The US economy grew at a dead-pace 0.4 per cent in the first quarter and only 1.3 per cent in the second quarter of 2011, the government said Friday in a report that was far worse than expected.
It was the weakest growth since the world's largest economy officially exited recession two years ago, and raised doubts about widespread forecasts of a 3.0 per cent-plus pace for the rest of the year.
The Commerce Department sharply revised lower its previous estimate of first-quarter gross domestic product (GDP) growth of 1.9 per cent.
The department also made sharp revisions to growth in earlier years that showed the US economy suffered much more during the financial crisis than had been understood.
The surprisingly weak GDP readings on the world's largest economy came amid a political deadlock in Washington over raising the country's debt ceiling just days before the Treasury says it could run out of money to pay its obligations.
With no sign of an agreement in Congress, economists and markets are increasingly worried that missing the August 2 debt deadline will result in the United States losing its top triple-A credit rating and the economy taking a further hit.
The numbers for the April-June period fell short of expectations of an already-sluggish 1.7 per cent growth pace as the economy suffered a slew of headwinds.
The tough second quarter included high commodity prices, Japanese supply-chain disruptions from the March 11 earthquake, financial market jitters over Europe's debt crisis and a gridlocked US government over deficit-reduction and debt.
Imports increased, subtracting from the GDP number.
The economy remained well below the strength needed to create jobs, leaving the troubled labour market with unemployment at 9.2 per cent in June.
Second-quarter activity was led by business investment and international trade, while consumer spending stalled and public spending fell.
Consumer spending, which normally drives 70 per cent of the US economy, edged up just 0.1 per cent, the first time it was virtually unchanged since the economy officially exited recession in June 2009. It had climbed 2.1 per cent in the prior quarter.
The department's annual revisions also gave a grim assessment of the economy's performance during the financial crisis, which peaked in 2008-2009, triggering the worst recession since the 1930s Great Depression.
It said during 2007-2010, the economy contracted an average 0.3 per cent annually, instead of growing 0.1 per cent each year as previously estimated.
In the worst quarter of the period, October-December 2008, the economy shrunk at a rate of 8.9 per cent. (Business Times)
Sunday, July 31, 2011
Saturday, July 30, 2011
US default deemed unlikely
THE US debt ceiling crisis is fast approaching the Aug 2 deadline and the markets are already signalling their collective nervousness if no deal could be struck in the penultimate hours of the self-imposed deadline.
Stock markets around the world have been in sell-down mode, as jittery investors hold their breath over the potential consequences of the US government technically defaulting on its debt obligation.
At stake here is US$14.3 trillion worth of government debt and politicians from the United States have been scrambling to work out a deal before Aug 2.
The last vote on Speaker John Boehner's proposed bill has been delayed as not enough ayes have been mustered to see the bill passed. His bill calls for an increase in the debt ceiling but must be linked to spending cuts.
Many think allowing the United States to technically default its loans would be financial insanity, but the scale of problems in the US has seen the big rating agencies threaten a rating downgrade. Moody's and Standard & Poor's have put the US debt rating on their ratings watch but downgrades by smaller agencies from a AAA rating to a AA rating took place this month.
Egan-Jones, a small US rating agency, and China's Dagong Global Credit Rating Co have cut their rating on US debt to AA.
Although the situation in the United States is unlike Greece or other parts of Europe that are reeling from a debt problem, the US government debt is nonetheless still sizeable.
The size of the US GDP was US$14.7 trillion as at 2010 and the size of government debt to GDP is close to 100%. The strength of the US economy and its position as the world's largest economy offers it latitude most other countries will not have but there are still limits to what investors will feel comfortable with.
A technical default will not mean the US Government will not be able to honour its debt obligations but it will have to go through irregular channels to do so.
Reports have suggested that the Obama administration will have at its disposal different tools to go skirt around the repayment issue. The US government could sell assets, prioritise payments, invoke the 14th Amendment and get the US Federal Reserve to pay off the government bills.
“But even if the debt ceiling is raised and an immediate default avoided, the magnitude of the fiscal austerity that awaits the US if it is to restore sanity to the public finances is daunting,” says Citigroup in a report.
Citigroup says that given the small near-term likelihood of a deal that would put the US back on the path towards fiscal sustainability, a near-term downgrade of the US to at least AA is therefore likely.
It feels the consequences of a moderate downgrade are likely to be far less damaging than a default but it will still be substantial, including increasing funding costs for the US sovereign, many related public entities and many related or unrelated private companies.
“A downgrade would also further reduce faith in the US dollar as an international currency and store of value and in US Treasuries as an international risk-free asset,” says Citigroup.
“It is hard to see how the US can overcome the unavoidable fiscal challenges without either experiencing a sovereign debt and US dollar crisis or a recession caused by significant fiscal tightening, or both.”
Economists feel that a cut in the US debt rating would bring dire repercussions to the US financial system.
“Estimation showed that a 50 basis point increase in US Treasury rates will add an additional US$75bil each year on taxpayers,” says MIDF Research Sdn Bhd chief economist Anthony Dass in a note this week.
Bank of America Merrill Lynch believes a solution to the debt problem will be in two stages. The first is a smaller upfront deal where US$50bil to US$100bil is trimmed from the deficit over the next decade and a comprehensive deal will be passed either at the end of the year or early next year.
“The comprehensive deal would include both tax and entitlement reform and cuts to discretionary spending. However, our concern is that policymakers struggle to come up with a credible longer-term plan before year-end, particularly since it is an election year.
“This would mean we could face the risk of another debt ceiling crisis and ultimately rating agency downgrades. With this plan, we believe the debt ceiling will be raised before Aug 2, but probably by only US$500bil to give Congress six months time to write and pass the new legislation.
“Any agreement to raise the debt ceiling by a much larger amount in the future would likely be conditioned upon passage of the more comprehensive legislation,” it says.
Any economic impact will be dependent on the composition of the deficit reduction plan.
“The ongoing fiscal uncertainty will only be a moderate restraint on growth, but near-term cuts will have a more serious drag. As a rough rule of thumb, for every US$100bil extra cuts next year we would anticipate cutting 2012 GDP growth by 0.7%,” it says.
The cut in the deficit would mean long end rates of Treasury bonds would likely rise but the direction of the dollar will depend on downgrades by the rating agencies.
Downgrades in the US debt rating would mean a weaker dollar in the longer term as foreign investors would be less likely to hold US debt.
For Malaysia, the stronger ringgit would be beneficial to importers and would facilitate more investments by Malaysian firms.
“Lowering import cost of inputs and capital will facilitate firms' transformation from labour to capital intensive production. It will raise productivity and profits and result to higher wages and more vibrant labour market with a larger pool of highly skilled workers,” says Dass. “Higher wages in turn will boost domestic consumption and spur non-tradable sectors' performance. It will re-orientate the economy from trade-dependent to domestic demand driven.” (The Star Online)
Stock markets around the world have been in sell-down mode, as jittery investors hold their breath over the potential consequences of the US government technically defaulting on its debt obligation.
At stake here is US$14.3 trillion worth of government debt and politicians from the United States have been scrambling to work out a deal before Aug 2.
The last vote on Speaker John Boehner's proposed bill has been delayed as not enough ayes have been mustered to see the bill passed. His bill calls for an increase in the debt ceiling but must be linked to spending cuts.
Many think allowing the United States to technically default its loans would be financial insanity, but the scale of problems in the US has seen the big rating agencies threaten a rating downgrade. Moody's and Standard & Poor's have put the US debt rating on their ratings watch but downgrades by smaller agencies from a AAA rating to a AA rating took place this month.
 | |||||||
| The US dollar is losing its value due to the debt crisis. — EPA |
Although the situation in the United States is unlike Greece or other parts of Europe that are reeling from a debt problem, the US government debt is nonetheless still sizeable.
The size of the US GDP was US$14.7 trillion as at 2010 and the size of government debt to GDP is close to 100%. The strength of the US economy and its position as the world's largest economy offers it latitude most other countries will not have but there are still limits to what investors will feel comfortable with.
A technical default will not mean the US Government will not be able to honour its debt obligations but it will have to go through irregular channels to do so.
Reports have suggested that the Obama administration will have at its disposal different tools to go skirt around the repayment issue. The US government could sell assets, prioritise payments, invoke the 14th Amendment and get the US Federal Reserve to pay off the government bills.
“But even if the debt ceiling is raised and an immediate default avoided, the magnitude of the fiscal austerity that awaits the US if it is to restore sanity to the public finances is daunting,” says Citigroup in a report.
Citigroup says that given the small near-term likelihood of a deal that would put the US back on the path towards fiscal sustainability, a near-term downgrade of the US to at least AA is therefore likely.
It feels the consequences of a moderate downgrade are likely to be far less damaging than a default but it will still be substantial, including increasing funding costs for the US sovereign, many related public entities and many related or unrelated private companies.
“A downgrade would also further reduce faith in the US dollar as an international currency and store of value and in US Treasuries as an international risk-free asset,” says Citigroup.
“It is hard to see how the US can overcome the unavoidable fiscal challenges without either experiencing a sovereign debt and US dollar crisis or a recession caused by significant fiscal tightening, or both.”
Economists feel that a cut in the US debt rating would bring dire repercussions to the US financial system.
“Estimation showed that a 50 basis point increase in US Treasury rates will add an additional US$75bil each year on taxpayers,” says MIDF Research Sdn Bhd chief economist Anthony Dass in a note this week.
Bank of America Merrill Lynch believes a solution to the debt problem will be in two stages. The first is a smaller upfront deal where US$50bil to US$100bil is trimmed from the deficit over the next decade and a comprehensive deal will be passed either at the end of the year or early next year.
“The comprehensive deal would include both tax and entitlement reform and cuts to discretionary spending. However, our concern is that policymakers struggle to come up with a credible longer-term plan before year-end, particularly since it is an election year.
“This would mean we could face the risk of another debt ceiling crisis and ultimately rating agency downgrades. With this plan, we believe the debt ceiling will be raised before Aug 2, but probably by only US$500bil to give Congress six months time to write and pass the new legislation.
“Any agreement to raise the debt ceiling by a much larger amount in the future would likely be conditioned upon passage of the more comprehensive legislation,” it says.
Any economic impact will be dependent on the composition of the deficit reduction plan.
“The ongoing fiscal uncertainty will only be a moderate restraint on growth, but near-term cuts will have a more serious drag. As a rough rule of thumb, for every US$100bil extra cuts next year we would anticipate cutting 2012 GDP growth by 0.7%,” it says.
The cut in the deficit would mean long end rates of Treasury bonds would likely rise but the direction of the dollar will depend on downgrades by the rating agencies.
Downgrades in the US debt rating would mean a weaker dollar in the longer term as foreign investors would be less likely to hold US debt.
For Malaysia, the stronger ringgit would be beneficial to importers and would facilitate more investments by Malaysian firms.
“Lowering import cost of inputs and capital will facilitate firms' transformation from labour to capital intensive production. It will raise productivity and profits and result to higher wages and more vibrant labour market with a larger pool of highly skilled workers,” says Dass. “Higher wages in turn will boost domestic consumption and spur non-tradable sectors' performance. It will re-orientate the economy from trade-dependent to domestic demand driven.” (The Star Online)
Tuesday, July 26, 2011
Growth May Slow in S. Korea, Taiwan on Exports
Growth in South Korea and Taiwan likely slowed in the second quarter as the debt crisis in Europe and faltering U.S. growth weighed on Asia’s exports.
South Korea’s gross domestic product grew 3.5 percent from a year earlier, less than the 4.2 percent gain in the previous quarter, according to the median estimate in a Bloomberg News survey of 11 economists. Taiwan’s growth likely slowed to 4.5 percent from 6.55 percent, a separate survey showed.
The forecast moderations in growth may fail to discourage policy makers from raising interest rates during the second half to restrain price gains. Bank of Korea Deputy Governor Kim Jae Chun said yesterday that the central bank’s biggest concern is that inflation will become a “chronic problem.”
“Even though growth is slowing a little, inflation shows no sign of cooling both in Korea and Taiwan,” said Wai Ho Leong, a senior regional economist at Barclays Capital in Singapore. “The policy trade-off is getting more challenging and they are facing some risks due to the U.S. and Europe.”
South Korea will release its preliminary GDP data at 8 a.m. Seoul time on July 27 while Taiwan’s report will come out at 4 p.m. local time on July 29.
Disruptions from Japan’s earthquake in March have also trimmed Asia’s exports. Shipments from South Korea expanded 14 percent in June, the smallest gain since October 2009. Taiwan’s export orders, an indication of shipments in the next one to three months, gained the least in four months in June.
“A possible economic slowdown is not in our list of policy concerns,” Kim, 57, said in an interview in Seoul.
