China's vice president says no plan to devalue yuan: Bloomberg

China's vice president told Bloomberg News on Thursday that his government has no intention of devaluing the yuan. 

PHOTO: BLOOMBERG

JAN 22, 20168:53 AM

[SINGAPORE] China's vice president told Bloomberg News on Thursday that his government has no intention of devaluing the yuan. "The fluctuations in the currency market are a result of market forces, and the Chinese government has no intention and no policy to devalue its currency," Li Yuanchao told Bloomberg in an interview on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland.

Mr Li, who is also a member of the Communist party's Politburo, also put the blame for the volatility in the yuan on the US Federal Reserve's first post-crisis rate rise in December.

The yuan's sharp swings this month have not only sparked capital outflows from China and a selloff in the stock markets but also stoked speculation China might once again devalue its currency, as it did in August 2015, to support a flagging economy.

China has come in for criticism that it has left markets confused about its policies, and occasionally its stated intentions such as keeping its currency stable have not always matched its actions.

International Monetary Fund director Christine Lagarde said at the World Economic Forum that China needed to communicate better with financial markets.

But Chinese authorities have consistently maintained they have the ability to keep the currency stable.

Chinese Premier Li Keqiang said in a meeting with the president of the European Bank for Reconstruction and Development the country does not intend to use a cheaper yuan as a way to boost exports and has the tools to keep the currency stable, state news agency Xinhua reported on Saturday.

Mr Li also told Bloomberg that China was willing to keep intervening in the stock market. The market is "not yet mature,"and the government would boost regulation to avoid volatility, he said.

REUTERS

    
 

China's AgBank may lose US$578m through suspected bill fraud: Caixin

The Agricultural Bank of China Ltd (AgBank) may lose 3.8 billion yuan (US$578 million) from a bills of exchange scam allegedly carried out by two employees, the influential financial publication Caixin reported.

PHOTO: BLOOMBERG

JAN 22, 201612:39 PM

[SHANGHAI] The Agricultural Bank of China Ltd (AgBank) may lose 3.8 billion yuan (US$578 million) from a bills of exchange scam allegedly carried out by two employees, the influential financial publication Caixin reported.

The report, quoting unnamed sources, said the employees had illegally sold the bills of exchange to an unnamed third-party, and then used the proceeds to invest in the stock market, which has slumped since the middle of last year.

The report said the employees, who worked at a Beijing branch, were now under investigation, but did not specify by whom. It said the Ministry of Public Security and the China Banking Regulatory Commission had also reported the case to the cabinet.

Officials at Agbank, China's third largest lender, did not respond to repeated attempts for comment.

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China's banks have been dogged by accusations of corruption, with a recent crackdown on the financial industry netting senior executives for bribery, including the former vice president of AgBank who was sentenced to life imprisonment last year for accepting bribes.

REUTERS

    
 

Singapore dollar facing record 4th annual decline prompts local selling

The Singapore dollar is set for a record fourth annual decline against the greenback after tumbling 6.6 per cent last year, its worst performance since the Asian crisis in 1997. 

PHOTO: SPH

JAN 22, 20168:21 AM

[SINGAPORE] Nirgunan Tiruchelvam, an equities analyst at Religare Capital Markets in Singapore, says he's been reducing his exposure to the local dollar by boosting investments in the US currency since the middle of last year. The timing couldn't have been much better.

The Singapore dollar is set for a record fourth annual decline against the greenback after tumbling 6.6 per cent last year, its worst performance since the Asian crisis in 1997. The Monetary Authority of Singapore might ease this year as China, Singapore's biggest trading partner, struggles to prop up its slowing economy, analysts at Australia & New Zealand Banking Group and BNP Paribas said.

"The Singapore dollar may weaken further," MR Tiruchelvam said. "I have increased my exposure to the US dollar as a preemptive move in the last six months." Analysts predict the Singdollar will depreciate to S$1.47 versus the greenback at the end of the year, according to the median estimate in a Bloomberg survey. That would be the longest streak of annual losses in data compiled by Bloomberg from 1982.

