Monday, August 17, 2015

Opec may boost oil output to record with Iran back amid glut

Opec may boost oil output to record with Iran back amid glut


[TEHRAN] Opec could potentially boost crude oil production to 33 million barrels a day, the most ever, after international sanctions are removed against Iran amid a global supply glut, according to the country's Opec representative.
The global oil market is already in surplus by about 3 million barrels a day, with Saudi Arabia and Iraq responsible for Opec's oversupply in the past six months, Iran's state-run Islamic Republic News Agency reported Sunday, citing Mehdi Asali. Iran can boost output by 500,000 barrels a day within one week after sanctions are lifted, Oil Minister Bijan Namdar Zanganeh said earlier this month.
Crude has lost half its value in the past year as US production jumped to the highest level in more than 40 years and Saudi Arabia had record output. Prices collapsed after Opec decided on Nov 27 to maintain production rather than sacrifice market share.
Brent oil for October settlement was trading at US$49.01 a barrel, down 0.4 per cent, at 1.18 pm London time Monday. Prices have fallen about 15 per cent this year. High supplies in North America and Opec, lack of demand growth and the strengthening dollar are all cause for the lower oil prices, Asali said.



Opec pumped 32.1 million barrels a day in July, the 14th consecutive month that the 12-nation group has produced more than its collective target of 30 million barrels, data compiled by Bloomberg show. The 12-member group's all-time high output was 32.8 million barrels set in July 2008, the data shows.
Iran made a "big mistake" when it backed Opec's decision in December 2011 to discard individual production quotas, Asali said. That allowed Saudi Arabia, Kuwait and other members to take over Iran's share which was diminishing because of sanctions, he said.
BLOOMBERG

Emerging currencies extend worst selloff since turn of century

Emerging currencies extend worst selloff since turn of century


[LONDON] Emerging-market currencies fell, extending the longest stretch of weekly declines since 2000, as Malaysian assets tumbled, Turkey's lira touched a record low for a third day and the ruble and Russian stocks retreated with oil.
A gauge tracking 20 of the most-traded developing-nation currencies dropped 0.3 per cent. The ringgit weakened to the lowest level since 1998 and the Taiwanese dollar lost 0.9 per cent. The currency measure has fallen eight straight weeks as the prospect for higher US interest rates and the shock yuan devaluation magnified the risks facing developing nations. The MSCI Emerging Markets Index of equities decreased to a four-year low and bonds fell.
China's devaluation "will be something that will shape the rest of the year for emerging-market currencies, especially the fact that people view this as a clear indication that the Chinese authorities are worried about the state of their economy," said Anders Svendsen, an analyst at Nordea Bank A/S in Copenhagen.
Mr Svendsen expects emerging currencies will stay lower for the rest of 2015, with a trough around the time the Fed lifts interest rates, probably in September. Underpinning the potential fallout of a weaker yuan on countries that export to China, Morgan Stanley dubbed Brazil's real, Peru's sol and Asian currencies in South Korea, Thailand and Singapore as part of the "Troubled Ten." China is the biggest export destination for all these nations, data compiled by Bloomberg show.