Second-quarter profit at Samsung Electronics Co., the world’s largest maker of televisions, dropped 26 percent on a slump in flat screen sales. Hynix Semiconductor Inc., the number-two maker of computer-memory chips, reported a 34 percent profit declined on falling chip prices.
Taiwan Semiconductor Manufacturing Co., the world’s largest maker of chips designed by other companies, reported slower quarterly profit growth for the January-March period.
“We think the central banks in Asia are still under pressure to raise interest rates, barring any unforeseen shocks in the global economy and global financial markets,” said Ma Tieying, an economist with DBS Bank Ltd. in Singapore. “The current rate level in the majority of economies in the region remains significantly below neutral.”
Ma predicts both South Korea and Taiwan will raise interest rates by half a percentage point more this year.
The Bank of Korea increased its benchmark seven-day repurchase rate to 3.25 percent from 3 percent in June. Taiwan’s monetary authority, which sets rates once every three months, raised borrowing costs by 0.125 percentage point for the fifth straight quarter on June 30, to 1.875 percent.
“The central banks will keep raising interest rates, for inflation in Korea and for financial stability in Taiwan,” said Erik Lueth, a Hong Kong-based economist at Royal Bank of Scotland Group Plc. “Both Korea and Taiwan will grow faster for the rest of this year after some slowdown in the second quarter.”
President Lee Myung Bak held an emergency cabinet meeting on July 20 to discuss ways to contain inflation. South Koreans’ unhappiness about climbing costs has spurred a drop in his approval rating to 32.8 percent this month compared with 76 percent when he came to power in February 2008, according to a poll by Seoul-based Realmeter.
If the government fails to meet its 4 percent inflation target this year, that “would be highly burdensome politically given the political backdrop ahead of parliamentary elections in April 2012 and the adverse impact of inflation on the living standards of the middle class,” said Kwon Goohoon, an economist at Goldman Sachs Group Inc. in Seoul.
In Taiwan, inflation quickened to a 16-month high of 1.93 percent last month and home prices rebounded to a record in May.
Taiwan’s labor council said last week it plans to increase its minimum wage for the second straight year in January as accelerating inflation and record home prices threaten to widen the income gap.
President Ma Ying-Jeou, striving for re-election in January, is running neck-and-neck with opposition leader Tsai Ing-wen. Ma would get 37.3 percent of votes to Tsai’s 37.2 percent, according to a poll by the Taipei-based Global Views Survey Research Center published July 21.(Bloomberg)
South Korea’s gross domestic product grew 3.5 percent from a year earlier, less than the 4.2 percent gain in the previous quarter, according to the median estimate in a Bloomberg News survey of 11 economists. Taiwan’s growth likely slowed to 4.5 percent from 6.55 percent, a separate survey showed.
The forecast moderations in growth may fail to discourage policy makers from raising interest rates during the second half to restrain price gains. Bank of Korea Deputy Governor Kim Jae Chun said yesterday that the central bank’s biggest concern is that inflation will become a “chronic problem.”
“Even though growth is slowing a little, inflation shows no sign of cooling both in Korea and Taiwan,” said Wai Ho Leong, a senior regional economist at Barclays Capital in Singapore. “The policy trade-off is getting more challenging and they are facing some risks due to the U.S. and Europe.”
South Korea will release its preliminary GDP data at 8 a.m. Seoul time on July 27 while Taiwan’s report will come out at 4 p.m. local time on July 29.
Disruptions from Japan’s earthquake in March have also trimmed Asia’s exports. Shipments from South Korea expanded 14 percent in June, the smallest gain since October 2009. Taiwan’s export orders, an indication of shipments in the next one to three months, gained the least in four months in June.
‘Pretty Strong’
The Bank of Korea’s Kim indicated that he was not concerned about the outlook, describing exports as still “pretty strong” and adding that the nation’s economic growth would accelerate on a year-on-year basis in the second half.“A possible economic slowdown is not in our list of policy concerns,” Kim, 57, said in an interview in Seoul.
Second-quarter profit at Samsung Electronics Co., the world’s largest maker of televisions, dropped 26 percent on a slump in flat screen sales. Hynix Semiconductor Inc., the number-two maker of computer-memory chips, reported a 34 percent profit declined on falling chip prices.
Taiwan Semiconductor Manufacturing Co., the world’s largest maker of chips designed by other companies, reported slower quarterly profit growth for the January-March period.
Stronger Currencies
A strengthening in the two economies’ currencies may also crimp trade gains. South Korea’s won has risen about 6 percent against the dollar this year, with the Taiwan dollar climbing 5 percent.“We think the central banks in Asia are still under pressure to raise interest rates, barring any unforeseen shocks in the global economy and global financial markets,” said Ma Tieying, an economist with DBS Bank Ltd. in Singapore. “The current rate level in the majority of economies in the region remains significantly below neutral.”
Ma predicts both South Korea and Taiwan will raise interest rates by half a percentage point more this year.
The Bank of Korea increased its benchmark seven-day repurchase rate to 3.25 percent from 3 percent in June. Taiwan’s monetary authority, which sets rates once every three months, raised borrowing costs by 0.125 percentage point for the fifth straight quarter on June 30, to 1.875 percent.
“The central banks will keep raising interest rates, for inflation in Korea and for financial stability in Taiwan,” said Erik Lueth, a Hong Kong-based economist at Royal Bank of Scotland Group Plc. “Both Korea and Taiwan will grow faster for the rest of this year after some slowdown in the second quarter.”
Pork Prices
South Korea’s inflation has exceeded the central bank’s target limit of 4 percent every month this year. Pork prices surged 46 percent in June from a year earlier, prompting school cafeterias to serve beef or chicken instead.President Lee Myung Bak held an emergency cabinet meeting on July 20 to discuss ways to contain inflation. South Koreans’ unhappiness about climbing costs has spurred a drop in his approval rating to 32.8 percent this month compared with 76 percent when he came to power in February 2008, according to a poll by Seoul-based Realmeter.
If the government fails to meet its 4 percent inflation target this year, that “would be highly burdensome politically given the political backdrop ahead of parliamentary elections in April 2012 and the adverse impact of inflation on the living standards of the middle class,” said Kwon Goohoon, an economist at Goldman Sachs Group Inc. in Seoul.
In Taiwan, inflation quickened to a 16-month high of 1.93 percent last month and home prices rebounded to a record in May.
Taiwan’s labor council said last week it plans to increase its minimum wage for the second straight year in January as accelerating inflation and record home prices threaten to widen the income gap.
President Ma Ying-Jeou, striving for re-election in January, is running neck-and-neck with opposition leader Tsai Ing-wen. Ma would get 37.3 percent of votes to Tsai’s 37.2 percent, according to a poll by the Taipei-based Global Views Survey Research Center published July 21.(Bloomberg)
Monday, July 25, 2011
The action’s in Asia
CEO sees region’s inflation cooling off and prices rising
KUALA LUMPUR: Investors should consider investing 50% of their money in Asia Pacific, as this is the start of the Asian millenia, driven by consumption from China and India.
MIDF Amanah Asset Management Bhd chief executive officer and chief investment officer Scott Lim foresees inflation cooling off in the second half of the year, and prices starting to rise again.
With negative external news dampening sentiment for the major part of the year, Asian markets have been similarly moderated.
However, as inflation cools off, Asia countries which are in fact growing very strongly will once again reflect its growth trend, and that's when prices start rising.
“This is Asia's most exciting period. The slowdown in the US and the debt problems in Europe does not derail Asia's growth trend. This simply means that the upward momentum will come in a more ferocious manner,” said Lim.
Lim expects food industries and key industrialisations to do very well.
“Food is a basic necessity of all humans. We are already seeing a shortage of food in Somalia and how the people there suffer. What we don't realise is that this will eventually affect our monetary and political systems as well. Food is the highest inflating asset class,” said Lim.
He likes the industrial sectors because of China's growth, driven by its manufacturing sector. China now controls 10% of the world's manufacturing segment. This industrialisation drive will cause prices of key commodities to continue rising as supply continues to outstrip demand.
“These are very challenging times because the world is now in a major transition. The maturing economies of the west are undergoing structural decline and the power is shifting to Asia,” said Lim.
“It is propoganda when they say that Asia cannot live without the US. We have some 3 billion people in Asia, all who have savings rate of some 30% to 50%. Furthermore, China now has some US$3.2 trillion in its banking system, out of which US$1 trillion are in US treasuries. Meanwhile, the US has some 300 million people who have no savings and are also suffering from high unemployment rates. So no, US is no longer a major export market.”
Lim sees a maximum 20% downside of the market from here, and an upside of 30% to 40%.
“We still like Malaysia, but its ability to outperform is low. Structural changes are happening, but it is still half hearted. However, the people are doing something about it now. People are waking up. If Malaysia can get it right, it will have plenty of upside. Look at what happened to Indonesia after it reformed.”
Nonetheless, he expects the FBM KLCI trending upward, as most of the negative news have been priced into the market.
Lim believes that a successful fund manager must not just have IQ and EQ, but discipline as well which is to sell when the market is going up, and to buy when the market is going down.
“EQ alone is not enough. A lack of discipline will overwhelm all other factors. My specialty is alpha generation, which is to beat inflation for investors, and thus, raise the standard of their living,”
Lim practices an absolute return strategy, where he does not benchmark his funds against the index and neither does he need to be invested in the market all the time. He also practices a dynamic approach, where he can allocate money to a certain sector, when he spots the coming of a new trend.
MIDF Amanah recently launched two funds the MIDF Amanah Asia Pacific Equity Fund and the MIDF Amanah Asia Pacific Islamic Equity Fund. They are absolute return funds with a minimum return of 8% per year. The focus will be on some 10 markets in Asia Pacific, except for Japan. Australia is one of the markets featured in the funds, mainly because it controls the world's mining sector.
Lim will be giving a presentation on his Asia Pacific outlook on Saturday. (The Star Online)
KUALA LUMPUR: Investors should consider investing 50% of their money in Asia Pacific, as this is the start of the Asian millenia, driven by consumption from China and India.
MIDF Amanah Asset Management Bhd chief executive officer and chief investment officer Scott Lim foresees inflation cooling off in the second half of the year, and prices starting to rise again.
With negative external news dampening sentiment for the major part of the year, Asian markets have been similarly moderated.
However, as inflation cools off, Asia countries which are in fact growing very strongly will once again reflect its growth trend, and that's when prices start rising.
 | |||
| Lim: ‘Food is the highest inflating asset class.’ |
Lim expects food industries and key industrialisations to do very well.
“Food is a basic necessity of all humans. We are already seeing a shortage of food in Somalia and how the people there suffer. What we don't realise is that this will eventually affect our monetary and political systems as well. Food is the highest inflating asset class,” said Lim.
He likes the industrial sectors because of China's growth, driven by its manufacturing sector. China now controls 10% of the world's manufacturing segment. This industrialisation drive will cause prices of key commodities to continue rising as supply continues to outstrip demand.
“These are very challenging times because the world is now in a major transition. The maturing economies of the west are undergoing structural decline and the power is shifting to Asia,” said Lim.
“It is propoganda when they say that Asia cannot live without the US. We have some 3 billion people in Asia, all who have savings rate of some 30% to 50%. Furthermore, China now has some US$3.2 trillion in its banking system, out of which US$1 trillion are in US treasuries. Meanwhile, the US has some 300 million people who have no savings and are also suffering from high unemployment rates. So no, US is no longer a major export market.”
Lim sees a maximum 20% downside of the market from here, and an upside of 30% to 40%.
“We still like Malaysia, but its ability to outperform is low. Structural changes are happening, but it is still half hearted. However, the people are doing something about it now. People are waking up. If Malaysia can get it right, it will have plenty of upside. Look at what happened to Indonesia after it reformed.”
Nonetheless, he expects the FBM KLCI trending upward, as most of the negative news have been priced into the market.
Lim believes that a successful fund manager must not just have IQ and EQ, but discipline as well which is to sell when the market is going up, and to buy when the market is going down.
“EQ alone is not enough. A lack of discipline will overwhelm all other factors. My specialty is alpha generation, which is to beat inflation for investors, and thus, raise the standard of their living,”
Lim practices an absolute return strategy, where he does not benchmark his funds against the index and neither does he need to be invested in the market all the time. He also practices a dynamic approach, where he can allocate money to a certain sector, when he spots the coming of a new trend.
MIDF Amanah recently launched two funds the MIDF Amanah Asia Pacific Equity Fund and the MIDF Amanah Asia Pacific Islamic Equity Fund. They are absolute return funds with a minimum return of 8% per year. The focus will be on some 10 markets in Asia Pacific, except for Japan. Australia is one of the markets featured in the funds, mainly because it controls the world's mining sector.
Lim will be giving a presentation on his Asia Pacific outlook on Saturday. (The Star Online)
Sunday, July 24, 2011
Malaysia ringgit faces cautious trading next week
The ringgit is expected to trade cautiously against the US dollar next week with external headwinds arising from the US and Europe debt woes.
