central bank

 
 

Ukraine tycoon crows 'I won' after PrivatBank nationalisation ruled illegal

KIEV, April 19 — Ukrainian tycoon Ihor Kolomoisky won a major victory yesterday in his battle with the government over the nationalisation of the country's largest bank after a court ruled the change of ownership was illegal. The ruling is a major…


US retail sales, labour market data paint upbeat economic picture

WASHINGTON, April 19 — US retail sales increased by the most in 1-1/2 years in March as households boosted purchases of motor vehicles and a range of other goods, the latest indication that economic growth picked up in the first quarter after a…


RHB says ringgit sell-off overdone, unit remains attractive in medium term

PETALING JAYA: The ringgit’s current sell-off is overdone and any removal of Malaysia from the FTSE World Government Bond Index (WGBI) will not impact the country’s fundamentals and credit rating, according to RHB Group Treasury & Global Markets.

Despite that, the local unit extended its losses for the third day to a low of 4.1495 against the dollar today. At 5pm, it was 0.27% lower at 4.1475 to the greenback.

The selling pressure was triggered by the Norway Government Pension Fund Global’s plan to slash emerging market (EM) bonds in early April, as well as FTSE Russell’s announcement that it may drop Malaysian debt from the WGBI on accessibility and liquidity concerns.

“Both headlines disproportionally hit Malaysian assets, with the US dollar/ringgit touching an intraday high of 4.1455, short of the psychological 4.15 handle. We hold the view that markets panicked and overreacted to the news,” the research house said in a note today.

Nonetheless, RHB said Malaysia’s strengthened defences against external volatility should bode well for the ringgit’s medium-term attractiveness, attributed to the improving mix of external debt, robust domestic foreign exchange markets for trading and hedging, consistent current account surplus and far sufficient foreign reserves than recommended by the International Monetary Fund (7.4 months of retained imports).

It sees several factors that can potentially restore confidence in the ringgit over the short term, which include Brent crude prices remaining supported north of US$70 a barrel; improvement in EM sentiment; current account surplus; robust domestic foreign exchange markets enabled by foreign exchange administration rules continuing to offer confidence and stability to real stakeholders of the economy in ringgit trading and hedging; as well as Malaysian bonds to remain underpinned by these factors.

RHB noted that the medium-term outlook of Malaysian bonds remains intact, which should eventually drive foreign inflows into the space.

Meanwhile, Kenanga Research foresees risks of capital flight to be rather contained, with outflow of foreign funds estimated to possibly be anywhere between US$3 billion and US$5 billion, in part due to FTSE Russell’s emphasis that “inclusion on our Watch List is not a guarantee of future action”.

It said this should somewhat help soften the damage to investors’ sentiment, given that the statement suggests enhanced engagement with the government, central bank and regulators in adressing investors’ concerns in the interim period.

“In this regard, we expect the government will do whatever is necessary, regulatory and policy-wise, to ensure its bonds remain in the WGBI and hopefully send a positive signal to the global market in terms of quality of its debt instruments,“ Kenanga explained.

However, its expectation of a rate cut of 25 basis points in 2019 remains intact, though the window to cut may have narrowed marginally given the additional outflow at hand arising from the FTSE Russell’s announcement.


Asian markets down as global rally takes a break

HONG KONG: Asian markets fell Thursday as investors in most countries wound down going into the long Easter break, with positive comments on the China-US trade talks and healthy Chinese growth unable to fire buying activity.

Donald Trump’s key trade negotiator Robert Lighthizer is reportedly preparing to visit Beijing at the end of the month for another round of top-level talks aimed at ending the long-running tariffs spat.

The Wall Street Journal story was followed by the president saying he was optimistic the talks would be “successful”, and telling reporters there would be an announcement “very, very shortly”.

The upbeat developments were the latest to give hope for an end to a row that has dragged on the global economy and contributed to a market sell-off at the end of last year.

However, investors seemed unmoved, with Wall Street ending down and Asia also in the red on the final day of business before Easter.

OANDA senior market analyst Jeffrey Halley said the fact that markets “continue to bumble along in sideways ranges” indicated “a lot of good news — both present and future – is already baked into prices at these levels.

“Ahead of the extended Easter holidays and into the end of the month, the markets may be much more vulnerable to negative headlines than they have been in recent times.”

World markets have enjoyed a stellar year so far thanks to trade talk hopes as well as a more dovish stance by central banks, led the Federal Reserve saying it will not lift interest rates this year.

In early trade Hong Kong and Shanghai were each down 0.5 percent, Seoul shed 0.9 percent and Singapore eased 0.1 percent. Tokyo went into the break 0.5 percent lower.

Wellington and Taipei were also lower, though Sydney was flat.

Jakarta jumped more than one percent — and the rupiah rose 0.5 percent — as early polls suggested business-friendly incumbent Joko Widodo was on course to win Indonesia’s presidential election.