The "lukewarm" recovery means China won't be able to rely on exports to drive expansion, said Hans Redeker, the London-based global head of foreign-exchange strategy at Morgan Stanley, which coined the so-called Fragile Five in 2013.
Investors pulled money from emerging-market equity funds for a fifth straight week, according to a report from EPFR Global. The MSCI Emerging Markets Index retreated 1.1 per cent to 854.25 by 11:13 am in London.
Bonds also sold off on Monday. Malaysian debt underperformed peers in Asia and Turkish notes led declines in emerging Europe. Both countries have been rattled with political crises that are driving out investors.
In Turkey, where coalition talks failed last week, the Borsa Istanbul 100 Index headed for the weakest close since March and the lira slid to as weak as 2.8542 per US dollar, an all-time low. Malaysian shares sank to a three-year low and the ringgit depreciated 0.5 per cent to 4.0995 per US dollar. The currency's steepest slide since 1998 is evoking memories of the clash between then-Prime Minister Mahathir Mohamad and hedge-fund manager George Soros.
Oil's decline below US$50 a barrel in the past week has weighed on assets of commodity producers. Russia's ruble - also listed among the so-called Troubled Ten - retreated 0.8 per cent to 65.496 against the greenback. The dollar-denominated RTS Index of equities fell 1.3 per cent.
"Outflows will continue from emerging markets until the Fed confirms a date for the rate hike," said Danny Wong Teck Meng, chief executive officer of Kuala Lumpur-based Areca Capital Sdn, which manages about US$224 million in assets.
"We are switching to stocks that have been sold down." A US manufacturing report due Monday may offer clues on the timing of the Fed's first interest-rate increase since 2006.
All 10 industry groups in the MSCI Emerging Markets Index fell on Monday, led by technology and energy companies. SapuraKencana, Malaysia's biggest oil and gas services provider, tumbled the most on record, and Bumi Armada Bhd sank 10 per cent.
Net outflows from Chinese and Hong Kong equities reached US$531 million in the period to Aug 12, the ninth week of sales out of the past 10, China International Capital Corp. said, citing EPFR Global. Hong Kong's Hang Seng China Enterprises Index decreased to an eight-month low.
Vietnam's VN Index has dropped 10 per cent from its July peak amid concern about the nation's export growth after China devalued its currency.
BLOOMBERG

China regulator urges finance firms to support Tianjin disaster relief

China regulator urges finance firms to support Tianjin disaster relief


[SHANGHAI] China securities regulator on Monday urged financial institutions to support disaster relief efforts in the northeastern city of Tianjin, and said insurance companies would set up a 24-hour service to handle related claims.
The Tianjin branch of the China Development Bank would provide affected businesses and individuals with emergency loans, according to a notice posted on the China Securities Regulatory Commission.
Tianjin's port, one of the world's busiest, was hit on August 12 by blasts that damaged a large industrial area. The death toll has risen to 112, with 95 people missing, and scores of businesses have been affected.
Credit Suisse analysts, citing initial estimates from local media, said that the incident could generate total insurance losses of US$1 billion to US$1.5 billion.
REUTERS

The IMF wants Greek haircut.

Statement by IMF Managing Director Christine Lagarde on Greece

Press Release No. 15/381
August 14, 2015

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), made the following statement today:
“The policy package specified in the Memorandum of Understanding (MoU) recently agreed between the Greek authorities and European institutions, with input from Fund staff, is a very important step forward. It not only reverses much of the policy backtracking that caused the previous program to run seriously off track, but puts in place wide-ranging policies to restore fiscal sustainability, financial sector stability, and a return to sustainable growth. I particularly welcome the authorities’ efforts to overcome the serious loss of confidence in recent months through strong upfront actions. Most of these actions have been fully specified in the MoU, and key measures including in the fiscal structural areas will be implemented as prior actions for the disbursement of the first European Stability Mechanism (ESM) tranche.
“In two areas that are of critical importance for Greece’s ability to return to a sustainable fiscal and growth path—the specification of remaining parametric fiscal measures, not least a sizeable package of pension reforms, needed to underpin the program’s still-ambitious medium-term primary surplus target and additional measures to decisively improve confidence in the banking sector—the government needs some more time to develop its program in more detail. This is understandable, and I am encouraged in this regard by the government’s commitment to work with its European partners and the Fund on completing these essential reforms in the coming months. With the detailed specification of these outstanding reforms, the recently agreed MoU will entail a very decisive and credible effort on the part of the Greek authorities to restore robust and sustainable economic growth.
“However, I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own. Thus, it is equally critical for medium and long-term debt sustainability that Greece’s European partners make concrete commitments in the context of the first review of the ESM program to provide significant debt relief, well beyond what has been considered so far.
“In conclusion, I believe that the actions to be taken by the authorities by the time of the first review, in conjunction with the policies specified in the MoU, once they have been supplemented by the above-mentioned fiscal structural and financial sector reforms, as well as by significant debt relief, will provide the basis for a credible and comprehensive program to restore medium-term sustainability. We look forward to working closely with Greece and its European partners in the coming months to put in place all the elements needed for me to recommend to the Fund’s Executive Board to consider further financial support for Greece.”

