Emerging market assets receive boost from upbeat mood 

OCT 1, 20151:00 PM

[TOKYO] Emerging market currencies strengthened against the dollar Thursday, helped by an upbeat mood across Asian equity markets on speculation of increased monetary stimulus.

But the greenback's losses were unlikely to hold as sentiment remained dented on worries over a slowdown in China's economy and concerns over a Federal Reserve plan to hike near-zero interest rates in 2015, analysts said.

The Australian dollar climbed 0.54 per cent to 70.55 US cents today.

"When risk sentiment improves, the euro falls and the Australian dollar rises - it's a classic case of risk-based pattern," Kengo Suzuki, chief currency strategist at Mizuho Securities, told Bloomberg News.

"Right now, it's developed-nation currencies versus emerging and commodities-linked ones which take their cues from stocks that either fuel or ease risk aversion sentiment." The South Korean won gained 0.65 per cent against the dollar after also rising more than one percent on Wednesday. The currency of Asia's fourth-largest economy has weakened about 10 per cent against the greenback from a yearly low in April.

The South Korean central bank has stuck to keeping key interest rates at a record low of 1.5 per cent in recent months, following four reductions since August 2014.

Other Asia-Pacific currencies also rose against the US unit: the Taiwan dollar was up 0.70 per cent, the Indian rupee rose 0.34 per cent, and the Thai baht added 0.14 per cent.

The Singapore dollar declined 0.23 per cent, Malaysia's ringgit was down 0.25 per cent, and the Indonesian rupiah edged 0.12 per cent lower.

With financial markets in China and Hong Kong closed on Thursday for a public holiday, traders will pay attention to US unemployment figures for September, which Washington will release Friday.

A strong reading will likely add to calls on the Fed to raise interest rates, putting renewed pressure on emerging economies as investors withdraw their cash to seek better returns in the US.

A quarterly business survey released by the Bank of Japan today showed Japan's major manufacturers expect the yen to remain relatively weak during the rest of the year. A weakening of the yen supports Japanese exporter shares as it raises their profits on increased sales overseas.

The yen traded almost 3.5 per cent higher against the dollar in Tokyo Thursday compared to a yearly low of 116.17 in January. Japanese manufacturers expected a dollar-yen rate of 117.39 yen for fiscal 2015 in the September Tankan, compared to 115.62 yen in July and 111.81 yen in March.

The US unit rose to 120.22 yen from 119.86 yen Wednesday in New York, while the euro was mixed at US$1.1148 and 134.01 yen from US$1.1176 and 133.95 in US trade.

AFP

      

Euro zone banks still face profitability squeeze, credit risk: Nouy 

A euro sign sculpture is seen in front of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany, on Thursday, July 3, 2014.

PHOTO: BLOOMBERG

OCT 1, 20158:30 PM

[FRANKFURT] Euro zone banks continue to face a squeeze on their profitability due to weak growth and volatile financial conditions, so many have to review their business models to remain profitable, Europe's top regulator said on Thursday.

"While prices of financial assets are rising, real investments in the euro area remain relatively low," Daniele Nouy, the head of the ECB's supervisory arm, said. "If we also factor in the persistent low interest rate environment, it becomes clear that banks will have to review their business models in order to stay profitable," she said.

Nouy added that some banks within the euro area still face significant credit risk so a focus on non-performing exposures and concentrations of exposures in areas like real estate are likely to remain a key priority.

REUTERS

India factory output slumps to seven-month low

Commuters travel past a Reserve Bank of India (RBI) building in Kolkata in this November 11, 2014. 

PHOTO: REUTERS

OCT 1, 20152:41 PM

[MUMBAI] India's factory output slumped to a seven-month low in September on weak demand, a survey showed Thursday, adding weight to the central bank's view that the country's economic recovery was fragile.

Japanese media group Nikkei said its Purchasing Managers' Index fell to 51.2 points last month from 52.3 in August. It had touched a six-month high in July.

A reading of more than 50 points suggests industrial expansion while anything below indicates contraction, according to the survey, which is a key barometer of economic health.

"Growth of Indian manufacturing production in September was weighed down by a difficult economic climate," said Pollyanna De Lima, an economist at Markit, which compiles the survey.

The report came two days after the Reserve Bank of India slashed 50 basis points off interest rates in a bid to boost investment and demand.

Central bank Governor Raghuram Rajan said a "tentative" economic recovery was underway in India, but that it was "far from robust".

Prime Minister Narendra Modi has made reviving Asia's third-largest economy a priority since coming to power last May.

After a promising start, economic growth slowed to seven percent in the first quarter of the current financial year, matching China and outpacing most major economies, but down from 7.5 per cent in the previous quarter.

AFP

    
 

Indians declare US$500m in black money in tax crackdown

India's Prime Minister Narendra Modi delivers remarks during a Leaders' Summit on Peacekeeping to coincide with the United Nations General Assembly at the United Nations in Manhattan, New York, USA, 28 September 2015. 

PHOTO: EPA

OCT 1, 20155:30 PM

[NEW DELHI] Indians declared US$500 million in black money, the government announced Thursday, a fraction of the total amount feared hidden, as a deadline for coughing up assets hidden from the taxman expired.

Prime Minister Narendra Modi took power last year pledging to crack down on black money, a systemic problem in India that sees billions of rupees hidden in foreign bank accounts or funnelled into property abroad.

The finance ministry said more than 600 tax evaders had made declarations by midnight on Wednesday - when a three-month window for unveiling stashes and avoiding prosecution ended.

The ministry said "638 number of declarations have been received under the compliance window declaring undisclosed foreign assets," amounting to 37.7 billion rupees (US$574 million).

The government has announced a string of measures to crack down on black money, including a 10-year jail term for evaders who get caught from now on.

But Ashutosh Kumar Mishra, executive director of Transparency International in India, doubted whether the government could find the money offshore given how deeply entrenched the phenomenon has become.

"It's not easy. You need a set of clear reforms and determined political will and it will take years," Mishra told AFP.

India is one of the most cash-intensive societies in the world, corruption is endemic, and strict tax laws encourage people to keep money off the official books.

Estimates of Indian black money abroad vary widely. Some US$439 billion left the country illicitly from 2003-2012, according to estimates from the Global Financial Integrity group in Washington.

The wealthy channel money to tax havens such as Switzerland or Singapore, convert it into jewellery, antiques, paintings or property, or send a relative abroad for half the year to avoid tax.

Only 2.89 per cent of Indians pay any income tax at all, India's previous finance minister told parliament in 2013.

AFP