The currency was at S$1.4326 per dollar at 6:09 am in Singapore, after tumbling this month to S$1.4444 against the greenback, the weakest level since September 2009. China's central bank kicked off 2016 with four days of weaker yuan fixings, sparking a global equity rout on concerns the nation's economic slowdown is worsening.

ABN Amro Bank lowered on Jan 14 its year-end estimate of the Singdollar to S$1.52, from S$1.50, as it expects China to gradually depreciate the yuan against the currencies of its trading partners.

"A weaker yuan does make Singapore's exports to China a bit more expensive," said Roy Teo, senior currency strategist at ABN Amro in Singapore. "The bias is still toward a weaker Singapore dollar." MAS guides the currency against an undisclosed basket of currencies from its major trading partners and competitors, with the yuan having the largest weighting after the US dollar and Malaysian ringgit, according to BNP Paribas.

The monetary authority may widen the band within which it steers the local dollar if the currencies of its major trading partners and competitors become "extremely volatile," said Mirza Baig, head of foreign-exchange and interest-rate strategy for Asia Pacific at BNP Paribas.

The central bank intervenes in the market to keep the rate within an unspecified band and changes the slope, width and center of that band when it wants to adjust the pace of appreciation or depreciation of the local dollar.

There is scope for the MAS to ease at the first of its two scheduled meetings this year in April as a renewed slump in oil prices threatens to delay a recovery in inflation and China's slowdown hurts the island's economy, said Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd.

"The Singapore dollar will weaken," Mr Goh said.

"Implicit in that is some kind of policy action over the course of this year." MAS eased its exchange rate policy for a second time last year in October, saying weakening prospects for global growth would pose "headwinds" in the coming months.

Stamford Management, which oversees US$250 million for Asia's wealthiest families, still favors the US currency as the firm expects the Singdollar to weaken to S$1.50 this year, said Jason Wang, its chief executive officer in the city. The family office started switching its assets into the greenback from the local dollar about three years ago, he said.

"The mentality is still to buy the US dollar on any weakness," Mr Wang said. "I still believe S$1.50 is attainable, given the acute weakness in key economic areas for Singapore."

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George Soros says he expects hard landing for China economy

Billionaire investor George Soros said China's economy is facing a hard landing, a situation that will contribute to global deflationary pressures and prompted him to wager against US stocks. 

PHOTO: BLOOMBERG

JAN 22, 201611:44 AM

[NEW YORK] Billionaire investor George Soros said China's economy is facing a hard landing, a situation that will contribute to global deflationary pressures and prompted him to wager against US stocks.

"A hard landing is practically unavoidable," Mr Soros said Thursday in an interview with Bloomberg Television's Francine Lacqua from the World Economic Forum in Davos. "I'm not expecting it, I'm observing it." Mr Soros said while China has resources to manage the situation, the slowdown there has spillover effects on the rest of the world. The investor said he shorted the Standard & Poor's 500 Index, which is down about 8.5 per cent for the year, and advised that it's still too early to buy equities, echoing comments from other top investors this week who said they don't see a bottom yet for markets.

Mr Soros said he that at the end of last year he also bought U.S. government bonds, shorted raw-material producing countries and bet that Asian currencies would fall against the dollar.

"The key issue is deflation," Soros said, citing the impact of falling oil prices and competitive devaluations, in addition to the slowdown in China. "It's a condition that we're not used to." Investment managers such as Guggenheim Partners' Scott Minerd and DoubleLine Capital's Jeffrey Gundlach have warned that markets probably have further. The Standard & Poor's 500 Index may drop to 1,650 and oil could fall as low as US$20 a barrel as investors flee for safety, according to Minerd, chief investment officer of Guggenheim Partners.

"I expect a protracted decline in the S&P 500," Mr Gundlach, co-founder of DoubleLine, said this week. "Investors should sell the bounce-back rally which could come at any time." Investors are skeptical on the outlook for inflation with oil having lost about 20 per cent this month amid signs that China's economy, the world's second-largest, is cooling. Traders doubt that the Federal Reserve will be able to meet its 2 per cent inflation target or raise interest rates as aggressively as policy makers predicted last month.