Oil prices edged down after Wednesday’s losses that were fuelled by a smaller than anticipated drop in US inventories and worries the US could extend waivers linked to Iranian sanctions.

“Traders are exercising a high degree of caution as the White House has been very cryptic with regards to policy, which is potentially setting up the catalyst for prices to knee jerk lower if the administration decides to increase Iran waiver limits,” said Stephen Innes at SPI Asset Management.

“All the while talk of Moscow backing out of (a deal with OPEC to cut output) continues to percolate.”


Asian shares off nine-month peak, European PMIs in focus

TOKYO, April 18 ― Asian shares slipped today after losses on Wall Street but trade was subdued as investors awaited business surveys in Europe and largely stayed on the sidelines ahead of the long Easter weekend holiday. MSCI's broadest index of…


World stocks skid as healthcare plunge obscures China rebound

NEW YORK, April 18 ― Stocks around the globe fell yesterday as a continued flight from healthcare shares dragged on Wall Street, overshadowing upbeat economic data from China. The S&P 500 dipped as the healthcare index dived 2.9 per cent to…


Malaysia’s possible exclusion from global bond index spooks ringgit, stocks

PETALING JAYA: The ringgit weakened as much as 0.36% today to 4.1455 against the US dollar on fears over the possibility that Malaysia may be dropped from the FTSE World Government Bond Index (WGBI).

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As at 5pm, the local unit was trading 0.15% lower at 4.1365 against the greenback. Over the past two trading days, it has depreciated 0.66%.

Meanwhile, on Bursa Malaysia, the FBM KLCI fell 8.56 points or 0.53% to 1,620.90 points against Tuesday’s close of 1,629.46. Market breadth was negative with 661 losers and 208 gainers.

Top losers were led by heavyweights such as Tenaga Nasional, Malayan Banking and Petronas Dagangan, which slipped 24 sen, 21 sen and 16 sen to RM12.06, RM9 and RM24.94, respectively.

On Monday, FTSE Russell said it may drop Malaysian debt from the WGBI due to concern about market liquidity.

Malaysia is currently assigned a ‘2’ on the WGBI and is being considered for a potential downgrade to ‘1’ which will render Malaysia ineligible for inclusion in the WGBI.

The review is due in September, which includes potentially adding Chinese bonds into the index. It was reported that the review started in January to increase transparency in managing country inclusion to FTSE Russell global fixed-income indices. Malaysia’s weight in the WGBI is less than 0.4%.

FXTM’s newly appointed market analyst Tan Chung Han expects the weakness in the ringgit to be transitory, as Malaysia’s resilient economy is still awaiting the next chance to make its case before the markets.

“The projected 4.3-4.8% GDP growth for 2019 remains higher compared to what many other major economies are expecting this year. However, sentiment surrounding the Malaysian currency is currently swayed by other factors which have led to the ringgit’s recent weakness against the US dollar, including external risks such as US-China trade tensions and slowing global growth,” he told SunBiz.

He said headlines about Malaysia’s possible removal from the index may have lent itself to fund outflows, contributing to the ringgit’s recent weakness.

“Even if it actually transpires (Malaysia’s removal from WGBI), active funds may still focus on Malaysia’s accommodative monetary policy stance and robust domestic economic fundamentals when making their investment decisions,” Tan added.

However, Tan pointed out that according to central bank data, foreign holdings of Malaysian bonds rose during the first quarter of 2019, pointing to an increasing appetite for Malaysian notes.

Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the ringgit’s weakness is a valid concern considering that Malaysia Government Securities (MGS) yields have come down quite considerably when the US Federal Reserve is expected to keep interest rates unchanged in 2019.

“If exclusion materialises, theoretically we could expect some impact on bond yields, especially by managers who track the FTSE index as their benchmark,” he said.

Reuters quoted Morgan Stanley as saying that Malaysia could see outflows of almost US$8 billion (RM33 billion) if its bonds are downgraded by global index provider FTSE Russell.

Foreign investors have been reducing their Malaysian government bond holdings since late 2016 and, as of late March 2019, held US$37 billion, Morgan Stanley said.

Macquarie said as foreigners are already underweight on MGS in Malaysia, the outflows may be less.

“However, the implication would be larger for other index providers such as the JP GBI-EM and Bloomberg Barclays Aggregate. Just these two indexes alone could represent US$15 billion of outflows if Malaysia is excluded,” it said in its sales commentary.


China’s Q1 GDP growth steadies unexpectedly, but too early to call clear recovery

BEIJING: China’s economy grew at a steady 6.4% pace in the first quarter, defying expectations for a further slowdown, as industrial production jumped sharply and consumer demand showed signs of improvement.

The upbeat readings, which included faster growth in investment, will add to optimism that China’s economy may be starting to stabilise even as Beijing and Washington appear to be edging towards a trade deal.

Investors have ranked China’s slowdown and the trade war as the biggest risks facing the faltering global economy.

