Bank Of Indonesia
Sunday, August 19th, 2012
Emerging Markets Radar (August 20, 2012)
- Malaysia’s second quarter GDP accelerated to 5.4 percent year-over-year, higher than the consensus 4.6 percent. CPI for July fell to 1.4 percent from 1.6 percent in June, lower than the consensus 1.6 percent.
- Chinese premier Wen Jiabao said China has more room for stimulus policies since inflation has come down. He also told local business people and government officials in Zhejiang province that the economy is stabilizing.
- China railway investment for the next five months is expected to be about 50 percent higher than the amount invested in the same period last year.
- Indonesia’s current account deficit widened sharply to $6.9 billion or 3.1 percent of GDP in the second quarter. The Bank of Indonesia (BI), therefore, tightened monetary policy by raising the deposit facility rate by 25 basis points to 4 percent which will push up the interbank borrowing rate. BI also strengthened the loan-to-value ratio to 70 percent for housing and vehicle loans.
- China’s July power demand grew 4.5 percent, lower than the 5.4 percent total demand growth year-to-date. Industrial power demand continued slowing.
- Taiwan’s second quarter GDP contracted 18 basis points, more than the estimate of 16 basis points.
- According to research from ING, the dividend effect on stock outperformance is healthy in emerging Europe and is most prominent among Turkish stocks, some of which pay close to a 10-percent dividend.
- Prior to ex-date, the dividend effect is driven by interest from high-yield equity funds. Post the ex-date, the dividend effect exists due to: 1) cheapness on a P/E basis; and 2) a dividend reinvestment effect into the stock and sector.
- Recovery in Property Transaction Should Improve Cash Flow for Chinese Developers
The chart below shows July’s housing transactions have picked up on a yearly basis. This will help cash flow for developers, and also reduce inventories. The housing market needs further inventory reduction before new starts can go up.
- The much hoped for bank reserve ratio reduction by the People’s Bank of China has not arrived. Liquidity tightness in the banking system has affected new loan growth, which will slow the growth recovery of the economy.
- As European policy-makers return from their usual long holiday, the German constitutional court may rule against current transfers.
- Republican and Democratic conventions in the U.S. may reduce the opportunity for compromise on the fiscal cliff.
Tags: Bank Of Indonesia, Basis Points, China Railway, Chinese Premier Wen Jiabao, Current Account Deficit, Dividend Reinvestment, Emerging Europe, Emerging Markets, Equity Funds, Five Months, Housing Market, Interbank, Outperformance, Premier Wen Jiabao, Property Transaction, Quarter Gdp, Value Ratio, Vehicle Loans, Wen Jiabao, Zhejiang Province
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Sunday, November 13th, 2011
Emerging Markets Cheat Sheet (November 14, 2011)
- China’s CPI, the main gauge of inflation, rose 5.5 percent year-over-year in October, weakening from September’s 6.1 percent, the National Bureau of Statistics (NBS) said on Wednesday. This will enable the People’s Bank of China to reduce the required reserve rate (RRR) for the banks to allow more loans growth. China’s inflation peaked in July this year.
- China’s October PPI was up 5 percent, lower than the estimated 5.8 percent and September’s 6.5 percent, as slowing global economy dampened material price increase. Fixed asset investment was up 24.9 percent, higher than the estimated 24.8 percent, though in a slow declining trend as China plans to rely less on fixed asset investment to support its GDP growth.
- The Central Bank of Indonesia cut its reference rate by 50 basis points to 6 percent yesterday. This unexpected rate cut followed a 25 basis point rate reduction just a week ago. Bank Indonesia decided to support economic growth as the external economic environment deteriorates as the eurozone debt crisis became worse than expected.
- Turkish industrial production rose 12 percent from a year earlier, according to data published by the government statistics agency, compared with a median forecast of 6.4 in a Bloomberg survey of nine economists.
- China’s October exports rose 15.9 percent year-over-year versus 17.1 percent in September, and market expectation of 16.1 percent; imports rose 28.7 percent versus 20.9 percent in September and market expectation 22.2 percent; trade surplus was $17 billion in October, higher than September’s $14.5 billion. Trade with Europe weakened, proving the eurozone debt crisis slowed the European economy and demands for China’s goods. Growth of exports to Korea, the Association of Southeast Asian Nations (ASEAN), and Japan also slowed, further pointing to the signs of an Asia slowdown affected by Europe and the U.S.
- China’s October retail sales were up 17.2 percent year-over-year, lower than market estimate of 17.6 percent and September’s 17.7 percent. For the first 10 months, retail sales in China rose 17 percent, which is a strong showing and is fast enough to take China to a consumption-based economy in 3 to 5 years time.
- China’s October passenger car sales rose 1.4 percent on a year-over-year basis after enormous growth last year, according to the Center for Asian American Media (CAAM).
- China’s industrial value-added output grew 13.2 percent year-over-year in October, lower than September’s 13.8 percent, indicating slowing industrial production.
- China’s fixed-asset investment rose 24.9 percent year-over-year in the first 10 months of the year to $3.8 trillion.
- In its monetary policy meeting today, Bank of Korea (BoK) kept the interest rate unchanged at 3.25 percent, but BoK said domestic demand has faltered. Korea’s GDP increased 3.4 percent year-over-year in the third quarter, much lower than the government’s forecast of 4 percent for the year. The major disappointment was in declined capital expenditure investment and inventory destocking, which implied that business sentiment has turned very cautious in the uncertain environment. Consumption growth also slowed down in the third quarter, as a result of weaker consumer confidence.