"Although European policymakers had extended an olive branch in the form of extra aid for Greece, the US is still pressed for time to raise its debt ceiling while cutting spending," a dealer said.
He said developments and uncertainties in the US market would definitely weigh on the trading of the greenback next week.
"Risk sensitive Asian currencies would definitely see an increase in volatility arising from the uncertainties in other major markets," he said.
The US dollar depreciated against other major currencies after losing ground this week due to concerns that the US may not lift its debt ceiling in time, triggering a debt default which may possibly plunge the nation back into recession.
During the week, the ringgit was on an upward trend against the US dollar as traders fled to other safe havens.
On Friday, the ringgit ended the week on gains for the fourth consecutive day as escalating worries on a US debt default weighed on global markets.
Friday also marked the sixth year since the shift to the managed float regime for the ringgit exchange rate.
In a statement, Bank Negara Malaysia said that in the six years, the global economic landscape experienced exceptional developments, namely the worst global economic and financial crisis since the Second World War and extreme volatility in two-way capital flows.
"The exchange rate regime has accorded the economy with greater flexibility in facing these challenges," it said.
On a Friday-to-Friday basis, the ringgit rose against the US dollar to 2.9750/9775 from 3.0050/0080.
It was also higher against the Singapore dollar at 2.4593/4634 from 2.4651/4696 and the yen at 3.7874/7920 from 3.7918/7965.
However, it eased against the British pound to 4.8472/8527 from 4.8341/8399 and also against the euro to 4.2849/2894 from 4.2467/2518. -- Bernama
"Although European policymakers had extended an olive branch in the form of extra aid for Greece, the US is still pressed for time to raise its debt ceiling while cutting spending," a dealer said.
He said developments and uncertainties in the US market would definitely weigh on the trading of the greenback next week.
"Risk sensitive Asian currencies would definitely see an increase in volatility arising from the uncertainties in other major markets," he said.
During the week, the ringgit was on an upward trend against the US dollar as traders fled to other safe havens.
On Friday, the ringgit ended the week on gains for the fourth consecutive day as escalating worries on a US debt default weighed on global markets.
Friday also marked the sixth year since the shift to the managed float regime for the ringgit exchange rate.
In a statement, Bank Negara Malaysia said that in the six years, the global economic landscape experienced exceptional developments, namely the worst global economic and financial crisis since the Second World War and extreme volatility in two-way capital flows.
"The exchange rate regime has accorded the economy with greater flexibility in facing these challenges," it said.
On a Friday-to-Friday basis, the ringgit rose against the US dollar to 2.9750/9775 from 3.0050/0080.
It was also higher against the Singapore dollar at 2.4593/4634 from 2.4651/4696 and the yen at 3.7874/7920 from 3.7918/7965.
However, it eased against the British pound to 4.8472/8527 from 4.8341/8399 and also against the euro to 4.2849/2894 from 4.2467/2518. -- Bernama
Thursday, July 21, 2011
The euro-zone economy: Approaching stall speed
EUROPEAN markets enjoyed a respite from trouble today; equities rose, along with the euro, and yields on Spanish and Italian debt fell back. There's no enduring good news here, however. Rather, traders are probably taking profits while they await the outcome of this Thursday's emergency summit. And beneath the main indexes, trouble continues to build.
In a new debt auction, yields on Spanish 12-month and 18-month bonds rose sharply from the last debt sale; the yield on the latter rose to 3.912%, up from 3.26% a month ago. Spain will return to markets again on Thursday, when it will auction off €2.75 billion in long-term debt. Right now, the market yield on long-term debt is over 6%. If that's what Spain gets from markets in its new auction, the sustainability of its government finances will face new doubts. The Spanish government is on the brink; at lower interest rate levels its debts are manageable, but at higher rates it might well prove insolvent. This is why confidence is key. But there seems to be little urgency within the euro-zone's leadership regarding the need to get ahead of contagion.
Meanwhile, the economic picture continues to darken. Business confidence in Germany—the engine and primary bright spot in the euro-zone economy—fell by more than expected in July, according to one index. And eurostat reported today that euro-zone construction output fell by 1.1% from April to May. Since then, the European Central Bank has increased its benchmark rate for a second time, and the economic outlook has darkened.
According to the latest data, then, construction in the euro-zone is falling, manufacturing output growth is slowing (and declining outright in parts of the periphery), and the contribution to growth from government is falling around the continent. Trade has been a relative bright spot for the euro zone, but exports to emerging markets may deteriorate as they slow growth to head off inflation, and the ECB's decision to boost interest rates has prevented the decline in the euro that might be expected to accompany an intensification of the debt crisis.
In other words, every potential driver of euro-zone growth is contracting or weakening. And the governmental response is more fiscal austerity and an increase in interest rates. A return to recession seems unavoidable. I don't think that's likely to make the debt crisis any easier to manage. Indeed, if increased economic stress makes a departure from the euro zone more attractive, then creditors and depositors will become more likely to preemptively move money out of peripheral banks and economies. That, in turn, will make a euro-zone exit more probable.
One runs out of ways to state the obvious: the current path leads toward a break-up. There are other paths available, but to move the euro zone onto an alternative route will take a strong commitment from core economies and euro-zone institutions, including the ECB. Markets will watch for some sign of the emergence of such a commitment from the summit on Thursday, but I'm not sure its wise to get one's hopes up. (Economist)
In a new debt auction, yields on Spanish 12-month and 18-month bonds rose sharply from the last debt sale; the yield on the latter rose to 3.912%, up from 3.26% a month ago. Spain will return to markets again on Thursday, when it will auction off €2.75 billion in long-term debt. Right now, the market yield on long-term debt is over 6%. If that's what Spain gets from markets in its new auction, the sustainability of its government finances will face new doubts. The Spanish government is on the brink; at lower interest rate levels its debts are manageable, but at higher rates it might well prove insolvent. This is why confidence is key. But there seems to be little urgency within the euro-zone's leadership regarding the need to get ahead of contagion.
Meanwhile, the economic picture continues to darken. Business confidence in Germany—the engine and primary bright spot in the euro-zone economy—fell by more than expected in July, according to one index. And eurostat reported today that euro-zone construction output fell by 1.1% from April to May. Since then, the European Central Bank has increased its benchmark rate for a second time, and the economic outlook has darkened.
According to the latest data, then, construction in the euro-zone is falling, manufacturing output growth is slowing (and declining outright in parts of the periphery), and the contribution to growth from government is falling around the continent. Trade has been a relative bright spot for the euro zone, but exports to emerging markets may deteriorate as they slow growth to head off inflation, and the ECB's decision to boost interest rates has prevented the decline in the euro that might be expected to accompany an intensification of the debt crisis.
In other words, every potential driver of euro-zone growth is contracting or weakening. And the governmental response is more fiscal austerity and an increase in interest rates. A return to recession seems unavoidable. I don't think that's likely to make the debt crisis any easier to manage. Indeed, if increased economic stress makes a departure from the euro zone more attractive, then creditors and depositors will become more likely to preemptively move money out of peripheral banks and economies. That, in turn, will make a euro-zone exit more probable.
One runs out of ways to state the obvious: the current path leads toward a break-up. There are other paths available, but to move the euro zone onto an alternative route will take a strong commitment from core economies and euro-zone institutions, including the ECB. Markets will watch for some sign of the emergence of such a commitment from the summit on Thursday, but I'm not sure its wise to get one's hopes up. (Economist)
Italy and the euro On the edge
By engulfing Italy, the euro crisis has entered a perilous new phase—with the single currency itself now at risk
FOR more than a year the euro zone’s debt drama has lurched from one nail-biting scene to another. First Greece took centre stage; then Ireland; then Portugal; then Greece again. Each time European policymakers reacted similarly: with denial and dithering, followed at the eleventh hour with a half-baked rescue plan to buy time.
This week the shortcomings of this muddling-through were laid bare (see article). Financial markets turned on Italy, the euro zone’s third-biggest economy, with alarming speed. Yields on ten-year Italian bonds jumped by almost a percentage point in two trading days: on July 12th they breached 6%, their highest since the euro was created. The Milan stockmarket slumped to its lowest in two years. Though bond yields subsequently fell back, the debt crisis has clearly entered a new phase. No longer confined to the small peripheral economies of Greece, Ireland and Portugal, it has hurdled over Spain, supposedly next in line, and reached one of the euro zone’s giants. All its members, but especially Germany, face a stark choice.Consider the stakes. Italy has the biggest sovereign-debt market in Europe and the third-biggest in the world. It has €1.9 trillion ($2.6 trillion) of sovereign debt outstanding, 120% of its GDP, three times as much as Greece, Ireland and Portugal combined—and far more than the €250 billion or so left in the European Financial Stability Facility (EFSF), the currency club’s rescue kitty. Default would have calamitous consequences for the euro and the world economy. Even if the more likely immediate prospect is sustained stress in the Italian bond market, that will surely prompt investors to flee European assets, making the continent’s recovery ever harder. Meanwhile in the background there is the absurd pantomime of Barack Obama and congressional Republicans feuding over how to raise the federal government’s debt ceiling to stave off an American “default” (see article). That may have distracted American investors briefly; once they realise how much is at stake in Italy, it will not help.
From Rome to Brussels, Frankfurt and Berlin
The proximate cause of this week’s scare lies in Italian politics, and a row in which Silvio Berlusconi, the prime minister, hurled playground insults at Giulio Tremonti, the finance minister, over a new austerity budget. Add in the underlying concerns about the Italian economy’s feeble growth rate, and investors are understandably worried about the Italian government’s ability to shoulder its huge debt.
In theory, these concerns should be easy for a grown-up government to address. After all, Italy, for all its faults, is not a big Greece. Its debt burden has been high but stable for years. Its primary budget (ie, before interest payments) is in surplus. It has a record of cutting spending and raising taxes if it needs to do so: in 1997, when it was trying to get into the euro, its primary surplus was 6% of GDP. By European standards its banks are decently capitalised. High private saving means that much sovereign borrowing is funded at home.
In practice, though, there is seldom a clear line between illiquidity and insolvency: if the price Italy must pay to borrow rises high enough for long enough, its debt will eventually spiral out of control. And Italy’s prospects are being overwhelmed by the contradictions and uncertainties in Brussels, Frankfurt and Berlin, where respectively the Eurocrats, the European Central Bank (ECB) and Germany’s chancellor, Angela Merkel, have all vainly tried to follow two contradictory goals—namely, avoiding any formal default on Greek debt, while also avoiding an open-ended transfer from richer European countries to the insolvent periphery (see article).
To be fair to Mrs Merkel and Europe’s other leaders, they have not chosen to muddle through merely out of cowardice, though there has been plenty of that, but because the euro-zone countries are profoundly divided. They cannot agree on who should bear the cost of today’s crisis: should it be creditors (through a write-down), debtors (through austerity) or the Germans (through transfers to the south)? And they have not decided whether the long-term answer is a fiscal union, or not. Investors are thus unclear about how badly they may be hit. With Europeans in such a muddle over little Greece, no wonder investors are so terrified by big Italy.
Cometh the hour, cometh the Eurobond
What is to be done? This newspaper has long argued that muddling-through must be replaced by a comprehensive strategy based on three components: debt reduction for plainly insolvent countries; a recapitalisation of the European banks that will suffer from that restructuring; and the building of a firewall between the insolvent and the rest.
Debt reduction must begin with Greece, the country that is most obviously bust. However the restructuring is pitched, Greece will be in default, so a plan to recapitalise banks hit badly by this, starting with Greece’s own, will be needed too. The results of stress tests, due on July 15th, should show how much more help is required. There may have to be a similar restructuring for Portugal and Ireland.
he task of building a firewall around the solvent core, including Spain and Italy, has to be shared between the countries at risk and the euro zone as a whole. Italy needs to pass its budget speedily—and also push through long overdue structural reforms. Its challenges are not only, or even mainly, about fiscal austerity, but about making the economy grow. As for the euro zone, short-term help may have to come from the ECB buying Italian bonds (difficult politically because the next head of the ECB will be Mario Draghi, the boss of Italy’s central bank). Soon though the euro zone may well have to expand the EFSF and allow it to issue jointly guaranteed “Eurobonds”.
That is a huge political leap—especially for Mrs Merkel. Germany is firmly opposed to any solution that could imply open-ended transfers to feckless southerners; so are several other northern European countries, not least because guaranteeing others may raise their own borrowing costs. It is not a pleasant option. But the alternative could be the end of the euro. That is the horrible lesson of this week.(Economist)
Jobless Claims in U.S. Rose 10,000 Last Week
More Americans than forecast filed claims for unemployment benefits last week, reflecting the volatility of applications during the annual auto-plant retooling period.