Sunday, August 16, 2015

Quick takes: Singapore's July NODX fuels concerns over Q3 GDP growth momentum

Quick takes: Singapore's July NODX fuels concerns over Q3 GDP growth momentum

By

SINGAPORE'S non-oil domestic exports (NODX) declined 0.8 per cent year on year in July 2015 to S$14.26 billion, compared to the 4.5 per cent growth in the previous month, due to a decrease in non-electronics exports.
According to trade agency International Enterprise Singapore on Monday, NODX to all of the top 10 markets, except Hong Kong, South Korea and Thailand, declined last month. The top contributors to the contraction were Japan, Taiwan and China.
Here are some economists' comments:
Selena Ling, head of treasury research & strategy, OCBC Bank:



"NODX fell 0.8% yoy (+2.4% mom sa) in July, better than our estimate for -2.5% yoy (-0.1% mom sa), but below market consensus forecast of 0% yoy (-0.1% mom sa), while the June data was also revised down slightly to +4.5% yoy (-2.7% mom sa).
"This brought the NODX growth for the first seven months of 2015 to 2.7% yoy, but we expect a further softening in the remaining five months of 2015 due to a relatively higher base in 2H14.
"Our 2015 NODX growth forecast remains at 0-2% yoy, with 3Q NODX growth tipped at a weak -2.0% yoy.
"Our 3Q and full-year GDP growth forecasts are +2.0% yoy and 2.2% respectively. This compares with the official revised 2015 NODX and GDP growth forecasts of 1-2% and 2-2.5% yoy respectively."
Francis Tan, economist, Global Economics & Markets Research, UOB:
"The decline in July NODX brought back concerns on the recent global growth slowdown, particularly on the lackluster growth in China's manufacturing sector over the past few months, where we have seen benign PMI, production, and export numbers.
"We now think that the impact of PBoC's (People's Bank of China) action last week on Singapore's export sector would probably be minimal as the PBoC had reiterated that the bulk of the 'adjustment appears to be over'. Although the SGD gained 1.2% against the RMB since the PBoC devaluation move to date, it is still 3.3% lower against the RMB compared to the start of this year.
"Going forward, we remain cautious about the export outlook and therefore maintain our 2015 NODX forecast of a 1% contraction. On 11 Aug, the trade agency had also revised their 2015 NODX growth forecast to 1%-2%, from 1%-3% earlier."

Mass clean-up after China blasts trigger cyanide fears

Mass clean-up after China blasts trigger cyanide fears


[TIANJIN] Rescue personnel battled to clean up hundreds of tonnes of cyanide at the site of huge explosions in northern China on Monday, as state-run media lambasted officials over their response to the blasts which killed 114.
The August 12 explosions at the hazardous goods storage facility in the port of Tianjin set off a giant fireball, devastated a vast area and raised fears over the impact of toxic pollutants.
The company operating the site had been storing hundreds of tonnes of cyanide, reportedly nearly 30 times the allowed amount, and while officials have insisted that the air and water in the city is safe, residents and victims' relatives have voiced scepticism.
"Around 700 tonnes" of sodium cyanide was being stored at the warehouse where the blasts took place, He Shusheng, a Tianjin vice mayor, told a news conference.


