SHANGHAI: China’s yuan eased off a one-month high against the U.S. dollar on Thursday, as some companies took advantage of a much stronger midpoint to load up on the greenback.
After strong gains in the previous session sparked by upbeat economic data, traders’ attention was returning to the progress of U.S.-China trade talks, with the Wall Street Journal saying a deal may be ready to be signed by late May or early June.
Prior to the market opening on Thursday, the People’s Bank of China (PBOC) lifted its official yuan midpoint to 6.6911 per dollar, 199 pips, or 0.3 percent firmer than the previous fix of 6.7110. It was the strongest fixing since March 21.
In the spot market, yuan opened at 6.6860 and rose to a high of 6.6854 at one point, the firmest level since March 21. But, as of midday, it was changing hands at 6.6947, 67 pips weaker than the previous late session close and 0.05 percent softer than the midpoint.
The Chinese currency leapt on Wednesday as a raft of stronger-than-expected economic data suggested the slowing economy may be starting to stabilise.
Though analysts cautioned it was too early to call a turnaround, the numbers suggested the economy may be bottoming out a bit sooner than expected, and some market watchers bumped up their full-year economic forecasts.
Robin Xing, economist at Morgan Stanley, raised his growth forecast by 0.2 percentage point to 6.5 percent this year and 6.3 percent in 2020.
“(We) maintain our view of a growth upturn in 2Q-4Q19 as fiscal easing fully kicks in, trade tensions ease, and consumer confidence normalizes,” he said in a note on Thursday.
Traders many offshore institutions started building long yuan positions following the strong data on Wednesday.
But in the onshore market, a trader at a Chinese bank said supply and demand was “not in favor of a strong yuan” for now, noting most of the gains in the past two days were tracking the those in the offshore market.
“For now, (onshore) corporate client’s expectations do not seem to have changed much,” the trader said.
Economists at BNP Paribas China expect the yuan to remain in a tight range.
“While growth stabilization and a possible trade deal support the RMB, weak exports imply a strong currency is infeasible,” they said in a note on Thursday.
A CNBC report said Chinese officials were identifying travel dates on U.S. President Donald Trump’s calendar that might offer potential for a summit between leaders of the two nations.
“Our forecast for the USD/CNY of 6.75 by the end of the year essentially tracks the development of trade talks. But we need to closely monitor the yuan’s moves post-trade talks to determine if we need to revise up our yuan forecast in 2Q and 3Q,” ING’s Greater China economist Iris Pang said in a note.
The global dollar index rose to 97.052 at midday from the previous close of 97.009. The offshore yuan was trading at 6.6937 per dollar as of midday.
China’s foreign exchange regulator said on Thursday the U.S. Federal Reserve’s policy stance will be favourable for the nation’s capital flows, and expected the cross-border capital flows to remain steady despite some uncertainties.
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KUALA LUMPUR: The Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said the priority for the government right now should be on exuding certainty, clarity and consistency in embarking on fiscal reforms to restore investor sentiment and preventing the economy from slowing down.
At a media briefing held this morning, he noted that 2019 is the year of execution and implementation of the plans laid down in the Budget 2019.
Given the country’s debt and liability position, Lee said while political and institutional reforms are already underway, the government needs to further fine-tune macroeconomic reforms, some of which have already taken place under the previous administration.
“The government has to have a healthy balance sheet so that they can support the economy in terms of fiscal spending and giving out incentives,” he added.
SERC has projected Malaysia to record a gross domestic product (GDP) growth of 4.7% in 2018 and 2019, with domestic demand expected to be the engine for growth amid slowing global economy and weak exports.
PETALING JAYA: TH Plantations Bhd suffered a net loss of RM19.80 million during the third quarter ended Sept 30, 2018 compared with a net profit of RM15 million a year ago due to lower prices of crude palm oil (CPO) and palm kernel (PK).
The group said in a statement, the average realised CPO price recorded for the quarter was RM2,095 per metric tonne, which was 18% lower than the price recorded a year ago while the average realised PK price was RM1,724 per metric tonne, 22% lower than a year ago.
The group said that profit margins were significantly squeezed by lower prices and volumes during the quarter. In addition, it did not recognise any fair value in forestry during the quarter.
“Additionally, lower fresh fruit bunches (FFB) production (down by 4% from the corresponding period) and CPO production (down by 5%) as well as weaker sales (CPO sales down by 11% while PK sales down by 18%) also negatively impacted revenue,” it said.
Revenue for the quarter fell 25.57% to RM140.91 million from RM189.31 million a year ago due to lower average realised prices of CPO, PK and FFB as well as lower sales volume of CPO and PK.
For the nine months ended Sept 30, 2018, the group posted a net loss of RM16.37 million compared with a net profit of RM50.68 million a year ago while revenue fell 21.47% to RM400.70 million from RM510.27 million a year ago.
During the period, the group’s FFB production rose 4% but this was offset by the 18% drop in average realised CPO prices against last year and 24% drop in average realised PK prices. CPO and PK sales volumes also fell by 5% and 11% respectively.
“The group’s bottom line was also negatively impacted by lower fair value on government grant as well as lower fair value change, both for the group’s forestry assets, which collectively led to a variance of almost RM20 million to its year-to-date profit at operating level,” it said.
TH Plantations CFO Mohamed Azman Shah Ishak said the industry is seeing a repeat of the challenging operating conditions that plagued the industry about two to three years ago, with unfavourable market dynamics pushing prices lower while the high stockpile has exacerbated the low price environment.
“On top of these, the industry continues to grapple with labour issues and higher wages, environmental pressure as well as stiff competition from other vegetable oils. TH Plantations, as a pure upstream player, is visibly more affected by the current challenges,” he added.
Improved production and weak exports across the industry have led to a surge in CPO stock levels in the country, which may delay the recovery of palm product prices.
The group expects prices to remain range-bound in the near-term, causing continued pressure on profit margins for the industry, particularly when stock levels peak in November and December 2018.
However, demand is expected to pick up in 2019, driven by higher exports to China.
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