Applications for jobless benefits increased 10,,000 in the week ended July 16 to 418,000, Labor Department figures showed today. Economists forecast 410,000 claims, according to the median estimate in a Bloomberg News survey. The data included about 1,750 additional job cuts due to the Minnesota government shutdown, the agency said.
Employers have been reluctant to hire more workers over the past two months on concern the recovery was slowing and growing unease over stalled negotiations to extend the federal debt ceiling and reduce the budget deficit. Federal Reserve Chairman Ben S. Bernanke last week said recent data showed “continuing weakness” in the labor market.
“The labor market is still quite fragile,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York, who correctly forecast the rise in claims. “The pace of firings continues to move sideways and it’s obvious there is not a lot of hiring going on. There is not a lot of demand right now.”
The four-week moving average of claims, a less-volatile measure, fell to 421,250, a three-month low, from 424,000.
Shares Rise
Stock-index futures held earlier gains after the report on better-than-estimated results AT&T Inc. and Morgan Stanley. The contract on the Standard & Poor’s 500 Index maturing in September climbed 0.6 percent to 1,329.3 at 8:45 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year up to 2.97 percent from 2.93 percent late yesterday.
Estimates for first-time claims ranged from 385,000 to 430,000 in the Bloomberg survey of 46 economists. The Labor Department initially reported the prior week’s applications at 405,000.
The timing of auto plant shutdowns to retool for the new model year have been difficult to predict this year, making adjusting the claims data for these seasonal variations more challenging, a Labor Department spokesman said as the figures were released to the press. Supply disruptions caused by the disaster in Japan may have prompted car markers to close operations earlier than usual that year.
Debt Negotiations
President Barack Obama and Congressional Democrats and Republicans have been racing to reach a debt-ceiling agreement by Aug. 2 that would avert a U.S. default. The Obama administration signaled this week it may accept a short-term increase in the $14.3 trillion debt limit if it is combined with a major agreement to cut the deficit.
The number of people continuing to collect jobless benefits fell by 50,000 in the week ended July 9 to 3.7 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 133,000 to 3.7 million in the week ended July 2.
The unemployment rate among people eligible for benefits decreased to 2.9 percent in the week ended July 9 from 3 percent, today’s report showed. Forty states and territories reported an increase in claims, while 13 had a decrease.
Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.
Payroll Slowdown
Job gains have slowed in the past two months, raising concern about the durability of a labor market recovery. Payrolls expanded by 18,000 workers last month, the smallest gain since September, after increasing by 25,000 in May, Labor Department data showed July 8. The jobless rate climbed to 9.2 percent, the highest this year.
Banks and manufacturers are among companies still cutting jobs.
Goldman Sachs Group Inc. (GS), the U.S. bank that makes most of its money from trading, said it will cut about 1,000 jobs after a plunge in fixed-income revenue that was bigger than analysts estimated.
“It looks like the environment’s going to be somewhat slower for the foreseeable future and so we decided it made sense at this point to cut some level of expenses,” Chief Financial Officer David A. Viniar told analysts during a conference call this week.
More Firings
State Street Corp. (STT), the third-largest custody bank, will cut an additional 850 jobs over the next 20 months after reporting earnings that missed analysts’ estimates, the Boston- based bank said this week. The cuts are on top of 1,400 reductions announced last year and scheduled to be completed by the end of this year.
Cisco Systems Inc. (CSCO), the largest networking-equipment maker, said it plans to eliminate about 6,500 jobs, or 9 percent of its full-time workforce, to help trim $1 billion in annual costs and step up profit growth.
The job cuts will come from across the company and aren’t concentrated in a single unit, said Karen Tillman, a company spokeswoman, said in an interview this week. She declined to provide a geographic breakdown of the reduction. The company said affected workers in the U.S., Canada and other countries it didn’t name will be notified in early August.(Bloomberg)
Applications for jobless benefits increased 10,,000 in the week ended July 16 to 418,000, Labor Department figures showed today. Economists forecast 410,000 claims, according to the median estimate in a Bloomberg News survey. The data included about 1,750 additional job cuts due to the Minnesota government shutdown, the agency said.
Employers have been reluctant to hire more workers over the past two months on concern the recovery was slowing and growing unease over stalled negotiations to extend the federal debt ceiling and reduce the budget deficit. Federal Reserve Chairman Ben S. Bernanke last week said recent data showed “continuing weakness” in the labor market.
“The labor market is still quite fragile,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York, who correctly forecast the rise in claims. “The pace of firings continues to move sideways and it’s obvious there is not a lot of hiring going on. There is not a lot of demand right now.”
The four-week moving average of claims, a less-volatile measure, fell to 421,250, a three-month low, from 424,000.
Shares Rise
Stock-index futures held earlier gains after the report on better-than-estimated results AT&T Inc. and Morgan Stanley. The contract on the Standard & Poor’s 500 Index maturing in September climbed 0.6 percent to 1,329.3 at 8:45 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year up to 2.97 percent from 2.93 percent late yesterday.
Estimates for first-time claims ranged from 385,000 to 430,000 in the Bloomberg survey of 46 economists. The Labor Department initially reported the prior week’s applications at 405,000.
The timing of auto plant shutdowns to retool for the new model year have been difficult to predict this year, making adjusting the claims data for these seasonal variations more challenging, a Labor Department spokesman said as the figures were released to the press. Supply disruptions caused by the disaster in Japan may have prompted car markers to close operations earlier than usual that year.
Debt Negotiations
President Barack Obama and Congressional Democrats and Republicans have been racing to reach a debt-ceiling agreement by Aug. 2 that would avert a U.S. default. The Obama administration signaled this week it may accept a short-term increase in the $14.3 trillion debt limit if it is combined with a major agreement to cut the deficit.
The number of people continuing to collect jobless benefits fell by 50,000 in the week ended July 9 to 3.7 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 133,000 to 3.7 million in the week ended July 2.
The unemployment rate among people eligible for benefits decreased to 2.9 percent in the week ended July 9 from 3 percent, today’s report showed. Forty states and territories reported an increase in claims, while 13 had a decrease.
Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.
Payroll Slowdown
Job gains have slowed in the past two months, raising concern about the durability of a labor market recovery. Payrolls expanded by 18,000 workers last month, the smallest gain since September, after increasing by 25,000 in May, Labor Department data showed July 8. The jobless rate climbed to 9.2 percent, the highest this year.
Banks and manufacturers are among companies still cutting jobs.
Goldman Sachs Group Inc. (GS), the U.S. bank that makes most of its money from trading, said it will cut about 1,000 jobs after a plunge in fixed-income revenue that was bigger than analysts estimated.
“It looks like the environment’s going to be somewhat slower for the foreseeable future and so we decided it made sense at this point to cut some level of expenses,” Chief Financial Officer David A. Viniar told analysts during a conference call this week.
More Firings
State Street Corp. (STT), the third-largest custody bank, will cut an additional 850 jobs over the next 20 months after reporting earnings that missed analysts’ estimates, the Boston- based bank said this week. The cuts are on top of 1,400 reductions announced last year and scheduled to be completed by the end of this year.
Cisco Systems Inc. (CSCO), the largest networking-equipment maker, said it plans to eliminate about 6,500 jobs, or 9 percent of its full-time workforce, to help trim $1 billion in annual costs and step up profit growth.
The job cuts will come from across the company and aren’t concentrated in a single unit, said Karen Tillman, a company spokeswoman, said in an interview this week. She declined to provide a geographic breakdown of the reduction. The company said affected workers in the U.S., Canada and other countries it didn’t name will be notified in early August.(Bloomberg)
Wednesday, July 20, 2011
Economy Highlights (20th July, 2011)
US - Mortgage applications fell 5.2% last week on refinancing
Mortgage applications in the US fell for a third straight week, led by the biggest drop in refinancing since the end of March. The Mortgage Bankers Association’s index declined 5.2% in the period ended 1 July from the prior week as falling home prices are making it harder for homeowners to refinance current mortgages. (Bloomberg)
US - Service industries expanded at slower pace in June
Service industries in the US expanded at a slower pace in June, a sign the economy cooled at the end of the first half of 2011. The Institute for Supply Management’s index of non-manufacturing businesses decreased to 53.3, less than the projected 53.7, from 54.6 in May. (Bloomberg)
EU - Spain industrial production fell for third month in May
Spanish industrial production fell for the third month in May as the economy struggled to emerge from a three-year slump. Output at factories, refineries and mines fell 0.4% from a year earlier. (Bloomberg)
EU - Germany factory orders unexpectedly rose, led by domestic demand
Factory orders in Germany unexpectedly increased in May, led by domestic demand for investment goods such as machinery. Orders, adjusted for seasonal swings and inflation, increased 1.8% from April, when they surged a revised 2.9%. (Bloomberg)
EU - Ireland may be next to face junk as Moody's cut Portugal
Ireland’s credit rating may be cut to junk by Moody’s after Portugal yesterday lost its investment grade rating on concern the country will need to follow Greece in seeking a second bailout. Moody’s, which slashed Portugal to Ba2 from Baa1, in April lowered Ireland’s credit rating to the lowest investment grade Baa3 and left country’s outlook on negative. (Bloomberg)
Mortgage applications in the US fell for a third straight week, led by the biggest drop in refinancing since the end of March. The Mortgage Bankers Association’s index declined 5.2% in the period ended 1 July from the prior week as falling home prices are making it harder for homeowners to refinance current mortgages. (Bloomberg)
US - Service industries expanded at slower pace in June
Service industries in the US expanded at a slower pace in June, a sign the economy cooled at the end of the first half of 2011. The Institute for Supply Management’s index of non-manufacturing businesses decreased to 53.3, less than the projected 53.7, from 54.6 in May. (Bloomberg)
EU - Spain industrial production fell for third month in May
Spanish industrial production fell for the third month in May as the economy struggled to emerge from a three-year slump. Output at factories, refineries and mines fell 0.4% from a year earlier. (Bloomberg)
EU - Germany factory orders unexpectedly rose, led by domestic demand
Factory orders in Germany unexpectedly increased in May, led by domestic demand for investment goods such as machinery. Orders, adjusted for seasonal swings and inflation, increased 1.8% from April, when they surged a revised 2.9%. (Bloomberg)
EU - Ireland may be next to face junk as Moody's cut Portugal
Ireland’s credit rating may be cut to junk by Moody’s after Portugal yesterday lost its investment grade rating on concern the country will need to follow Greece in seeking a second bailout. Moody’s, which slashed Portugal to Ba2 from Baa1, in April lowered Ireland’s credit rating to the lowest investment grade Baa3 and left country’s outlook on negative. (Bloomberg)
Sunday, July 17, 2011
Singapore Q2 GDP Falls 7.8% On Quarter
Singapore's gross domestic product declined by a seasonally adjusted annualized 7.8 percent in the second quarter of 2011 compared to the previous three months, the Ministry of Trade and Industry said on Thursday in an advance estimate. That was significantly lower than analyst expectations for a 1.9 percent quarterly decline following the 27.1 percent surge in the first quarter of this year.
On a yearly basis, GDP added 0.5 percent - again shy of expectations for a 1.5 percent gain following the 9.3 percent increase in the first quarter.
The manufacturing sector was a key drag, falling 22.5 percent on quarter and 5.5 percent on year after jumping 16.4 percent on quarter and 96.6 percent on year in Q1.
"This largely reflected a decline in the biomedical manufacturing cluster, as some companies switched to producing a different value-mix of active pharmaceutical ingredients during the quarter," the MTI said in a statement accompanying the data. "Output in the electronics cluster also fell, partly due to an easing in global demand for semiconductor chips."
The construction sector added 1.6 percent on year in the second quarter, following the growth of 2.4 percent in the previous quarter. On a sequential basis, the sector jumped 13.8 percent after adding 13.3 percent in Q1. This was largely due to increasing construction activities in the industrial building segment, the ministry said.
Growth in the services producing industries moderated, the data showed. Services producing industries grew 3.3 percent on year, compared to the 7.6 percent growth in the preceding quarter. On a sequential basis, the services producing industries eased by an annualized rate of 2.9 percent after climbing 10.3 percent in the preceding quarter.
This was largely due to declines in the wholesale and retail trade and financial services sectors. The former was negatively affected by weaker trade flows during the quarter, while the latter was dragged down by a fall in stock trading activities.
In contrast, tourism-related sectors such as hotels and restaurants continued to register healthy growth due to strong visitor inflows.
Upon the release of the data, the Singapore dollar slipped slightly against the U.S. dollar, dropping to 1.2178 versus the greenback from a recent multi-year high of 1.2155. (RTT News)
On a yearly basis, GDP added 0.5 percent - again shy of expectations for a 1.5 percent gain following the 9.3 percent increase in the first quarter.
The manufacturing sector was a key drag, falling 22.5 percent on quarter and 5.5 percent on year after jumping 16.4 percent on quarter and 96.6 percent on year in Q1.
