HONG KONG: Most Asian markets rose Tuesday on the back of hopes for central bank and government stimulus measures around the world, while investors were also cheered by further signs of easing tensions in the China-US trade war.
Trading floors around the world have been tense for several weeks owing to concerns about a number of factors including the trade war, Brexit, a global economic slowdown and tensions in the Middle East.
However, while markets remain on edge, equities have enjoyed a positive start to the week, with Germany reportedly planning government support to avert a recession in Europe’s biggest economy and central banks elsewhere looking to ease monetary policy.
Among the key events this week is a speech by Federal Reserve boss Jerome Powell at the annual Jackson Hole symposium of central bankers in Wyoming.
His remarks will be pored over to see if he hints at another interest rate cut following last month’s move, and if so how deep it will be. However, some analysts have pointed out that while the US economy is showing signs of slowing, it remains healthy and Powell could decide no new help is needed just yet.
The Fed policy board “did not unanimously agree to the last 0.25 percent cut,” said Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA. “US economic data continues to perform blissfully, implying the economy is doing just fine.
“Against that backdrop, I struggle to see why… Powell would hit the panic button at Jackson Hole this week. The financial markets could be setting themselves up for an ugly correction into the week’s end.”
Huawei hope tempered
Still, for now the mood is positive and by lunch Tokyo was up 0.4 percent, while Shanghai was slightly higher and Hong Kong was flat, weighed by profit-taking after four days of gains.
Sydney gained 0.6 percent, Singapore, Seoul and Taipei each put on 0.3 percent and Wellington rose 0.6 percent. Manila and Jakarta were both down.
The White House’s decision to delay again by 90 days a ban on US firms doing business with Huawei was taken as a conciliatory move towards China and provided hope.
The announcement followed comments from Donald Trump and key advisers expressing optimism over the talks, with top-level negotiations between the economic titans lined up for next month.
The news was tempered, however, by the Commerce Department adding 46 companies to its list of Huawei subsidiaries and affiliates that would be covered by the ban if it is implemented in full, taking the total on the list to more than 100.
The “details don’t necessarily suggest the US is making too many concessions on the China trade negotiations”, said Rodrigo Catril, senior forex strategist at National Australia Bank.
Oil prices were flat, holding Monday’s strong gains — when Brent jumped 1.9 percent and WTI 2.4 percent — on hopes for the trade talks and stimulus and following a strike by Yemeni rebels on a Saudi Arabian oil field at the weekend. – AFP
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PETALING JAYA: Kenanga Research foresees the possibility of Bank Negara Malaysia (BNM) opting for another interest rate cut by year-end after a 25 basis point cut in May, given the heightened prospects of a slower global economy.
“BNM has room to embark on another rate cut as soon as September if the economic outlook continues to deteriorate and if the Fed signals another rate cut this year,” the research house said in a report today, referring to the US Federal Reserve.
On the currency front, it is revising its US dollar-ringgit year-end forecast to 4.20 from 4.10 in view that China may allow the yuan to depreciate, a steady fall in oil prices and the higher probability that BNM may cut rates.
BNM’s international reserves rose by 1.2% month-on-month or US$1.2 billion to US$103.9 billion as at July 31, remaining on an uptrend for two consecutive months.
The reserves position is sufficient to finance 7.6 months of retained imports and is 1.2 times the total short-term external debt, the central bank said.
The increase was driven by a rise in foreign currency reserves and reserves position with the International Monetary Fund (IMF). In particular, foreign currency reserves rose 1.1% month-on-month (June: +0.3%) to US$97.7 billion in July, suggesting a widening trade surplus amid slowing trade performance, while the IMF reserves position increased 9.1% month-on-month to US$1.2 billion. Meanwhile, Special Drawing Rights, gold and other reserve assets were unchanged.
In ringgit terms, the value of forex reserves rose by 1.2% month-on-month or RM4.9 billion to RM430.3 billion as at end-July, marking its highest level in 20 months. In July, the US dollar-ringgit was traded at an average of RM4.12 versus RM4.16 in the preceding month, reflecting a ringgit appreciation of 0.9% month-on-month.
This marked its second month of appreciation, primarily lifted by an increasingly dovish Fed and lower capital outflows. Similarly, other regional currencies also trended higher in July with the Philippine peso and Indonesian rupiah appreciating by 1.3% month-on-month, while the Thai baht strengthened by 1.0%.
“Despite ample foreign reserves, heightened risk from the external sector, particularly the escalation of US-China trade war continues to exert risk to the domestic financial market and economic growth,” Kenanga said.
Furthermore, the Japan-South Korea trade spat and the growth slowdown in key export markets may weigh on Malaysia’s economic growth, said Kenanga.
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PETALING JAYA: Fraser & Neave Holdings Bhd’s (F&N) net profit for the third quarter ended June 30, 2019 rose 10% to RM114.94 million from RM104.5 million a year ago driven by higher profits from food and beverages business in Thailand (F&B Thailand).
In a filing with Bursa Malaysia, F&N said F&B Thailand reported a 72.7% jump in operating profit to RM99.1 million from RM57.4 million a year ago due to favourable input costs, lower advertising spending and withholding tax refund amounting to RM2.3 million received during the quarter.
The group said its food and beverages business in Malaysia (F&B Malaysia) recorded a 7.3% rise in operating profit to RM52.7 million from RM49.1 million, attributed to higher sales volume from beverages and dairy products, lower marketing spending and favourable input costs mainly for sugar, offset by higher freight costs and foreign exchange (forex) loss during the quarter.
