Competitive currency devaluation could prompt global financial chaos, says ex-PBOC chief

SHANGHAI, June 14 — Competitive currency devaluation does not benefit any country and could cause chaos to global financial order, former China central bank governor Zhou Xiaochuan said today. Zhou did not specifically mention the Chinese yuan in…

Global recession fears grow as factory activity shrinks

LONDON, June 3 — Factory activity contracted across Asia and Europe last month as an escalating trade war between Washington and Beijing raised fears of a global economic downturn and heaped pressure on policymakers to roll out more stimulus. Such…

Asia factory activity “bottoming out” but policy support still needed

HONG KONG: Factory activity recovered last month in parts of Asia but still appeared to be on shaky ground as global demand remained subdued and China’s stimulus measures were yet to show their full pulling power.

That left the outlook for the region’s central banks skewed towards easing, with Malaysia and New Zealand prime suspects for potential rate cuts, and Australia — whose monetary policy setters also meet next week — facing growing calls to ease.

Business surveys showed factories were struggling around the world, with euro zone data later on Thursday expected to show a contraction in the manufacturing sector, and the United States still growing, but missing expectations by a wide margin on Wednesday.

The Federal Reserve held interest rates steady overnight, saying it saw no strong case for either hiking or cutting them, disappointing U.S. stock markets.

A resolution in the trade dispute between Washington and Beijing would go a long way towards improving the mood.

While there is still great uncertainty, U.S. Treasury Secretary Steven Mnuchin said the two countries completed “productive” talks on Wednesday and were nearing a deal that would roll back a portion of the $250 billion in U.S. tariffs on Chinese goods.

Purchasing Managers’ Indexes showed manufacturing activity contracted in Malaysia and Taiwan in April, slowed in the Philippines and Indonesia, and picked up a notch in Vietnam and Thailand.

Earlier this week, official data showed activity in China expanded for a second consecutive month in April, but at a much slower pace than expected.

“We’re starting to see a bottoming out of the slowdown that started in the latter part of last year,” said Khoon Goh, head of Asia research at ANZ.

“But bottoming out doesn’t mean that economies are firing away .. We still think in some economies further support will be very helpful,” said Goh, who expects rate cuts in Malaysia, Philippines and Indonesia.

South Korean manufacturing snapped a five-month streak of contractions, but remained weak with new export orders shrinking for a ninth straight month and subcomponents of the index pointing to sluggish demand both at home and abroad.

South Korea’s economy contracted in the first quarter and chances are it may struggle to return to growth in the second. Data on Wednesday showed exports still shrinking, with memory chip shipments down 13.5 percent.

“Export-driven economies are inevitably being hit hardest but sector-specific stories continue to explain country divergences: vehicles and semi-conductors remain among the weakest,” said Janet Henry, global chief economist at HSBC.

After a projected 5.3 percent growth rate in 2018, east Asian economies are expected to expand at a slower pace of 5.1 percent in 2019 and 5.0 percent in 2020, the ASEAN+3 Macroeconomic Research Office (AMRO) said in a report.

The region includes China, South Korea, Japan and the 10 countries in the Association of South East Asian Nations.

Japan releases PMI data next week due to public holidays. India’s are due later on Thursday.


In China, both official and private factory surveys suggested an unexpected loss of momentum last month, though overall activity still expanded, albeit at a more subdued rate.

While most analysts believe the worst may be over for the world’s second-largest economy, the disappointing readings — which followed surprisingly upbeat March data — suggested it is still struggling for traction.

The Caixin/Markit Manufacturing PMI fell to 50.2 in April from March’s eight-month high of 50.8, countering economists’ expectations for a rise to 51.0. The official PMI survey fell to 50.1 from 50.5, also missing forecasts.

Economists had predicted steady to slightly stronger growth, indicating that stimulus measures may be kicking in more slowly than expected. Beijing in March announced additional tax cuts and infrastructure spending this year worth hundreds of billions of dollars, while bank lending in the first quarter hit a record 5.81 trillion yuan ($862.8 billion).

The People’s Bank of China has also been cutting banks’ reserve requirements and keeping short-term money market rates low.

The pick-up in manufacturing activity in March, and steady economic growth overall in the first quarter, prompted the central bank to shift into a wait-and-see stance, with stronger easing measures seen on hold while policymakers await more data.

April’s downbeat factory readings, however, coupled with a soft outlook for trade, have raised questions over how much more stimulus is needed to generate sustainable growth with risking a sharper jump in debt.

“These uncertainties make us strongly believe that the Chinese government will continue its fiscal stimulus to support industrial sectors through infrastructure stimulus, and will provide enough credit to smaller private firms to keep them running and stabilise the job market,” said ING’s Greater China economist Iris Pang.

China factory activity softens despite stimulus

BEIJING, May 1 — China’s factory activity softened in April, official data showed yesterday, in the latest sign that the world’s second-largest economy remains on uneven footing despite a raft of government stimulus measures. The Purchasing…

Brent edges further away from US$70 level

TOKYO: Oil prices slipped a second day today, with Brent edging down further from the US$70 mark after weekly US oil data showed a surprise build in crude inventories and record production.

Brent futures were down 3 cents at US$69.28 a barrel by 0603 GMT. Brent fell 6 cents on Wednesday, after touching US$69.96, highest since Nov 12, when it last traded above US$70.