But analysts warn it is too early to call a sustainable turnaround, and further policy support is needed to maintain momentum in the world’s second-largest economy. Many had expected a recovery only in the second half of 2019.

Beijing has ramped up fiscal stimulus this year, announcing billions of dollars in additional tax cuts and infrastructure spending, while Chinese banks lent a record 5.8 trillion yuan (RM3.59 trillion) in the first quarter, more than the economy of Switzerland.

“We need more evidence to call a full-fledged recovery. Our view for the economy is still cautious,” said Jianwei Xu, senior economist, Greater China at Natixis in Hong Kong. “We think it (the stronger-than-expected data) is somewhat linked to the stimulus, but we can’t attribute it all to it.”

Analysts polled by Reuters had expected GDP growth to slow slightly to 6.3% in January-March from a year earlier.

Share markets and most currencies in Asia rose in relief, as China’s slowdown has increasingly weighed on its trading partners from Japan to Germany. The yuan currency rose 0.4% to a seven-week high.

Government support is gradually having an effect, though the economy still faces pressure, Mao Shengyong, spokesman at the National Bureau of Statistics, cautioned today.

Quarterly growth was supported by a sharp jump in industrial production, which surged 8.5% in March on-year, the fastest in over 4½ years. That handily beat estimates of 5.9% and 5.3% in the first two months of the year.

Output of building materials such as steel and cement, as well as machinery, showed strong gains. Prices of steel reinforcing bars used in construction hit 7½-year highs this week on firm demand.

Industrial output growth will likely remain steady, with exports expected to keep expanding, Mao said.

Exports rebounded more than expected in March, but analysts say the gains could have been due to seasonal factors rather than a rebound in tepid global demand. Long holidays in February likely pushed some production into the following month.

The jump in output was also somewhat at odds with trade data last week, which showed imports shrank for the fourth straight month, suggesting domestic demand is still sluggish.

“We don’t think the strength in industrial output is sustainable, said Nie Wen, an economist at Hwabao Trust.

“At home, the huge amount of social financing might ease as the central bank is wary of reigniting property market bubbles, while abroad the global economic recovery is expected to slow down,” Nie said, pencilling in more moderate output growth of 6.0-6.5% for the rest of the year.

The OECD on Tuesday sounded a warning about the dangers of prolonged stimulus, saying China’s support measures will shore up growth this year and next but may undermine its drive to control debt and worsen structural distortions over the medium term.

Analysts polled by Reuters expect China’s growth to slow to a near 30-year low of 6.2% this year, as sluggish demand at home and abroad and the trade war weigh on activity despite support measures.

The government is aiming for growth of 6.0-6.5%.

Today’s data also helped ease fears of weakening consumer confidence in China. Retail sales rose 8.7% in March, beating estimates of 8.4% and the previous 8.2%.

Sales were led by stronger demand for appliances, furniture and building materials, reflecting a resurgence in the residential property market, a key economic driver.

Real estate investment rose slightly to 11.8% in the first three months, while construction starts jumped in March. Data on Tuesday showed March new home prices rose at a quicker pace after months of cooling.

But auto sales extended their decline in March, falling 4.4% on-year.

Fixed-asset investment expanded 6.3% in January-to-March on-year, in line with estimates but picking up from the previous period as new road, rail and port projects gathered steam.

Local governments will be allowed to issue 2.15 trillion yuan of special purpose bonds in 2019 to fund infrastructure projects, a jump of 59% from last year.

On a quarterly basis, GDP in the first quarter grew 1.4%, as expected, but dipped from 1.5% in October-December.

However, many analysts do not expect a sharp rebound in China’s economy like its recoveries in the past, which produced a strong reflationary pulse worldwide. Most say its stimulus has been relatively more restrained this time around, given concerns about high levels of debt left over from past credit sprees.

Earlier support measures will take time to fully kick in, and corporate balance sheets are expected to remain under stress if profits are slow to recover from their worst slump in more than seven years.

Some analysts such as Nomura warn there is a risk of a “double dip”, where growth appears to improve only to falter soon after. In particular, it noted there was further heavy drop in land sales for future development, which could drag on construction and local government revenues later this year.

The central bank has already slashed banks’ reserve requirement ratios five times over the past year and is expected to ease policy further in coming quarters to spur lending and make borrowing costs more affordable.

However, some analysts said authorities could be more cautious about further stimulus if data remains solid.

China has rolled out many policies to support growth – the key is to implement them, Mao said.


Aussie jumps after China data restores some volatility to FX markets

LONDON, April 17 — The Australian dollar rose to a two-month high today after Chinese economic growth beat forecasts and indicated to some investors that the worst is over for the global economy. The Aussie's jump encouraged some traders who have…


Germany set to further slash 2019 growth forecast

BERLIN, April 17 — Berlin is set to further lower its economic growth forecast today as Europe's largest economy cools off, but ministers are unlikely to bend to foreign demands to boost activity with extra government spending. According to media…