Revenue for the quarter rose 10.86% to RM1.07 billion from RM961.89 million a year ago underpinned by higher contribution from both F&B Thailand and F&B Malaysia.
For the nine-month period ended June 30, 2019, F&N’s net profit increased 12.62% to RM342.23 million from RM303.89 million a year ago, while revenue was up 6.11% to RM3.10 billion from RM2.92 billion a year ago.
F&N expects the overall domestic market for F&B Malaysia to remain challenging due to intense competition, especially in the canned milk segment. For beverages, it has introduced an extensive portfolio of healthier options to mitigate the impact of the sugar tax.
“The prospects for F&B Thailand are better, following improvement in both sweetened condensed and evaporated milk segments. Management will continue to invest in brand building to strengthen our product portfolio and will increase significantly our advertising and promotions investment in the last quarter of this financial year,” it said.
For exports, F&N said slower off take from key customers and geopolitical tension in the Middle East have affected sales in certain markets while the strengthening of Thai baht has reduced its export competitiveness from Thailand.
The group expects raw and packaging material prices to remain volatile and has hedged most of its core commodity requirements and corresponding foreign currency exposure for the remaining quarter of the financial year.
For the next financial year, it is closely monitoring the dairies input prices that have increased and will take the necessary actions to mitigate any adverse impact.
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SYDNEY: Asian shares suffered their steepest daily drop in nine months on Monday, as Sino-U.S. trade friction sent the yuan slumping to a more than decade trough and stampeded investors into safe harbours including the yen, bonds and gold.
Markets have been badly spooked since U.S. President Donald Trump abruptly declared he would slap 10% tariffs on $300 billion in Chinese imports, ending a month-long trade truce. China vowed on Friday to fight back.
In response, China’s yuan burst beyond the psychological 7-per-dollar threshold in a move that threatened to unleash a whole new front in the trade hostilities – a currency war.
“Everything is selling off right now,” said Ray Attrill, head of forex strategy at National Australia Bank in Sydney. “We have no reason to expect any cessation in selling unless we see any strong action to defend any CNY or CNH weakness.”
“Our working assumption is that we are unlikely to see any meaningful resolution to the trade dispute anytime soon.”
Asian share markets were a sea of red with Japan’s Nikkei shedding 2.3% to the lowest since early June. It was the sharpest daily drop since March and led Japanese officials to call a special meeting to discuss market turmoil.
Australian shares slipped about 1.5% to spend their fourth straight session in the red, and South Korea’s KOSPI tumbled 2.1% to hit its lowest since December 2016.
MSCI’s broadest index of Asia-Pacific shares outside Japan sank 2.2% to depths not seen since late January.
In China, the blue-chip index fell 1% while the troubled Hong Kong market hit a seven-month trough.
The pain was quick to spread, with futures for the S&P500 , the FTSE and EUROSTOXX all down more than 1%.
Oil prices were dragged down on demand worries, while gold climbed 0.8% to $1,452.17 an ounce.
The grim mood followed declines on Wall Street on Friday with MSCI’s gauge of world stocks posting its largest weekly loss of the year.
The trade dispute between the world’s two largest economies has already disrupted global supply chains and investment.
The abrupt escalation capped a critical week for global markets after the U.S. Federal Reserve delivered a widely anticipated interest rate cut and played down expectations of further easing.
EVER DEEPER CUTS
So far, investors are not buying Fed Chairman Jerome Powell’s claim that the 25-basis-point rate reduction was a mere “mid-cycle adjustment to policy”.
Futures are now pricing in deeper cuts than before last week’s Fed meeting. The terminal U.S. rate is seen at 1.22%, 93 basis points below the current effective rate.
Analysts at TD Securities are forecasting no less than five more cuts from the Fed, amounting to 125 basis points of easing, over the coming year or so.
Bond markets were well ahead of the game as U.S. 10-year yields dived 7 basis points to 1.77%, a violent shift for usually cautious Asian hours. Yields in Australia and New Zealand touched all-time lows.
German 10-year government bond yields dropped on Friday to an all-time low of -0.502% and the country’s entire government bond yield curve turned negative for the first time ever.
The flight to safety lifted the yen, which often gains at times of stress thanks to Japan’s position as the world’s largest creditor. The dollar slipped to a seven-month trough of 105.78 yen, while the euro sank to its lowest since April 2017 at 117.64 yen.
That dragged the dollar index off 0.1%, though it was up against most other Asian currencies and those exposed to China or commodities including the Australian dollar.
The Aussie, a liquid proxy for emerging market and China risk, slipped to a fresh seven-month trough at $0.6748 after losing 1.6% last week.
The Swiss franc was boosted by safe-haven demand from the escalating trade tensions. Trump is also eyeing tariffs on the European Union, but is yet to make any formal announcements. The euro was relatively steady on the dollar at $1.1125.
Sterling hovered near 2017 lows at $1.2150, pressured by concerns about Britain exiting the European Union without a deal in place.
Oil extended losses with U.S crude off 26 cents at 55.40 and Brent down 35 cents at $61.54.
SYDNEY, Aug 5 — Asian shares suffered their steepest daily drop in nine months today, as Sino-US trade friction sent the yuan slumping to a more than decade trough and stampeded investors into safe harbours including the yen, bonds and gold….