The Beijing News, citing storage plans it had seen, said the warehouse was only authorised to hold 24 tonnes of the substance.
A huge, "very complicated and difficult" clean-up was underway on Monday, said He, made harder by the presence of 16,500 empty shipping containers and amid fears forecast rain could release hydrogen cyanide gas.
Authorities had built up sand and earth barriers around the blasts' 0.1 square kilometre "core area" to prevent any leakage of cyanide or other pollutants, said Mr He.
The closest water test point to the blast site revealed cyanide 27.4 times standards on Sunday, officials said without specifying the quantity, but not beyond the cordoned-off area.
Sodium cyanide had been found as far as around 1km from the blast site.
Military chemical and nuclear experts have been brought in, as have experts from producers of sodium cyanide - exposure to which can be "rapidly fatal", according to the US Centers for Disease Control.
Environmental campaign group Greenpeace said Sunday it had tested surface water for cyanide at four locations in the wider city and had not detected high levels of the chemical.
Officials said Monday the death toll from the disaster had risen to 114 with 70 people missing, but cautioned that some of those could among the 60 corpses yet to be identified.
'ALL KINDS OF CHEMICALS MIXED'
Authorities have faced criticism over failing to uphold regulations surrounding the site's operation, notably requirements that warehouses stocking dangerous materials be at least one kilometre from surrounding public buildings and main roads.
Chinese media reports on Monday said the son of a former police chief of Tianjin port was a major shareholder in the company operating the site, Rui Hai International Logistics.
The reports in web portal Sohu and the Beijing News illustrate the oft-criticised links between business and official elites in China, which have raised concerns that firms with strong government ties face lax enforcement of regulations.
A day earlier, Chinese Premier Li Keqiang visited the city to meet with victims and direct rescue efforts, a common move after major disasters in the country.
"The situation is very complicated," the Communist Party number two told Hong Kong's i-Cable TV. "All kinds of chemical products have been mixed." "We must investigate the accident, find the cause of the blasts and anyone who acted illegally will be severely punished."
Chinese state-run media on Monday lambasted officials for a lack of transparency over the explosions, echoing frustrations voiced by Tianjin residents, victims' relatives and netizens over what they say has been a slow release of information in the aftermath of the explosions.
"During the first dozens of hours after the blasts, there was scant information offered by Tianjin authorities," the Global Times tabloid said in an editorial.
"Tianjin is not an exceptional case in terms of the inadequate disaster-response work," the paper, which has close ties to the ruling Communist Party, wrote.
The government-published China Daily, meanwhile, noted that "many questions... remain to be answered" over the blasts.
"Not surprisingly, the lack of verified information has resulted in conspiracy theories emerging," it wrote.
State prosecutors on Sunday said they had launched an investigation into whether there had been any "abuse of power or dereliction of duty", Xinhua said.
The official and media comments may indicate that authorities will look to hold individuals responsible for the disaster.
But accusations of corruption were raised when more than 5,000 schoolchildren died in a 2008 earthquake in the southwestern province of Sichuan, crushed to death when their shoddily-built classrooms collapsed.
No one has been prosecuted over the Sichuan casualties.
AFP

Oil prices slide further in Asia

Oil prices slide further in Asia


[SINGAPORE] Oil prices resumed their decline in Asia on Monday as a global glut of crude supplies showed no signs of abating in the face of sluggish demand, analysts said.
US benchmark West Texas Intermediate (WTI) for September delivery fell 63 cents to US$41.87 a barrel in late-morning trade, the lowest since March 2009. Brent crude for October, a new contract, was down 65 cents to US$48.54.
WTI and Brent's September contract rose in New York on Friday after closing at their lowest level in six and a half years in the prior session.
But oil came under renewed pressure in Asia after the latest data showing the number of rigs drilling for US oil increased last week, the sixth rise in seven weeks, analysts said.