"This largely reflected a decline in the biomedical manufacturing cluster, as some companies switched to producing a different value-mix of active pharmaceutical ingredients during the quarter," the MTI said in a statement accompanying the data. "Output in the electronics cluster also fell, partly due to an easing in global demand for semiconductor chips."
The construction sector added 1.6 percent on year in the second quarter, following the growth of 2.4 percent in the previous quarter. On a sequential basis, the sector jumped 13.8 percent after adding 13.3 percent in Q1. This was largely due to increasing construction activities in the industrial building segment, the ministry said.
Growth in the services producing industries moderated, the data showed. Services producing industries grew 3.3 percent on year, compared to the 7.6 percent growth in the preceding quarter. On a sequential basis, the services producing industries eased by an annualized rate of 2.9 percent after climbing 10.3 percent in the preceding quarter.
This was largely due to declines in the wholesale and retail trade and financial services sectors. The former was negatively affected by weaker trade flows during the quarter, while the latter was dragged down by a fall in stock trading activities.
In contrast, tourism-related sectors such as hotels and restaurants continued to register healthy growth due to strong visitor inflows.
Upon the release of the data, the Singapore dollar slipped slightly against the U.S. dollar, dropping to 1.2178 versus the greenback from a recent multi-year high of 1.2155. (RTT News)
Tuesday, July 12, 2011
China Money Supply Growth, New Lending Rebound Even After Cooling Measures
China’s new loans exceeded estimates in June and foreign-exchange reserves jumped by $153 billion in the second quarter, bolstering the case for more increases in bank reserve requirements.
New loans were 633.9 billion yuan ($98 billion), compared with the 622.5 billion yuan median estimate in a Bloomberg News survey of economists. M2, the broadest measure of money supply, rose by a more-than-forecast 15.9 percent, and foreign-exchange reserves climbed to $3.2 trillion. The People’s Bank of China released the data on its website today.
The central bank last week raised interest rates for the third time this year ahead of a report that showed consumer prices jumped the most in three years, indicating the government’s priority is still fighting inflation. Premier Wen Jiabao may be reluctant to ease monetary policy even amid slowing growth as state planners forecast “elevated” price levels for the rest of the year.
“This suggests more tightening on the horizon,” said Joe Lau, a Hong Kong-based economist at Societe Generale SA. “This may be more likely through further reserve ratio hikes,” he said, adding that slowdown risks and the debt burdens of local governments mean policy makers may be more reluctant to raise interest rates.
Lau said he expects one or two more increases in banks’ reserve requirements by year end. Economists at Nomura Holdings Inc. estimated in a July 8 report the ratio could rise by another 100 basis points in the second half of the year.
Record Reserve Requirements
The benchmark Shanghai Composite Index dropped 1.7 percent to 2,754.58 at the 3 p.m. local-time close, the most in seven weeks, on concerns Greece’s debt crisis may spread and higher- than-estimated new lending in China will make it difficult for the government to ease tightening policies. The yuan fell 0.1 percent to 6.4722 per dollar as of 4:30 p.m. in Shanghai, according to the China Foreign Exchange Trade System.
The central bank has raised requirements nine times since mid-November to a record 21.5 percent for the biggest banks, with the most recent increase announced on June 14. Inflation accelerated to 6.4 percent in June from a year earlier and Mizuho Securities Ltd. estimates consumer prices could jump 6.2 percent to 6.5 percent in July.
The government will stabilize prices, curb “unreasonable” housing demand and increase supplies of hogs to promote a stable market for pork, Wen said in a statement posted on the government’s website today after meetings to discuss the country’s economic situation. The price of the meat surged 57 percent in June from a year earlier, a government report showed last week.
Slowing Growth
Policy makers are trying to cool the fastest inflation in three years without choking growth in the world’s second-largest economy. A report tomorrow may show that gross domestic product rose 9.3 percent in the second quarter from a year earlier, the least in almost two years, according to the median estimate in a Bloomberg survey. That compares with 9.7 percent in the previous quarter.
“The main contradiction in the economy is still the large pressure on price increases and the financing difficulties faced by small and medium-sized enterprises,” Wen said in today’s statement.
He said last month the government may fail to keep price gains within this year’s 4 percent target although they could be kept below 5 percent.
Not As Tight
M2 growth in June rebounded from the slowest gain since 2008 the previous month, although still within the central bank’s full year target of 16 percent. It compared with the median forecast of 15.3 percent in a Bloomberg survey of 18 economists. New local-currency lending in the first six months amounted to 4.17 trillion yuan, 10 percent lower than the same period a year ago.
“Monetary conditions in the past few months have not been as tight” as the money-supply data suggests, said Chang Jian, a Hong Kong-based economist at Barclays Capital. “M2 growth has become less accurate an indicator to measure liquidity conditions and aggregate demand in the past few months as the rapid growth of wealth management products” has shifted loans off banks’ balance sheets, she said.
Chinese banks helped arrange 320 billion yuan of loans between companies in the first quarter that weren’t recorded in the lenders’ balance sheets, central bank data show. Ningbo Bird Co., a maker of cellular phones, said April 30 it had lent 50 million yuan through an entrusted loan at a rate of 18 percent to a property company in Jiangsu province.
Selective Easing
Still, other economists say the June money supply and lending figures show central bank has already started loosening curbs at the margin.
“Some selective easing has already been in progress,” said Ken Peng, senior economist for China at BNP Paribas SA in Beijing. “If local governments don’t get financing, it will affect the normal operation of the economy and could raise the risks of a hard landing.”
Central bank governor Zhou Xiaochuan said last week inflation can’t be the government’s only policy target and that it needs to consider goals including growth, employment and the exchange rate. The PBOC also said yesterday that loans to local government financing vehicles can be contained and that only a “small portion” of loans likely to need “financial grants.”
The second-quarter rise in foreign-exchange reserves was the smallest quarterly gain in a year, according to Bloomberg data.
The growth “still points to solid demand and continued hot money inflows,” said Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong. “There may be more foreign pressure on China to speed up yuan gains but we think appreciation will slow in the second half as inflation eases.” (Bloomberg)
New loans were 633.9 billion yuan ($98 billion), compared with the 622.5 billion yuan median estimate in a Bloomberg News survey of economists. M2, the broadest measure of money supply, rose by a more-than-forecast 15.9 percent, and foreign-exchange reserves climbed to $3.2 trillion. The People’s Bank of China released the data on its website today.
The central bank last week raised interest rates for the third time this year ahead of a report that showed consumer prices jumped the most in three years, indicating the government’s priority is still fighting inflation. Premier Wen Jiabao may be reluctant to ease monetary policy even amid slowing growth as state planners forecast “elevated” price levels for the rest of the year.
“This suggests more tightening on the horizon,” said Joe Lau, a Hong Kong-based economist at Societe Generale SA. “This may be more likely through further reserve ratio hikes,” he said, adding that slowdown risks and the debt burdens of local governments mean policy makers may be more reluctant to raise interest rates.
Lau said he expects one or two more increases in banks’ reserve requirements by year end. Economists at Nomura Holdings Inc. estimated in a July 8 report the ratio could rise by another 100 basis points in the second half of the year.
Record Reserve Requirements
The benchmark Shanghai Composite Index dropped 1.7 percent to 2,754.58 at the 3 p.m. local-time close, the most in seven weeks, on concerns Greece’s debt crisis may spread and higher- than-estimated new lending in China will make it difficult for the government to ease tightening policies. The yuan fell 0.1 percent to 6.4722 per dollar as of 4:30 p.m. in Shanghai, according to the China Foreign Exchange Trade System.
The central bank has raised requirements nine times since mid-November to a record 21.5 percent for the biggest banks, with the most recent increase announced on June 14. Inflation accelerated to 6.4 percent in June from a year earlier and Mizuho Securities Ltd. estimates consumer prices could jump 6.2 percent to 6.5 percent in July.
The government will stabilize prices, curb “unreasonable” housing demand and increase supplies of hogs to promote a stable market for pork, Wen said in a statement posted on the government’s website today after meetings to discuss the country’s economic situation. The price of the meat surged 57 percent in June from a year earlier, a government report showed last week.
Slowing Growth
Policy makers are trying to cool the fastest inflation in three years without choking growth in the world’s second-largest economy. A report tomorrow may show that gross domestic product rose 9.3 percent in the second quarter from a year earlier, the least in almost two years, according to the median estimate in a Bloomberg survey. That compares with 9.7 percent in the previous quarter.
“The main contradiction in the economy is still the large pressure on price increases and the financing difficulties faced by small and medium-sized enterprises,” Wen said in today’s statement.
He said last month the government may fail to keep price gains within this year’s 4 percent target although they could be kept below 5 percent.
Not As Tight
M2 growth in June rebounded from the slowest gain since 2008 the previous month, although still within the central bank’s full year target of 16 percent. It compared with the median forecast of 15.3 percent in a Bloomberg survey of 18 economists. New local-currency lending in the first six months amounted to 4.17 trillion yuan, 10 percent lower than the same period a year ago.
“Monetary conditions in the past few months have not been as tight” as the money-supply data suggests, said Chang Jian, a Hong Kong-based economist at Barclays Capital. “M2 growth has become less accurate an indicator to measure liquidity conditions and aggregate demand in the past few months as the rapid growth of wealth management products” has shifted loans off banks’ balance sheets, she said.
Chinese banks helped arrange 320 billion yuan of loans between companies in the first quarter that weren’t recorded in the lenders’ balance sheets, central bank data show. Ningbo Bird Co., a maker of cellular phones, said April 30 it had lent 50 million yuan through an entrusted loan at a rate of 18 percent to a property company in Jiangsu province.
Selective Easing
Still, other economists say the June money supply and lending figures show central bank has already started loosening curbs at the margin.
“Some selective easing has already been in progress,” said Ken Peng, senior economist for China at BNP Paribas SA in Beijing. “If local governments don’t get financing, it will affect the normal operation of the economy and could raise the risks of a hard landing.”
Central bank governor Zhou Xiaochuan said last week inflation can’t be the government’s only policy target and that it needs to consider goals including growth, employment and the exchange rate. The PBOC also said yesterday that loans to local government financing vehicles can be contained and that only a “small portion” of loans likely to need “financial grants.”
The second-quarter rise in foreign-exchange reserves was the smallest quarterly gain in a year, according to Bloomberg data.
The growth “still points to solid demand and continued hot money inflows,” said Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong. “There may be more foreign pressure on China to speed up yuan gains but we think appreciation will slow in the second half as inflation eases.” (Bloomberg)
Monday, July 11, 2011
Economy Highlight (11th July, 2011)
US - Mortgage applications fell 5.2% last week on refinancing
Mortgage applications in the US fell for a third straight week, led by the biggest drop in refinancing since the end of March. The Mortgage Bankers Association’s index declined 5.2% in the period ended 1 July from the prior week as falling home prices are making it harder for homeowners to refinance current mortgages. (Bloomberg)
US - Service industries expanded at slower pace in June
Service industries in the US expanded at a slower pace in June, a sign the economy cooled at the end of the first half of 2011. The Institute for Supply Management’s index of non-manufacturing businesses decreased to 53.3, less than the projected 53.7, from 54.6 in May. (Bloomberg)
EU - Spain industrial production fell for third month in May
Spanish industrial production fell for the third month in May as the economy struggled to emerge from a three-year slump. Output at factories, refineries and mines fell 0.4% from a year earlier. (Bloomberg)
EU - Germany factory orders unexpectedly rose, led by domestic demand
Factory orders in Germany unexpectedly increased in May, led by domestic demand for investment goods such as machinery. Orders, adjusted for seasonal swings and inflation, increased 1.8% from April, when they surged a revised 2.9%. (Bloomberg)
EU - Ireland may be next to face junk as Moody's cut Portugal
Ireland’s credit rating may be cut to junk by Moody’s after Portugal yesterday lost its investment grade rating on concern the country will need to follow Greece in seeking a second bailout. Moody’s, which slashed Portugal to Ba2 from Baa1, in April lowered Ireland’s credit rating to the lowest investment grade Baa3 and left country’s outlook on negative. (Bloomberg)
Mortgage applications in the US fell for a third straight week, led by the biggest drop in refinancing since the end of March. The Mortgage Bankers Association’s index declined 5.2% in the period ended 1 July from the prior week as falling home prices are making it harder for homeowners to refinance current mortgages. (Bloomberg)
US - Service industries expanded at slower pace in June
Service industries in the US expanded at a slower pace in June, a sign the economy cooled at the end of the first half of 2011. The Institute for Supply Management’s index of non-manufacturing businesses decreased to 53.3, less than the projected 53.7, from 54.6 in May. (Bloomberg)
EU - Spain industrial production fell for third month in May
Spanish industrial production fell for the third month in May as the economy struggled to emerge from a three-year slump. Output at factories, refineries and mines fell 0.4% from a year earlier. (Bloomberg)
EU - Germany factory orders unexpectedly rose, led by domestic demand
Factory orders in Germany unexpectedly increased in May, led by domestic demand for investment goods such as machinery. Orders, adjusted for seasonal swings and inflation, increased 1.8% from April, when they surged a revised 2.9%. (Bloomberg)
EU - Ireland may be next to face junk as Moody's cut Portugal
Ireland’s credit rating may be cut to junk by Moody’s after Portugal yesterday lost its investment grade rating on concern the country will need to follow Greece in seeking a second bailout. Moody’s, which slashed Portugal to Ba2 from Baa1, in April lowered Ireland’s credit rating to the lowest investment grade Baa3 and left country’s outlook on negative. (Bloomberg)
Saturday, July 9, 2011
China's inflation highest in three years
China said its politically sensitive inflation rate accelerated in June to the highest level in three years, as the government struggles to rein in soaring food costs.