- China’s broadest measure of money supply, M2, was up 12.9 percent at the end of October from a year earlier, slightly slower than the 13.0 percent rise at the end of September, and below economists’ expectations for 13.1 percent. Chinese financial institutions issued CNY586.8 billion worth of new yuan loans in October, up from CNY470.0 billion in September and above economists’ expectations of CNY500.0 billion, which is expected to rise continuously toward the end of the year.
- Hungary’s inflation rate unexpectedly rose to the highest level in five months in October as fuel and clothing prices jumped. Consumer prices increased 3.9 percent from a year earlier after a 3.6 percent rise in September, according to the statistics office in Budapest.
- CLSA strategist Francis Cheung compared the MSCI China earnings yield today with those during the Financial Crisis in 2008, SARS in March 2002, the dotcom burst in early 2000, and the Asia Financial Crisis in September 1997. He finds many sectors are trading at 2008 lows, as shown in the graph below. This may indicate Chinese stocks are at the bottom of the current market cycle.
- Exxon recently signed contracts with the Kurdistan Regional Government (KRG) to explore six blocks in the north of Iraq. The move suggests that a compromise is close between KRG and the central government to recognize existing production sharing agreements with other exploration companies already in the region.
- October’s industrial production and exports in China, and elsewhere in Asia, has started a slowing trend. China’s October PMI also showed slowing export orders. Other indicators such as Canton Fair Order also pointed to slowing growth of both exports and imports. The Bank of Korea has said October domestic consumption faltered in Korea. As the eurozone debt storm gathered pace in Italy, Asian governments have to take measures to support growth. As of today, we only saw Indonesia ease monetary policy by cutting its reference rate.
- The European Union’s energy commissioner Gunther Oettinger has accused Russia of using energy as a political weapon. The commissioner sees the southern corridor route to deliver gas from the Caspian Sea as Europe’s best strategy, calling Gazprom’s South Stream pipeline a “new route for old gas.”
Tags: Asset Investment, Association Of Southeast Asian Nations, Bank Indonesia, Bank Of China, Bank Of Indonesia, Basis Point Rate, Basis Points, Bureau Of Statistics, Debt Crisis, European Economy, External Economic Environment, Fixed Asset, GDP Growth, Global Economy, Material Price, National Bureau Of Statistics, Rrr, Southeast Asian Nations, Statistics Agency, Trade Surplus
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Saturday, June 19th, 2010
Emerging Markets Diary (June 21, 2010)
- Further progress was made in the third round of negotiation between Taiwan and mainland China on the Economic Cooperation Framework Agreement (ECFA). China agreed to reduce tariffs on more than 500 import items from Taiwan and mainland market-access rules for Taiwanese banks were also relaxed.
- The Bank of Indonesia’s recently-announced measures to reduce volatility in the currency market and smooth capital flows did not cause a negative reaction from institutional investors.
- The cumulative budget balance in Turkey improved noticeably in May and significantly outperformed the results of 2009. Morgan Stanley called fiscal performance in Turkey “impressive” and its year-end deficit forecast of 4.3 percent of GDP “conservative.”
- Malaysian palm oil futures declined this week amid concerns over deteriorating exports to China in June based on preliminary surveys, potentially higher production next year because of La Nina weather patterns and a record supply of soybean oil, a major substitute, from South America.
- Hong Kong’s unemployment rate rose to 4.6 percent in May from 4.4 percent in April, the first increase since mid-2009, as uncertainties in overseas markets, especially Europe, discouraged hiring.
- Despite higher oil prices, capital inflows into Russia in 2010 remain relatively weak.
- In the first half of 2009, the Russian economy combined double-digit inflation with a double-digit drop in GDP. One year later, the economy returned to growth and inflation is below 8 percent, creating an opportunity for Russia to resume long-term growth with less inflationary pressure.
- Equity investors and credit investors seem to price Russia-specific risk very differently at the moment. The last time such a widening of equity risk premium over the credit risk occurred in 2005, and it was followed by a strong rally in the equity prices.
- Recent media focus on wage hikes for low-skilled assembly line workers in China should be interpreted in light of potential impact on corporate profitability. Wages typically account for no more than 10 percent of total operating costs for Chinese and Taiwanese companies, which may relocate capacity inland or pass on some of the cost pressure to downstream customers. In addition, China’s labor market could see significant relief next year when the 2008 stimulus is due to end and unemployment rises.
- Within the banking system in Poland, the foreign currency loan-to-deposit ratio of 250 percent is very high because Polish banks rely on non-deposit foreign liabilities to fund loans. A cutoff in foreign financing amid jitters in the European financial system is a considerable threat.
- According to the latest quarterly survey from China’s central bank, a record 72.5 percent of responding households believe current home prices were “too high to be acceptable,” with only 15.5 percent of respondents indicating a readiness to buy homes in the next three months. While further tightening in China’s property market may not occur in the near term, Chinese policymakers probably would not reverse their strict bias toward real estate before a considerable decline in prices occurs.
Tags: Bank Of Indonesia, Budget Balance, Capital Inflows, China, Currency Market, Ecfa, Economic Cooperation, Emerging Markets, Equity Investors, Equity Risk Premium, Fiscal Performance, Inflationary Pressure, Institutional Investors, La Nina Weather, La Nina Weather Patterns, Mainland China, Mainland Market, Malaysian Palm Oil, Morgan Stanley, Palm Oil Futures, Russia, Russian Economy, Soybean Oil
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