Global gold demand slid to 6-year low in second quarter: WGC

Gold demand hit a six-year low in the second quarter, a World Gold Council report showed on Thursday, as sluggish price movement and the prospect of better returns in equities curbed interest in the metal. 

PHOTO: REUTERS

AUG 13, 201512:09 PM

[LONDON] Gold demand hit a six-year low in the second quarter, a World Gold Council report showed on Thursday, as sluggish price movement and the prospect of better returns in equities curbed interest in the metal.

Demand fell 12 per cent to 914.9 tonnes, with declines in China and India accounting for nearly half of the drop, the WGC said. Globally, jewellery buying fell 14 per cent, investment slid 11 per cent, and central bank buying was 13 percent lower. "Jewellery demand came under pressure from negative consumer sentiment, while investment was a casualty of directionless prices and stock market gains," the WGC said.

Chinese consumer demand fell 3 per cent, with consumer sentiment damaged by volatility in equities and concerns over decelerating growth. With offtake of 216.5 tonnes, China remained the world's biggest gold consumer.

In number two buyer India, jewellery consumption fell 23 per cent as rural incomes were knocked by severe weather, while investment slid 30 per cent to a six-year low, hurt by competition from equities and uncertainty over price direction.

Spot gold was heavily rangebound in the second quarter, with the spread between its highs and lows the narrowest of any quarter in eight years. Prices have since dropped sharply, hitting a 5-1/2 year low late last month.

Lower prices should lead to better demand in Asia in the full year, the WGC said. This week's devaluation of the Chinese yuan is also expected to boost demand, it added. "One of the big narratives for the development of the global economy is that the renminbi (yuan) will attain an ever greater role in global financial markets," the WGC's market intelligence manager Alistair Hewitt said. "For it to do that, it needs a floating exchange rate, and it needs to internationalise." "As that happens we're going to see greater degrees of volatility within currency markets and within financial markets. Those factors will ultimately underpin gold demand as people look to hedge their risk." Consumer demand fell by nearly a quarter in the Middle East in the last quarter, while Turkish buying was down 50 per cent.

US and European consumer demand rose, however, with European investors buying on concerns over Greece.

European bar and coin demand rose 19 per cent or 7.3 tonnes, against average declines of 1.7 tonnes across other markets. Investment in European exchange-traded funds rose 6.6 tonnes in Q2, compared to an outflow of nearly 23 tonnes in ETFs globally. "Demand for bars, coins and ETFs was boosted by the Greek crisis and the possible threat to the stability of the euro area," the WGC said.

In the full year the WGC expects global demand to reach 4,200-4,300 tonnes, it said. Last year it totalled 4,220 tonnes.

REUTERS

Bank of Korea points to China risk, holds rate at record low

The Bank of Korea held its key interest rate unchanged at a record low as it gauges the health of the economy and the impact of China's currency devaluation. 

PHOTO: BLOOMBERG

AUG 13, 201512:40 PM

[SEOUL] The Bank of Korea held its key interest rate unchanged at a record low as it gauges the health of the economy and the impact of China's currency devaluation.

Authorities in Seoul are closely monitoring volatility in financial markets following the drop in the yuan, which the central bank said Thursday adds to uncertainties for Korea.

"It's clear that the BOK acknowledges China's move as a risk to its growth path," said Lee Sang Jae, a Seoul-based economist for Eugene Investment & Securities Co. "The chance of a rate cut is now higher with the yuan devaluation." Low borrowing costs have failed to boost economic expansion in Korea, with gross domestic product increasing just 0.3 per cent in the second quarter and exports falling every month this year. Debt is increasing faster than incomes, with bank lending to households surpassing 600 trillion won (S$710.8 billion) last month.

The central bank's decision to hold the seven-day repurchase rate at 1.5 per cent on Thursday was unanimous, and matched the forecast of all 16 analysts surveyed by Bloomberg. It follows four cuts in the past year that total a full percentage point.

Korea's won strengthened 1.4 per cent versus the dollar to 1,174.40 at 12:55 pm in Seoul. It's weakened 5 percent against the dollar since the end of June, 3.6 per cent against the Japanese yen and 1.9 per cent versus the yuan during the same period.

Governor's View "While the exchange rate should be decided on supply and demand in the market and economic fundamentals, an excessive move in one direction isn't desirable," said BOK Governor Lee Ju Yeol. "We have prepared scenarios and measures for global financial market volatility and its impact on the domestic economy." Mr Lee didn't elaborate on these.