The country's consumer price index rose 6.4 per cent in June, the National Bureau of Statistics said in a statement, the highest level since June 2008 when the inflation rate reached 7.1 per cent.
The June reading -- higher than the 5.5 per cent in May and well above the government's annual target of four per cent -- is likely to fuel concern among policymakers anxious about inflation's potential to trigger social unrest.
China has been struggling to tame inflation despite restricting the amount of money banks can lend on numerous occasions and hiking interest rates five times since October -- most recently on Wednesday.
The price of pork, a staple of the Chinese diet, hit a new high in China last month due to rising costs and short supply, while severe flooding in crop growing regions of the country also fuelled inflation.
Fruit and vegetable prices in the eastern province of Zhejiang soared by as much as 40 per cent last month after heavy rains destroyed crops, state media said previously.
Premier Wen Jiabao reportedly admitted last month that it would be difficult to keep inflation within the government's target for 2011, but added fighting rising prices remained a priority.
The government has said it expects price pressures to ease in the second half.
Some analysts are concerned Beijing might go too far in tightening monetary policy and trigger a sharp slowdown in the world's second largest economy -- which could have dire consequences for the world.
Growth in China's manufacturing activity almost stalled in June and year-on-year auto sales have fallen for two straight months. (AAP)
The country's consumer price index rose 6.4 per cent in June, the National Bureau of Statistics said in a statement, the highest level since June 2008 when the inflation rate reached 7.1 per cent.
The June reading -- higher than the 5.5 per cent in May and well above the government's annual target of four per cent -- is likely to fuel concern among policymakers anxious about inflation's potential to trigger social unrest.
China has been struggling to tame inflation despite restricting the amount of money banks can lend on numerous occasions and hiking interest rates five times since October -- most recently on Wednesday.
The price of pork, a staple of the Chinese diet, hit a new high in China last month due to rising costs and short supply, while severe flooding in crop growing regions of the country also fuelled inflation.
Fruit and vegetable prices in the eastern province of Zhejiang soared by as much as 40 per cent last month after heavy rains destroyed crops, state media said previously.
Premier Wen Jiabao reportedly admitted last month that it would be difficult to keep inflation within the government's target for 2011, but added fighting rising prices remained a priority.
The government has said it expects price pressures to ease in the second half.
Some analysts are concerned Beijing might go too far in tightening monetary policy and trigger a sharp slowdown in the world's second largest economy -- which could have dire consequences for the world.
Growth in China's manufacturing activity almost stalled in June and year-on-year auto sales have fallen for two straight months. (AAP)
Friday, July 8, 2011
US Banks Continue Killing Jobs
Reports that layoffs have begun to resume on Wall Street are starting to see some confirmation in the jobs report, with the financial sector being among the industries that shed jobs in June.
According to the Bureau of Labor Statistics' nonfarm payrolls report, the "Financial activities" sector shed 15,000 jobs in June on a seasonally adjusted basis after adding 14,000 in May.
Financial activities include banks, insurance companies, real estate, rental and leasing sectors.
The sector breakdown showed finance and insurance category laid off 8,700 jobs after creating 9,100 in May. Within that, commercial banks shed 3,400 jobs after adding 6,800 in May.
Investment banks are starting to reduce payrolls amid a tough operating environment and tighter regulations. Goldman Sachs(GS) recently said in a filing that it may cut about 230 jobs in the New York region between September this year and March 2012, citing economic reasons. The filing did not specify the details of the people it planned to layoff. Goldman plans to add jobs in other countries such as Brazil, India and Singapore.
Credit Suisse(CS) started laying off investment-banking employees last week, and the cost-cutting push could claim 400 to 600 jobs the Wall Street Journal reported, citing people familiar with the situation.
Morgan Stanley(MS) recently indicated that it might cut more jobs from its brokerage arm.
The money center banks are also being driven to cut costs as revenue pressures continue and legal costs climb. Bank of America(BAC) said Thursday that it would layoff 100 people in Connecticut.
The company is eliminating 56 positions at its Hartford Cash Vault site, transferring the work to Dedham, Mass., and Schenectady, N.Y. It is also exiting its East Hartford Lockbox site, which will affect about 50 workers. The work will be relocated to Boston.
Layoffs will take place in Hartford on Sept. 23 and between Aug. 11 and Dec. 1 in East Hartford.
Wells Fargo(WFC) is expected to reveal more details of its cost-savings initiative "Project Compass" this quarter which is focused on delivering savings by cutting down response times for loan applications, eliminating redundancies to name a few. The bank has not spoken about reducing its workforce. But Deutsche Bank analysts expect some "right-sizing" in its mortgage business.
The finance and insurance sector has been the weak link in the jobs recovery story. The sector has lost more than 80,000 jobs in total on a seasonally adjusted basis since June 2009, when the recession officially ended.(The Street)
According to the Bureau of Labor Statistics' nonfarm payrolls report, the "Financial activities" sector shed 15,000 jobs in June on a seasonally adjusted basis after adding 14,000 in May.
Financial activities include banks, insurance companies, real estate, rental and leasing sectors.
The sector breakdown showed finance and insurance category laid off 8,700 jobs after creating 9,100 in May. Within that, commercial banks shed 3,400 jobs after adding 6,800 in May.
Investment banks are starting to reduce payrolls amid a tough operating environment and tighter regulations. Goldman Sachs(GS) recently said in a filing that it may cut about 230 jobs in the New York region between September this year and March 2012, citing economic reasons. The filing did not specify the details of the people it planned to layoff. Goldman plans to add jobs in other countries such as Brazil, India and Singapore.
Credit Suisse(CS) started laying off investment-banking employees last week, and the cost-cutting push could claim 400 to 600 jobs the Wall Street Journal reported, citing people familiar with the situation.
Morgan Stanley(MS) recently indicated that it might cut more jobs from its brokerage arm.
The money center banks are also being driven to cut costs as revenue pressures continue and legal costs climb. Bank of America(BAC) said Thursday that it would layoff 100 people in Connecticut.
The company is eliminating 56 positions at its Hartford Cash Vault site, transferring the work to Dedham, Mass., and Schenectady, N.Y. It is also exiting its East Hartford Lockbox site, which will affect about 50 workers. The work will be relocated to Boston.
Layoffs will take place in Hartford on Sept. 23 and between Aug. 11 and Dec. 1 in East Hartford.
Wells Fargo(WFC) is expected to reveal more details of its cost-savings initiative "Project Compass" this quarter which is focused on delivering savings by cutting down response times for loan applications, eliminating redundancies to name a few. The bank has not spoken about reducing its workforce. But Deutsche Bank analysts expect some "right-sizing" in its mortgage business.
The finance and insurance sector has been the weak link in the jobs recovery story. The sector has lost more than 80,000 jobs in total on a seasonally adjusted basis since June 2009, when the recession officially ended.(The Street)
Wednesday, July 6, 2011
Economy Highlights today (06th July, 2011)
US - Orders rose 0.8% in May on capital goods
Orders placed with US factories increased in May, indicating manufacturing may rebound from a slowdown in economic growth in the first half of 2011. Bookings for manufacturers’ goods rose 0.8%, less than forecast, after a revised 0.9% decline in April that was smaller than previously estimated, figures from the Commerce Department showed today in Washington. Demand for durable goods that are meant to last at least three years increased 2.1%, while unfilled orders climbed the most since September. Manufacturing is showing signs of recovering from parts shortages linked to the earthquake and tsunami in Japan, at the same time commodity costs ebb and growing economies overseas fuel exports. (Bloomberg)
Portugal - Ratings cut to junk by Moody's on financing risk
Portugal’s credit rating was cut to below investment grade by Moody’s Investors Service on concern the country will need to follow Greece in seeking a second bailout. The euro dropped for the first time in seven days. The long-term government bond ratings were lowered to Ba2, or junk, from Baa1, and the outlook is negative. Discussions to involve private investors in a new rescue plan for Greece make it more likely that the European Union will require the same pre-conditions in the case of Portugal, Moody’s said in a statement. (Bloomberg)
Greece - Banks ready to take part in rollover, Venizelos says
Greek banks are willing to roll over their government bonds as part of a European Union rescue plan that will keep the country out of financial markets for three years, Finance Minister Evangelos Venizelos said. “The Greek banks are ready to participate,” he said in an interview with Bloomberg Television in Athens. Greece will meet its goal of achieving a primary surplus next year and in following years, and is targeting EUR1.7bn in revenue from state-asset sales by the end of September, the minister said. He added that he will appoint a new head of the country’s privatization fund by 11 July. (Bloomberg)
Australia - Trade surplus in may widens to seven-month high
Australia’s trade surplus in May was the widest in seven months as the mining industry fueled a recovery from the economy’s worst quarterly contraction in two decades. Exports exceeded imports by AUD2.33bn (USD2.5bn), from a revised AUD1.62bn surplus in April, the Bureau of Statistics said in a report in Sydney. The median estimate in a Bloomberg News survey of 25 economists was for a surplus of AUD1.9bn. Reserve Bank of Australia Governor Glenn Stevens is forecast to hold interest rates at 4.75% for a seventh meeting to help the economy recover from natural disasters at home and abroad. (Bloomberg)
China - Services industries expand as new orders, jobs climb
China’s services industries expanded at the second-fastest pace this year as new orders and employment climbed, supporting growth amid the government’s campaign to cool inflation. A purchasing managers index was 54.1 in June compared with 54.3 in May, HSBC Holdings Plc and Market Economics said. A reading above 50 indicates expansion. “The continuous steady expansion of the service sector, in particular the notable improvement in employment, should lend support to economic growth,” HSBC’s chief China economist Qu Hongbin said in the statement. “This should provide room for Beijing to keep the current tightening measures for another two to three months to slow inflation meaningfully into the fourth quarter.”(Bloomberg)
Orders placed with US factories increased in May, indicating manufacturing may rebound from a slowdown in economic growth in the first half of 2011. Bookings for manufacturers’ goods rose 0.8%, less than forecast, after a revised 0.9% decline in April that was smaller than previously estimated, figures from the Commerce Department showed today in Washington. Demand for durable goods that are meant to last at least three years increased 2.1%, while unfilled orders climbed the most since September. Manufacturing is showing signs of recovering from parts shortages linked to the earthquake and tsunami in Japan, at the same time commodity costs ebb and growing economies overseas fuel exports. (Bloomberg)
Portugal - Ratings cut to junk by Moody's on financing risk
Portugal’s credit rating was cut to below investment grade by Moody’s Investors Service on concern the country will need to follow Greece in seeking a second bailout. The euro dropped for the first time in seven days. The long-term government bond ratings were lowered to Ba2, or junk, from Baa1, and the outlook is negative. Discussions to involve private investors in a new rescue plan for Greece make it more likely that the European Union will require the same pre-conditions in the case of Portugal, Moody’s said in a statement. (Bloomberg)
Greece - Banks ready to take part in rollover, Venizelos says
Greek banks are willing to roll over their government bonds as part of a European Union rescue plan that will keep the country out of financial markets for three years, Finance Minister Evangelos Venizelos said. “The Greek banks are ready to participate,” he said in an interview with Bloomberg Television in Athens. Greece will meet its goal of achieving a primary surplus next year and in following years, and is targeting EUR1.7bn in revenue from state-asset sales by the end of September, the minister said. He added that he will appoint a new head of the country’s privatization fund by 11 July. (Bloomberg)
Australia - Trade surplus in may widens to seven-month high
Australia’s trade surplus in May was the widest in seven months as the mining industry fueled a recovery from the economy’s worst quarterly contraction in two decades. Exports exceeded imports by AUD2.33bn (USD2.5bn), from a revised AUD1.62bn surplus in April, the Bureau of Statistics said in a report in Sydney. The median estimate in a Bloomberg News survey of 25 economists was for a surplus of AUD1.9bn. Reserve Bank of Australia Governor Glenn Stevens is forecast to hold interest rates at 4.75% for a seventh meeting to help the economy recover from natural disasters at home and abroad. (Bloomberg)
China - Services industries expand as new orders, jobs climb
China’s services industries expanded at the second-fastest pace this year as new orders and employment climbed, supporting growth amid the government’s campaign to cool inflation. A purchasing managers index was 54.1 in June compared with 54.3 in May, HSBC Holdings Plc and Market Economics said. A reading above 50 indicates expansion. “The continuous steady expansion of the service sector, in particular the notable improvement in employment, should lend support to economic growth,” HSBC’s chief China economist Qu Hongbin said in the statement. “This should provide room for Beijing to keep the current tightening measures for another two to three months to slow inflation meaningfully into the fourth quarter.”(Bloomberg)
Tuesday, July 5, 2011