The news added to fears of a prolonged global surplus as output from the Organization of the Petroleum Exporting Countries and the United States remains robust despite the tumbling prices.
"The combination of elevated stockpiles in the US and increasing production from Opec, sluggish demand growth, and a stronger US (dollar) would continue to pressure oil prices," said Bernard Aw, market strategist at IG Markets in Singapore.
The dollar strengthened in Asia on Monday after solid data boosted expectations of an imminent US rate rise, after China's shock devaluation of the yuan last week hurt Asia-Pacific currencies.
As oil is traded in the US currency, a strong dollar makes it more expensive for international investors, dampening demand.
"The devaluation of the yuan by China led to the weakening of other emerging market currencies," said Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at professional services firm EY.
"This spells negative news for crude as a strong US dollar makes crude expensive for importing countries, thereby curtailing demand." Mr Gupta said traders will be watching Chinese home prices data due for release Tuesday for further clues on the health of the world's second-largest economy.
Traders will also comb through the minutes of the US central bank's meeting in late July, due for release Wednesday, for signs on when the Fed will raise interest rates.
"We continue to expect further short-term downside in WTI crude over the next few months," the Australia and New Zealand Banking Group (ANZ) said in a market commentary.
AFP

Singapore monetary policy caught between rock and hard place

Singapore monetary policy caught between rock and hard place


[SINGAPORE] Singapore is caught between a rock and a hard place: easing its exchange rate-based monetary policy would strengthen its export competitiveness after China's devaluation of its yuan but may drive out capital and raise borrowing costs in a slow economy.
Shrinking factory output, an economic contraction and months of falling consumer prices have revived speculation the Monetary Authority of Singapore (MAS) may ease policy at its next review in October. China's currency devaluation to prop up the world's second-largest economy has only added to the expectations. Yet, the MAS said last week its current monetary policy remains appropriate.
The MAS manages monetary policy by letting the Singapore dollar rise or fall against the currencies of the country's main trading partners within an undisclosed trading band. But an MAS easing and a consequently softer Singapore dollar would squeeze local interest rates as investors demand higher yields as compensation for holding a weaker currency. The Singapore dollar has lost nearly 6 per cent against the US dollar this year, after a surprise MAS easing in January. With the currency's weakness, the three-month Singapore interbank offered rate (SIBOR) jumped to 1.02705 percent in April, its highest since December 2008. The three-month Sibor, used to set interest rates on mortgages, hit a four-month high of 0.93908 per cent on Friday.
Higher interest rates, aside from inflicting pain on property owners, also weigh on returns from Singapore real-estate investment trusts (Reits) - the biggest in Asia outside of Japan. OCBC Investment Research said the average borrowing cost of Reits under its coverage rose to 2.9 per cent as of the end of March, up 5 basis points (bps) from the preceding three months. It said an increase of 100 bps in borrowing costs could cut average distribution per unit forecast for the fiscal year by 2.1 per cent and the next fiscal year by 1.9 per cent.



Sibor will test 1.3 per cent this year, and a potential central bank easing may push it to 1.5-2.0 per cent, said Commonwealth Bank of Australia's Asian currency analyst Andy Ji."Any easing will instil further depreciation expectation which leads to capital outflows and oblige the central bank to intervene. Both lift domestic interest rates," said Mr Ji, adding he expected the central bank to stay put in October. "I don't think the MAS has the appetite to lift rates higher by either further easing or even suggesting it may ease. Managing exchange rate is about managing expectation of resultant capital flows."
REUTER
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China strengthens yuan rate against dollar by 0.01%






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China strengthens yuan rate against dollar by 0.01%   


[SHANGHAI] China's central bank on Monday raised the value of the yuan against the US dollar by 0.01 per cent, the national foreign exchange market said, after a devaluation last week rocked markets.
The daily reference rate was set at 6.3969 yuan to US$1.00, slightly stronger than Friday's 6.3975, the China Foreign Exchange Trade System said.
Chinese authorities keep a tight grip on the currency and it is only allowed to fluctuate up or down two per cent on either side of the reference rate.
Authorities had based the rate on a poll of market-makers, but last week shocked financial markets by suddenly cutting the value of the yuan nearly two per cent and moving to what they say is a more market-oriented system.
The mechanism now also takes into account the previous day's close, foreign exchange supply and demand and the rates of major currencies.
AFP

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