The central bank will wait and see whether a 11.6 trillion won extra budget will help the economy, according to Park Jong Youn, a Seoul-based fixed-income analyst for NH Investment & Securities Co. Mr Park said that policy makers would also be looking for a rebound in foreign tourists after an outbreak of Middle East Respiratory Syndrome in May.

The BOK in July lowered its growth forecast for 2015 to 2.8 per cent from 3.1 per cent. Governor Lee said recent data suggests the economy is moving in line with the projection.

The economy is gradually improving as the impact of Mers recedes, the BOK said Thursday. There have been no new infections reported since early July.

Eugene Investment's Lee said China's surprise devaluation of its currency could raise concern over Korean exporters' price competitiveness.

"If the yuan continues to weaken and the won stays relatively strong, it could lead to a deterioration of Korean exports," said Mr Lee at Eugene Investment.

On the other hand, because about two-thirds of Korean shipments to its larger neighbor are intermediate goods that form building blocks for many products that China exports, the yuan devaluation could be a benefit, according to Park Chong Hoon, an economist at Standard Chartered Plc's local unit in Seoul.

Of 24 analysts surveyed by Bloomberg from July 23 to July 28, three forecast a rate cut to 1.25 per cent next quarter. The rest expected borrowing costs to remain on hold at 1.5 per cent.

BLOOMBERG

    

Twisted metal wreckage and luxury flats in China blast

      

Worker dormitories in Tianjin's port area were reduced to twisted wreckage and injured migrants packed emergency rooms on Thursday, as the migrant underclass of China's economic boom bore the brunt of a series of giant blasts. 

PHOTO: REUTERS

AUG 13, 201511:29 AM

[TIANJIN] Worker dormitories in Tianjin's port area were reduced to twisted wreckage and injured migrants packed emergency rooms on Thursday, as the migrant underclass of China's economic boom bore the brunt of a series of giant blasts.

The explosions in Tianjin - one of which was equivalent to detonating 21 tonnes of TNT - killed at least 17 people and left hundreds injured, according to state media.

Paramedics stretchered the wounded into the city's hospitals as doctors bandaged up victims, many of them covered in blood after the impact of an enormous fireball was felt for several kilometres.

A doctor wept as the body of a firefighter still in uniform was wheeled by, his skin blackened from smoke.

As dawn broke to reveal the extent of the devastation, many of the developments close to the blast site - near-complete luxury apartments and office buildings in the up-and-coming Binhai New District - appeared relatively intact, except for shattered windows and the odd object crashing into a facade.

But alongside the pristine new buildings that epitomise China's rise sat twisted metal, torn off roofs and burnt out huts - remnants of the flimsy metal structures that house workers, and looked instead like crumpled, discarded sweet wrappers.

Brightly coloured bedding was exposed to the morning sun, some stained with splatters of blood.

Construction worker Wang He lived in one of the dormitories, less than a kilometre from the blast, and awoke with a jolt, hitting his head on the ceiling.

"I saw a huge fireball, felt a hot wind on my face and then heard one of the loudest sounds in my life," the 26-year-old told AFP.

"After I got over the shock, our workers' dormitory looked as if a giant had punched the side of the building." Mr Wang and about a dozen of his coworkers were waiting in Gangkou Hospital's emergency room, where migrant workers were the only patients still being treated.

He is from the poor central province of Henan, and one of the hundreds of millions of low-paid, hard-working labourers who have poured into China's cities from the countryside over the past two decades.

They have powered the boom that has made the country the world's second-largest economy, but not always equally shared in its benefits.

At the city's TEDA hospital, close to the blast site, security guard Zhang Hongjie, 50, sat with his head wrapped in bandages, his arms peppered with small cuts from flying glass.

"The explosion was terrifying, and I almost passed out," he told AFP. "I'm sorry, I still can't think straight, I'm a bit confused," he said, adding he was homeless after his dormitory was destroyed.

Broken glass from shattered windows littered the ground as far away as 3km from the blast site.

A guard stood outside a bank branch whose entrance was completely destroyed, water from burst pipes slowly flooding the floor.

AFP

   

China's central bank says halts "regular" yuan intervention but allows for effective management

China's central bank has stopped "regularly" intervening in the foreign exchange market but allowed it could still conduct "effective management" of the yuan in cases of extreme volatility, bank officials said on Thursday. 

PHOTO: EPA

AUG 13, 20151:14 PM

[BEIJING] China's central bank has stopped "regularly" intervening in the foreign exchange market but allowed it could still conduct "effective management" of the yuan in cases of extreme volatility, bank officials said on Thursday.

People's Bank of China (PBOC) Vice-governor Yi Gang, who also runs the State Administration of Foreign Exchange, was asked at a news conference whether the central bank had intervened behind closed doors to halt the currency's slide on Wednesday. "The central bank has already withdrawn from regular intervention," Mr Yi said.