Economy Highlights today (5th July,2011)
US - Payrolls probably rose at pace that failed to reduce jobless rate
Employers in the US probably expanded payrolls at a pace that failed to reduce the unemployment rate in June as companies sought to contain costs amid slower growth, economists said a report may show this week. Payrolls climbed by 100,000 workers after a 54,000 increase in May that was the smallest in eight months, according to the median forecast of economists surveyed by Bloomberg News ahead of Labor Department data due 8 July. The jobless rate held at 9.1%. Another report may show growth in services cooled. A recovery that Federal Reserve Chairman Ben S. Bernanke said is “frustratingly slow” explains why employers such as Lockheed Martin Corp. (LMT) and Gannett Co. are cutting positions or becoming reluctant to add as many workers. Faster payroll growth is needed to spur consumer spending that accounts for 70% of the economy. (Bloomberg)
China - Services slowdown boosts speculation government may ease tightening
China’s non-manufacturing industries expanded at the slowest pace in four months in June, sending stocks higher on speculation the government may ease monetary tightening policies aimed at taming inflation. A purchasing managers’ index dropped to 57 from 61.9 in May, the China Federation of Logistics and Purchasing said on its website yesterday. A reading above 50 indicates expansion. The Shanghai Composite Index rose 1.7%, extending a two-week rally, as expectations climbed that the government will refrain from raising interest rates and ease some lending restrictions due to slowing growth in manufacturing and services. Vice Premier Wang Qishan urged banks to increase financing to small companies that are having problems raising funds, according to a statement yesterday from the State Council. (Bloomberg)
EU - Germany raises annual borrowing targets more than 10% on costs of bailout
German Chancellor Angela Merkel’s government raised borrowing targets by more than 10% for the three years through 2015 after pledging contributions to a future European bailout fund, its multi-year budget plan shows. Borrowing will amount to EUR24.9bn (USD36.2bn) in 2013, more than the EUR22.3bn the Cabinet endorsed on 16 March, according to the 2013-2015 budget plan drafted by the Finance Ministry. The government aims to borrow EUR18.7bn in 2014 and EUR14.7bn in 2015, up from EUR15.3bn and EUR13.3bn, respectively. (Bloomberg)
Thailand - Yingluck may spur prices, Baht in 'double whammy' for exporters
Efforts by Thailand’s incoming government to boost growth and lift incomes may accelerate inflation, forcing interest rates higher and increasing business costs even as a strengthening currency threatens exports. The Bank of Thailand is assessing the economic effect of policies that may be implemented by the Pheu Thai party after it won the 3 July election, director Mathee Supapongse said. Pheu Thai, which is assembling a five-party coalition that would hold 299 seats in the 500-member parliament, campaigned on pledges to raise the minimum wage and guarantee rice prices for farmers. (Bloomberg)
Employers in the US probably expanded payrolls at a pace that failed to reduce the unemployment rate in June as companies sought to contain costs amid slower growth, economists said a report may show this week. Payrolls climbed by 100,000 workers after a 54,000 increase in May that was the smallest in eight months, according to the median forecast of economists surveyed by Bloomberg News ahead of Labor Department data due 8 July. The jobless rate held at 9.1%. Another report may show growth in services cooled. A recovery that Federal Reserve Chairman Ben S. Bernanke said is “frustratingly slow” explains why employers such as Lockheed Martin Corp. (LMT) and Gannett Co. are cutting positions or becoming reluctant to add as many workers. Faster payroll growth is needed to spur consumer spending that accounts for 70% of the economy. (Bloomberg)
China - Services slowdown boosts speculation government may ease tightening
China’s non-manufacturing industries expanded at the slowest pace in four months in June, sending stocks higher on speculation the government may ease monetary tightening policies aimed at taming inflation. A purchasing managers’ index dropped to 57 from 61.9 in May, the China Federation of Logistics and Purchasing said on its website yesterday. A reading above 50 indicates expansion. The Shanghai Composite Index rose 1.7%, extending a two-week rally, as expectations climbed that the government will refrain from raising interest rates and ease some lending restrictions due to slowing growth in manufacturing and services. Vice Premier Wang Qishan urged banks to increase financing to small companies that are having problems raising funds, according to a statement yesterday from the State Council. (Bloomberg)
EU - Germany raises annual borrowing targets more than 10% on costs of bailout
German Chancellor Angela Merkel’s government raised borrowing targets by more than 10% for the three years through 2015 after pledging contributions to a future European bailout fund, its multi-year budget plan shows. Borrowing will amount to EUR24.9bn (USD36.2bn) in 2013, more than the EUR22.3bn the Cabinet endorsed on 16 March, according to the 2013-2015 budget plan drafted by the Finance Ministry. The government aims to borrow EUR18.7bn in 2014 and EUR14.7bn in 2015, up from EUR15.3bn and EUR13.3bn, respectively. (Bloomberg)
Thailand - Yingluck may spur prices, Baht in 'double whammy' for exporters
Efforts by Thailand’s incoming government to boost growth and lift incomes may accelerate inflation, forcing interest rates higher and increasing business costs even as a strengthening currency threatens exports. The Bank of Thailand is assessing the economic effect of policies that may be implemented by the Pheu Thai party after it won the 3 July election, director Mathee Supapongse said. Pheu Thai, which is assembling a five-party coalition that would hold 299 seats in the 500-member parliament, campaigned on pledges to raise the minimum wage and guarantee rice prices for farmers. (Bloomberg)
Sunday, July 3, 2011
Queries arise on OPR hike come July 2011 policy meeting
Possible hike?...
Yeah believes that the current OPR level of the three per cent will not see a hike of 25bps in Bank Negara's next policy meeting in July.
With global economic uncertainties gazing upon rising inflation, it is anticipated that the nation's Overnight Policy Rate (OPR) will likely to rise b a further 25 basis points (bps) to 50bps in the near term.
Of course,there were several debates regarding the timing of the rate hikes prior to inflationary build-ups and concerns over the country's current gross domestic product (GDP)growth.
According to the comments by RAM Holdings Bhd's (RAM)group chief economist Dr Yeah Kim Leng, he believed that the current OPR level of three per cent would not see a hike of 25bps in Bank Negara's next policy meeting in July.
He believed that Bank Negara's focus on inflation would most likely shift towards the growth sustainability of Malaysia.
"As a result in the release in the oil stockpile and a further weakening in oil prices, inflation will most likely move at a moderate pace in the second half. As concerns over the current negative external economic conditions builds up, particularly in US and the EU (European Union).
The economic growth of Malaysia will be the first priority to the central bank.
Hence, OPR hike will most likely stay at its current level of three per cent.
Meanwhile, according to the comment given by chief economist of Malaysian Rating Corporation Bhd (MARC), Bank Negara will most likely 'put a brake' on its OPR hike for the moment, as the current GDP growth is hovering at four per cent to 4.5 per cent in the second quarter, and taking into the consideration of external factors like current global economic uncertainties. This of course, based on the possible inflow of 'hot money' from portfolio investments. At present, total foreigners' shareholdings in the Malaysian Government Securities (MSG)is at a historical high of 31 per cent of total outstanding MGS.
As a result, a massive inflow of 'hot money' would increase the risk of money flowing out of the country. Meaning to say, a huge outflow of money will cause adverse impacts in of the businesses as well as consumer's sentiments.
7GFN42WK3SF7
Yeah believes that the current OPR level of the three per cent will not see a hike of 25bps in Bank Negara's next policy meeting in July.
With global economic uncertainties gazing upon rising inflation, it is anticipated that the nation's Overnight Policy Rate (OPR) will likely to rise b a further 25 basis points (bps) to 50bps in the near term.
Of course,there were several debates regarding the timing of the rate hikes prior to inflationary build-ups and concerns over the country's current gross domestic product (GDP)growth.
According to the comments by RAM Holdings Bhd's (RAM)group chief economist Dr Yeah Kim Leng, he believed that the current OPR level of three per cent would not see a hike of 25bps in Bank Negara's next policy meeting in July.
He believed that Bank Negara's focus on inflation would most likely shift towards the growth sustainability of Malaysia.
"As a result in the release in the oil stockpile and a further weakening in oil prices, inflation will most likely move at a moderate pace in the second half. As concerns over the current negative external economic conditions builds up, particularly in US and the EU (European Union).
The economic growth of Malaysia will be the first priority to the central bank.
Hence, OPR hike will most likely stay at its current level of three per cent.
Meanwhile, according to the comment given by chief economist of Malaysian Rating Corporation Bhd (MARC), Bank Negara will most likely 'put a brake' on its OPR hike for the moment, as the current GDP growth is hovering at four per cent to 4.5 per cent in the second quarter, and taking into the consideration of external factors like current global economic uncertainties. This of course, based on the possible inflow of 'hot money' from portfolio investments. At present, total foreigners' shareholdings in the Malaysian Government Securities (MSG)is at a historical high of 31 per cent of total outstanding MGS.
As a result, a massive inflow of 'hot money' would increase the risk of money flowing out of the country. Meaning to say, a huge outflow of money will cause adverse impacts in of the businesses as well as consumer's sentiments.
7GFN42WK3SF7
Saturday, July 2, 2011
Malaysia Monetary Policy Statements
Bank Negara Malaysia decided to raise the Overnight Policy Rate (OPR) by 25 basis points to 3.00 percent. The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 2.75 percent and 3.25 percent respectively.
The global economic recovery has continued in the first quarter of the year, but the growth has been highly uneven across regions. Growth in the advanced economies during this period has remained modest. In the region, despite some moderation, the growth has remained strong, supported by robust domestic economic activity. Global inflation has, however, increased on account of rising energy and commodity prices. In several countries, further upward pressure on inflation has been exerted by domestic demand conditions. Although the global recovery is expected to continue going forward, downside risks have increased, arising from the potential for higher energy and commodity prices, possible supply disruptions following developments in Japan, and the heightened volatility in capital flows to emerging economies.
In the domestic economy, the latest indicators point towards the continued strengthening of private investment and sustained private consumption expenditure in the first quarter. The export performance also improved, supported by regional demand. Going forward, the assessment is for the Malaysian economy to remain firmly on a steady growth path, with growth improving gradually during the course of the year. Growth will be underpinned by the firm expansion of domestic demand. Sustained employment conditions and income growth is expected to provide support to private consumption, while private investment is projected to strengthen amidst the improved investment environment. The developments in Japan are expected to have a limited impact on the overall domestic economy. Positive prospects for the region and strong demand for commodities are expected to continue to support the Malaysian economy.
Domestic headline inflation has continued to increase, rising to 3% in March to average 2.8% for the first quarter of 2011. The increase was mainly due to higher food and fuel prices. The assessment is that supply factors will continue to be a key determinant affecting consumer prices. Global commodity and energy prices are projected to remain elevated during the year, with inflation in major trading partners also expected to rise further. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year.
With the economy firmly on a steady growth path, the MPC decided to adjust the degree of monetary accommodation. At the current OPR level, the stance of monetary policy remains supportive of growth. The future stance of monetary policy will depend on the assessment of the risk to growth and inflation prospects. (Central Bank of Malaysia, BNM, 5 May 2011)
The global economic recovery has continued in the first quarter of the year, but the growth has been highly uneven across regions. Growth in the advanced economies during this period has remained modest. In the region, despite some moderation, the growth has remained strong, supported by robust domestic economic activity. Global inflation has, however, increased on account of rising energy and commodity prices. In several countries, further upward pressure on inflation has been exerted by domestic demand conditions. Although the global recovery is expected to continue going forward, downside risks have increased, arising from the potential for higher energy and commodity prices, possible supply disruptions following developments in Japan, and the heightened volatility in capital flows to emerging economies.
In the domestic economy, the latest indicators point towards the continued strengthening of private investment and sustained private consumption expenditure in the first quarter. The export performance also improved, supported by regional demand. Going forward, the assessment is for the Malaysian economy to remain firmly on a steady growth path, with growth improving gradually during the course of the year. Growth will be underpinned by the firm expansion of domestic demand. Sustained employment conditions and income growth is expected to provide support to private consumption, while private investment is projected to strengthen amidst the improved investment environment. The developments in Japan are expected to have a limited impact on the overall domestic economy. Positive prospects for the region and strong demand for commodities are expected to continue to support the Malaysian economy.