Soros said he would be surprised if the Fed raised interest rates again after increasing them in December for the first time in almost a decade. He said the central bank could even decide to cut borrowing costs again, but it would not help much in stimulating the economy because the effect of monetary stimulus is diminishing.

Soros said the Fed made a mistake in raising interest rates when it did, after waiting too long and missing its opportunity. By the time it moved to raise rates, deflation had already set in, he said, and consumers were less likely to spend money on goods because they expected to be able to buy them more cheaply in the future.

Soros predicts that 2016 will be "a difficult year" in the markets, which could see further declines.

"If you have a real bottom, it's always retested," he said. BLOOMBERG

    
 

Gold above US$1,100 as top forecaster says fear driving trade

Gold extended its rally above US$1,100 an ounce as investors seek protection from the sell-off in equities and commodities. 

PHOTO: BLOOMBERG

JAN 21, 20164:52 PM

[SINGAPORE] Gold extended its rally above US$1,100 an ounce as investors seek protection from the sell-off in equities and commodities.

"Right now there is some risk-aversion in the market given all that is happening, be it the Chinese slowdown, the lower crude oil prices," Barnabas Gan, an economist at Singapore's Oversea-Chinese Banking Corp, said by phone.

"The markets are really trading out of fear," said Mr Gan, who's ranked by Bloomberg as the top precious-metals forecaster. He said he still expects gold to fall this year as US interest rates climb.

Bullion for immediate delivery rose 0.3 per cent to US$1,104.02 an ounce at 3:37 pm in Singapore, according to Bloomberg generic pricing. So far in 2016, bullion has advanced 4.1 per cent against an 11 per cent drop in global stocks.

Holdings in gold-backed exchange-traded products rose 2.6 metric tons to 1,514.4 tons as of Wednesday, the highest level since Nov 5, data compiled by Bloomberg show.

Silver also rose, while palladium and platinum fell.

BLOOMBERG

    
 

Indian banks to get commission for unlocking household gold: cbank

Prime Minister Narendra Modi launched the Gold Monetisation Scheme on Nov 5 to lure an estimated 20,000 tonnes of gold hoarded in households and temples into the banking system and trim the import bill of the world's second biggest gold consumer after China. 

PHOTO: REUTERS

JAN 22, 201611:45 AM

[MUMBAI] The Indian government will pay banks a 2.5 percent commission to unlock the country's massive stash of gold under a new monetisation scheme, the central bank said, as the ambitious plan received a poor response from banks and customers.

Prime Minister Narendra Modi launched the Gold Monetisation Scheme on Nov 5 to lure an estimated 20,000 tonnes of gold hoarded in households and temples into the banking system and trim the import bill of the world's second biggest gold consumer after China.

But only a few kilograms trickled in over the last two months as banks showed little interest in popularising the scheme because of negligible returns for them.

Now the government has decided to pay the participating banks a total commission of 2.5 per cent, including 1.5 per cent handling charges, for the first year, the Reserve Bank of India said in a statement late on Thursday.

Support from banks is crucial to the success of the scheme. Similar programmes in the past have failed as they were not profitable for the banks.

Under the current scheme, Indians are encouraged to deposit jewellery, bars or coins with banks so it can be refined to meet fresh demand and cut the need for imports.

The consumer would earn interest and, at the end of the deposit term, get the gold back in the form of bars.

But the public response has been lacklustre. Indians'penchant for bullion spans centuries and they would not part with their gold, which is seen as providing financial security, unless they were offered incentives such as higher interest rates.

Banks, however, were saying they could not offer attractive rates unless the government compensated them for the loss from higher rates. "The 2.5 per cent commission will make the scheme attractive for banks even after offering a decent interest rate to customers," said a Mumbai-based bullion dealer with a private bank.

Banks are allowed to accept gold under medium- and long-term deposit schemes. For the medium-term deposit, the tenure is 5 to 7 years and customers can earn 2.25 per cent interest per annum.

For long-term deposits, the tenure is 12 to 15 years and customers can earn 2.50 per cent interest per annum, the central bank said.

Withdrawals are allowed after a minimum lock-in period of three years for medium-term deposits and five years for long-term deposits, although such withdrawals will attract a penalty in the form of a lower interest rate, the bank said.

REUTERS