But he added that the central bank will implement "effective management" of the exchange rate in case of external shocks or extreme currency volatility.

China's central bank stunned global markets on Tuesday by suddenly allowing the currency to fall by nearly 2 per cent after a run of poor economic data. It fell again on Wednesday, sparking market fears that Beijing was intent on a much deeper devaluation which could destabilise the global economy.

However, the PBOC now appears to be moving to stem the slide and calm jittery markets.

Trading sources said that major state banks had been buying up yuan and selling off dollars to prop up the currency, causing the exchange rate to recover sharply in the last few minutes of trade on Wednesday.

Assistant PBOC governor Zhang Xiaohui said that the recent decline of the yuan had released "accumulated" depreciation pressure of around 3 per cent, adding that loosening monetary policy has added to downward pressure on the exchange rate.

Mr Zhang said the yuan could return to appreciation in the future.

The officials' comments came after the bank distributed an official statement in which it said there is no basis for further depreciation in the yuan given strong economic fundamentals, but that it will increase monitoring of "abnormal" cross-border flows.

The officials said that reports predicting a decline of 10 per cent were "unfounded" and that there was no need to adjust the exchange rate to support exports.

Reuters reported on Wednesday that the central bank was under pressure from factions within the government to deeply devalue the yuan in order to support struggling exporters.

Chinese steelmakers, suffering from endemic overcapacity and weak demand at home, have already leapt to cut prices to boost offshore demand.

Many analysts see the yuan depreciating further this year.

REUTERS

    

Update: China devalues yuan for third straight day

China cut the reference rate for its currency for the third straight day on Thursday, authorities said, after their surprise devaluation of the yuan this week unsettled global financial markets. 

PHOTO: REUTERS

AUG 13, 201512:06 PM

[SHANGHAI] China cut the reference rate for its currency for the third straight day on Thursday, authorities said, after their surprise devaluation of the yuan this week unsettled global financial markets.

The central bank put the yuan's central parity rate at 6.4010 yuan for US$1, the China Foreign Exchange Trade System said, a drop of 1.11 per cent from Wednesday's 6.3306.

It was also lower than Wednesday's close, and comes after China adopted a more market-oriented method of calculating the currency rate in a move widely seen as a devaluation.

The cuts have put financial markets on edge, sparking worries of a "currency war" as other countries feel pressure to devalue and raising questions about the health of the world's second-largest economy, where growth is already slowing.

China keeps a tight grip on the yuan, allowing it to fluctuate up or down just two per cent on either side of the reference rate, which it sets daily.

The People's Bank of China (PBoC) on Tuesday announced a "one-time correction" of nearly two percent in the yuan's value against the greenback as it changed the mechanism. Previously, it said it based the fixing on a poll of market-makers, but declared it would now also take into account the previous day's close, foreign exchange supply and demand and the rates of major currencies.

It has since lowered the central rate twice more, and the week's combined drop is the biggest since China set up its modern foreign exchange system in 1994, when it devalued the yuan by 33 per cent at a stroke.

Analysts viewed the move as a way for China to both boost exports by making its goods cheaper abroad and push economic reforms as it seeks to become one of the reserve currencies in the International Monetary Fund's SDR (special drawing rights) group. But the volatility in the normally unusually stable unit has raised concerns, and Bloomberg News reported on Wednesday the central bank had intervened in the market to prop it up.

AFP

    

SIA buys back 446,600 shares during Wednesday's selloff

By

Angela Tanangelat@sph.com.sg

Singapore Airlines bought back some 446,600 of its own shares on Wednesday as the blue chip Straits Times Index (STI) plunged more than 2 per cent after China stunned the financial world by devaluing the yuan. 

ST PHOTO: LIM WUI LIANG

AUG 13, 201510:37 AM

SINGAPORE Airlines bought back some 446,600 of its own shares on Wednesday as the blue chip Straits Times Index (STI) plunged more than 2 per cent after China stunned the financial world by devaluing the yuan.

In a filing to the Singapore Exchange, the national carrier said it spent S$4.57 million, buying back 446,600 of its own shares at S$10.16 to S$10.32 each in the open market.

The STI spent the whole of Wednesday in the red before ending a net 91.57 points or 2.9 per cent lower at 3,061.49, on a high volume of 1.8 billion units worth S$2.1 billion.

At 10.19am on Thursday, SIA was trading around S$10.21 a share, up one cent from its closing price on Wednesday. The STI was trading around 3,097.79, up 1.19 per cent or 36.30 points.

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