Domestic headline inflation has continued to increase, rising to 3% in March to average 2.8% for the first quarter of 2011. The increase was mainly due to higher food and fuel prices. The assessment is that supply factors will continue to be a key determinant affecting consumer prices. Global commodity and energy prices are projected to remain elevated during the year, with inflation in major trading partners also expected to rise further. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year.
With the economy firmly on a steady growth path, the MPC decided to adjust the degree of monetary accommodation. At the current OPR level, the stance of monetary policy remains supportive of growth. The future stance of monetary policy will depend on the assessment of the risk to growth and inflation prospects. (Central Bank of Malaysia, BNM, 5 May 2011)
Malaysia Monetary and Financial Development May 2011
Price Conditions:
Headline inflation, as measured by the Consumer Price Index (CPI), increased to 3.3% on an annual basis. The main contributors to inflation during the month were the food and non-alcoholic beverages and transport categories. Higher food prices were mainly due to the increase in meat prices. Inflation in the transport category increased during the month reflecting the effect from the upward adjustment in the price of RON97 from RM2.70/litre to RM2.90/litre due to the rise in the price of WTI crude oil in April.
Monetary Conditions:
Following the Monetary Policy Committee’s (MPC) decision to raise the Overnight Policy Rate (OPR) by 25 basis points to 3.00% on 5 May 2011, interbank rates across all maturities adjusted upwards. In terms of retail rates, deposit rates were revised upwards by between 24 to 28 basis points. Similarly, the average base lending rate (BLR) of commercial banks rose from 6.27% to 6.54%, with all domestic commercial banks adjusting their respective BLRs by 30 basis points. Broad money (M3) increased by 11.1% on an annual basis. The increase during the month reflected mainly credit extension by the banking system to the private sector and higher trade inflows. Net financing to the private sector expanded in May due to higher private debt security (PDS) issuances and an increase in banking system loans during the month. PDS issuances rose due to several large issuances, mainly by the finance sector. Loans outstanding to businesses also expanded largely due to higher loans extended to the real estate; manufacturing; wholesale and retail trade, restaurants and hotels; and finance sectors. Loans to households continued to rise steadily, driven mainly by loans for the purchase of residential and non-residential properties; personal use and passenger cars. Loan applications continued to increase in May, with higher loan demand from both businesses and households.
Banking Conditions:
The banking system remained well-capitalised with the risk-weighted capital ratio (RWCR) and core capital ratio (CCR) at 14.4% and 12.8% respectively. The level of net impaired loans remained stable to account for 2.1% of net loans. Loan loss coverage stood at 92.2%.
Exchange Rates and International Reserves:
In May, the ringgit broadly depreciated against most of the currencies of Malaysia’s major trade partners with the exception of the euro. The ringgit’s depreciation was in line with the regional trend due to the heightened global risk aversion amid concerns over the sovereign debt crisis in Europe. In June, the ringgit continued to depreciate against the currencies of Malaysia’s key trading partners, with the exception of the euro. The international reserves of Bank Negara Malaysia stood at RM402.6 billion (equivalent to USD133.2 billion) as at 15 June 2011, sufficient to finance 9.5 months of retained imports and were 4.4 times the short-term external debt. (Central Bank of Malaysia,BNM)
Headline inflation, as measured by the Consumer Price Index (CPI), increased to 3.3% on an annual basis. The main contributors to inflation during the month were the food and non-alcoholic beverages and transport categories. Higher food prices were mainly due to the increase in meat prices. Inflation in the transport category increased during the month reflecting the effect from the upward adjustment in the price of RON97 from RM2.70/litre to RM2.90/litre due to the rise in the price of WTI crude oil in April.
Monetary Conditions:
Following the Monetary Policy Committee’s (MPC) decision to raise the Overnight Policy Rate (OPR) by 25 basis points to 3.00% on 5 May 2011, interbank rates across all maturities adjusted upwards. In terms of retail rates, deposit rates were revised upwards by between 24 to 28 basis points. Similarly, the average base lending rate (BLR) of commercial banks rose from 6.27% to 6.54%, with all domestic commercial banks adjusting their respective BLRs by 30 basis points. Broad money (M3) increased by 11.1% on an annual basis. The increase during the month reflected mainly credit extension by the banking system to the private sector and higher trade inflows. Net financing to the private sector expanded in May due to higher private debt security (PDS) issuances and an increase in banking system loans during the month. PDS issuances rose due to several large issuances, mainly by the finance sector. Loans outstanding to businesses also expanded largely due to higher loans extended to the real estate; manufacturing; wholesale and retail trade, restaurants and hotels; and finance sectors. Loans to households continued to rise steadily, driven mainly by loans for the purchase of residential and non-residential properties; personal use and passenger cars. Loan applications continued to increase in May, with higher loan demand from both businesses and households.
Banking Conditions:
The banking system remained well-capitalised with the risk-weighted capital ratio (RWCR) and core capital ratio (CCR) at 14.4% and 12.8% respectively. The level of net impaired loans remained stable to account for 2.1% of net loans. Loan loss coverage stood at 92.2%.
Exchange Rates and International Reserves:
In May, the ringgit broadly depreciated against most of the currencies of Malaysia’s major trade partners with the exception of the euro. The ringgit’s depreciation was in line with the regional trend due to the heightened global risk aversion amid concerns over the sovereign debt crisis in Europe. In June, the ringgit continued to depreciate against the currencies of Malaysia’s key trading partners, with the exception of the euro. The international reserves of Bank Negara Malaysia stood at RM402.6 billion (equivalent to USD133.2 billion) as at 15 June 2011, sufficient to finance 9.5 months of retained imports and were 4.4 times the short-term external debt. (Central Bank of Malaysia,BNM)
Friday, July 1, 2011
Japan Car Sales Slump, South Koreans Gain Globally
New vehicle sales in Japan slumped by more than a fifth in June as the production disruption from the March earthquake lingered, but the data showed a big improvement from the previous months as more parts became available.
In neighboring South Korea, Hyundai Motor and Kia Motors extended their strong run with double-digit growth, driven by brisk sales of new models.
Japanese vehicle sales, excluding 660cc microcars, fell 23 percent to 225,024 last month, marking the 10th straight month of declines. But officials put on a rare optimistic face on the result, saying sales were well off the post-disaster trough.
"The trend of recovery is very clear," Michiro Saito, general manager at the Japan Automobile Dealers Association, told reporters. "We remain somewhat uncertain of future demand, but we hope that new model launches will help fuel it," he said.
In June, an average 10,228 cars were registered per day, up from 7,482 in May and 5,441 in April, when cars were assembled at a significantly reduced pace with hundreds of parts still missing.
Toyota Motor [TM 82.86 0.44 (+0.53%) ], Nissan Motor [NSANY 21.00 -0.05 (-0.24%) ]and Honda Motor [HMC 38.60 -0.01 (-0.03%) ], Japan's top three automakers, have all said they are close to being able to build as many cars as they had planned before the quake, with only a few critical components still affected.
Including minivehicles, which are tallied separately, new vehicle sales in Japan, the world's third-biggest car market, slid 22 percent to 351,828 in June.
Results varied across the brands, with Nissan showing a 4.2 percent rise from a year ago — the first uptick in nine months — while Toyota and Honda suffered declines of more than 30 percent.
Nissan has restored production faster than its rivals, managing to build more vehicles in May while output at Toyota and Honda more than halved.
Hyundai, Kia on a Roll
Hyundai and Kia extended their industry-beating march after sales accelerated in the past few months as quake-hit Japanese rivals suffered from a dearth of products.
The duo, which ranks fifth in global car sales, are expected to report healthy sales and earnings in the second half, but would need to manage investors' expectations in the face of a weakening global economy, analysts said.
"The slowing global economy may deal a blow to consumer sentiment. But there is pent-up demand for cars in the United States after the market collapsed in the wake of the global financial crisis," said Yoon Phil-joong, an analyst at Samsung Securities.
"Consumers also place value on practicality during difficult economic times. Korean car makers are relatively safe," he said.
Hyundai's global sales rose 12.3 percent to a monthly record in June, helped by strong sales in the United States, China, India and South Korea. Kia's sales surged 22 percent.
Maruti Suzuki Sales Fall
Sales at top car maker Maruti Suzuki India declined 8.8 percent to 80,298 vehicles, marking the first fall since December 2008 and pushing its shares down as much as 2.6 percent.
Production at Maruti, 54.2 percent owned by Japan's Suzuki Motor, was hurt by a strike last month that led to a production loss of about 16,000 cars.
In total, Indian automakers sold 158,817 vehicles in May, up 7 percent in what was the slowest pace of growth in two years.
Analysts expect a further slowdown as rising fuel prices, interest rates and vehicle prices crimp demand. India raised diesel and petrol prices by about 9 percent in the past two months.
"There will certainly be a shift from cars to two wheelers for the middle class who are looking to buy low-end cars, because they can save on costs," said Kishor Ostwal, chairman at brokerage CNI Research.
India's third-largest two-wheeler maker, TVS Motor, reported a 14 percent rise in June sales to 182,456.
Sales at Tata Motors, India's largest maker of trucks and buses, fell 1 percent to 66,358.
Sales of its Tata Nano, touted as the world's cheapest car with its lowest priced variant costing 151,907 rupees ($3,398), plunged 29 percent. (CNBC Asia)
In neighboring South Korea, Hyundai Motor and Kia Motors extended their strong run with double-digit growth, driven by brisk sales of new models.
Japanese vehicle sales, excluding 660cc microcars, fell 23 percent to 225,024 last month, marking the 10th straight month of declines. But officials put on a rare optimistic face on the result, saying sales were well off the post-disaster trough.
"The trend of recovery is very clear," Michiro Saito, general manager at the Japan Automobile Dealers Association, told reporters. "We remain somewhat uncertain of future demand, but we hope that new model launches will help fuel it," he said.
In June, an average 10,228 cars were registered per day, up from 7,482 in May and 5,441 in April, when cars were assembled at a significantly reduced pace with hundreds of parts still missing.
Toyota Motor [TM 82.86 0.44 (+0.53%) ], Nissan Motor [NSANY 21.00 -0.05 (-0.24%) ]and Honda Motor [HMC 38.60 -0.01 (-0.03%) ], Japan's top three automakers, have all said they are close to being able to build as many cars as they had planned before the quake, with only a few critical components still affected.
Including minivehicles, which are tallied separately, new vehicle sales in Japan, the world's third-biggest car market, slid 22 percent to 351,828 in June.
Results varied across the brands, with Nissan showing a 4.2 percent rise from a year ago — the first uptick in nine months — while Toyota and Honda suffered declines of more than 30 percent.
Nissan has restored production faster than its rivals, managing to build more vehicles in May while output at Toyota and Honda more than halved.
Hyundai, Kia on a Roll
Hyundai and Kia extended their industry-beating march after sales accelerated in the past few months as quake-hit Japanese rivals suffered from a dearth of products.
The duo, which ranks fifth in global car sales, are expected to report healthy sales and earnings in the second half, but would need to manage investors' expectations in the face of a weakening global economy, analysts said.
"The slowing global economy may deal a blow to consumer sentiment. But there is pent-up demand for cars in the United States after the market collapsed in the wake of the global financial crisis," said Yoon Phil-joong, an analyst at Samsung Securities.
"Consumers also place value on practicality during difficult economic times. Korean car makers are relatively safe," he said.
Hyundai's global sales rose 12.3 percent to a monthly record in June, helped by strong sales in the United States, China, India and South Korea. Kia's sales surged 22 percent.
Maruti Suzuki Sales Fall
Sales at top car maker Maruti Suzuki India declined 8.8 percent to 80,298 vehicles, marking the first fall since December 2008 and pushing its shares down as much as 2.6 percent.
Production at Maruti, 54.2 percent owned by Japan's Suzuki Motor, was hurt by a strike last month that led to a production loss of about 16,000 cars.
In total, Indian automakers sold 158,817 vehicles in May, up 7 percent in what was the slowest pace of growth in two years.
Analysts expect a further slowdown as rising fuel prices, interest rates and vehicle prices crimp demand. India raised diesel and petrol prices by about 9 percent in the past two months.
"There will certainly be a shift from cars to two wheelers for the middle class who are looking to buy low-end cars, because they can save on costs," said Kishor Ostwal, chairman at brokerage CNI Research.
India's third-largest two-wheeler maker, TVS Motor, reported a 14 percent rise in June sales to 182,456.
Sales at Tata Motors, India's largest maker of trucks and buses, fell 1 percent to 66,358.
Sales of its Tata Nano, touted as the world's cheapest car with its lowest priced variant costing 151,907 rupees ($3,398), plunged 29 percent. (CNBC Asia)
Subscribe to:
Posts (Atom)