US West Texas Intermediate (WTI) crude fell 8 cents, or 0.1%, to US$62.38 a barrel. The contract dropped 12 cents in the previous session after briefly hitting US$62.99, also the highest since November.

Global benchmark Brent has gained nearly 30% this year, while WTI has gained nearly 40%. Prices have been underpinned by tightening global supplies and signs of demand picking up.

“There is a clear bias to the upside with the supply restrictions,“ said Michael McCarthy, chief market strategist at CMC Markets in Sydney, pointing to supply cuts by Opec and others, along with sanctions on Iran.

“And there’s a much-better-than-expected demand picture after the recent China and US PMI numbers, along with a potential kicker from any US-China trade agreement,“ he said.

The Caixin/Markit services purchasing managers’ index (PMI) rose to 54.4, the highest since January 2018 and up from February’s 51.1, a fourth-month low, a private business survey of China’s service sector showed on Wednesday.

Trade talks between the United States and China made “good headway” last week in Beijing and the two sides aim to bridge differences during further talks, White House economic adviser Larry Kudlow said on Wednesday.

Crude oil is also supported by an agreement between the Organisation of the Petroleum Exporting Countries (Opec) and allies such as Russia, a group known as Opec+, to reduce oil output by about 1.2 million bpd this year.

US pressure on Iran is increasing, with a senior Trump administration official saying earlier this week that Washington is considering more sanctions on the Middle Eastern country.

The refinery maintenance season is also drawing to a close and that will provide further demand for crude, said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.

“The physical market is very strong and we are now starting to trade post-turnaround barrels, which should mean physical markets strengthen and flat prices should follow,“ he said.

Still, crude oil inventories in the United States rose by 7.2 million barrels last week, as net imports climbed, the Energy Information Administration (EIA) said on Wednesday. Analysts had forecast a decrease of 425,000 barrels.

US crude production climbed 100,000 barrels per day (bpd) to a record 12.2 million bpd, after hovering around 12 million to 12.1 million bpd since mid-February, according to the EIA data.

China manufacturing returns to growth in March, Caixin PMI shows

BEIJING, April 1 — China's manufacturing sector unexpectedly returned to growth for the first time in four months in March, in a sign that government stimulus measures may be slowly gaining traction, a private business survey showed today. But…

Cathay’s budget-airline deal may add HNA surcharge

SINGAPORE: Cathay Pacific’s budget-airline deal may come with an HNA surcharge. Buying Hong Kong Express for $630 million is a sensibly defensive move.

One shareholder – possibly the target’s own chairman – has threatened to fight the sale, however. That could raise the price for the buyer, and serves as a warning to others shopping at the ailing Chinese conglomerate.

After swinging from two years of losses to a profit in 2018, Cathay Pacific Airways is approaching the end of a three-year overhaul.

Boss Rupert Hogg is now ready to join those he struggled to beat, snapping up the city’s only low-cost carrier.

Having acquired Dragonair over a decade ago, Cathay will now control half of Hong Kong’s capacity and have ample room to push into the discount segment already tapped by the likes of Singapore Airlines and Qantas.

Only 12 percent of the city’s traffic is budget-oriented, according to consultancy CAPA, below the Asian average.

Unprofitable HK Express has not come cheap. The price tag amounts to more than four times book value, according to Daiwa analysts, while rivals like Air Asia trade at closer to one times. That misses the potential, however.

In a hub where capacity cannot keep up with passenger growth, $7 billion Cathay wants more slots and to capitalise on Hong Kong’s planned third runway. It also wants to prevent a competitor from muscling in.

Buying from HNA, a sprawling group which owns Hong Kong Airlines and others, comes with its own quirks.

Indeed, the deal’s fine print rattled investors. Cathay said an unnamed shareholder of an intermediate holding company is contesting the transaction.

HK Express Chairman Zhong Guosong is the investor in question, according to Chinese daily Caixin. Zhong is also an indirect owner of HNA and involved in a separate debt dispute with it.

Such complexities have arisen before. In 2017, for example, one HNA dealmaker who also served as a board member at some of its companies said he was holding a stake in the parent as a favour.

Ultimately, Zhong may prove more of an irritant than an obstruction. For other suitors of HNA assets, though, it’s worth watching out for potential hidden fees before getting on board.

Tesla says working on China import hiccup

BEIJING, March 6 — Tesla said today it was working to resume imports of its new Model 3 sedan in China after the company said a labelling hiccup caused problems with customs. Elon Musk's electric car firm denied the issue would impact sales of the…

US holds interest rate policy unchanged

Fundamental outlook THE US Fed chairman Jerome Powell and policymakers retained US interest rate policy. He mentioned that the Fed will remain patient in its rate hike plan. However, Powell also said the rate hike policy will stay on course despite criticism from President Donald Trump. Before the weekend, US bond yields fell and Dow […]

Factory activity shrinks across Asia as China cools

HONG KONG: Factory activity shrank across much of Asia in January, falling to the weakest in years in several countries and adding to worries that trade tariffs and cooling demand in China pose an increasing threat to global growth. The weak Purchasing Managers Index (PMI) readings reinforce expectations that central banks in Asia will put […]