’s current projection for Asean’s growth is 5% to 6%, we believe it can go beyond 7%. To achieve this, it is imperative that Asean constantly reforms, collectively addresses tough issues and introduces regulatory changes to stay competitive and nimble,” said Husni.
“One of the biggest risks for Asean next year is that relating to (global economic) growth and GDP. We need to monitor the situation in the European Union as growth there is currently fragile. This is also the case in the United States,” he said at a press conference yesterday.
“The lower growth rate and GDP will (also) affect the world,” Husni said.
“The challenge is to be able to ignite intra Asean and Asia trade. Funds need to be directed towards productive purposes rather than speculative purposes,” he said.
The seminar, themed “Discovering Tomorrow’s Asean,” was co-organised by the Finance Ministry and Securities Commission. Finance ministers from the respective Asean countries, as well as 500 regional and international capital market players, investors and intermediaries, atten the event.
Husni said the finance ministers had collectively affirmed that Asean as an asset class is a reality with huge potential.
“Member countries remained committed to Asean economic transformation and regulatory changes to reduce regulatory friction and the cost of doing business.”
He also said private sector participation and involvement in the Asean economic integration agenda was critical for sustainable and inclusive growth in the region.
“While the International Monetary Fund’s current projection for Asean’s growth is 5% to 6%, we believe it can go beyond 7%. To achieve this, it is imperative that Asean constantly reforms, collectively addresses tough issues and introduces regulatory changes to stay competitive and nimble,” said Husni.
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