Malaysian businesses warn of 'economic fire' on labour cost surge

FEB 1, 20164:27 PM

[KUALA LUMPUR] Malaysian manufacturers warned the government of an "insurmountable economic fire" that threatens businesses and jobs after what it said was a sudden decision by authorities to double foreign worker levies.

The government will increase the annual levy it charges employers to hire overseas labour for manufacturing, construction and services sectors to RM2,500 (US$601) from RM1,250 effective Feb 1, Deputy Prime Minister Zahid Hamidi said Sunday. In the plantations and agriculture industries, the rate will be RM1,500, he said. The new measures will increase government revenue by RM2.5 billion, Zahid said.

Prime Minister Najib Razak's administration is seeking new measures to boost its coffers after a plunge in oil meant spending plans had to be reviewed for a second year to keep fiscal deficit targets in check. Manufacturers have demanded structural changes to policies on human resource and foreign workers that will provide clarity and consistency for the sector as the government tries to reduce reliance on overseas labour.

"The government's sudden decision to double levy rate for the manufacturing sector with immediate effect is unacceptable," the Federation of Malaysian Manufacturers said in a statement Monday. "Business sustainability is at stake. Jobs are also at stake, even for local workers when businesses find great difficulty in sustaining their operations."

Malaysia should look at labour market demands more closely when determining foreign worker inflows as its current approval system doesn't sufficiently reflect the needs of industries, the World Bank said in December. It advised the government to improve its existing evidence-based system for identifying labour shortages in the economy and change its levy structure to one that could keep up with varying market conditions.

While businesses are aware of the need to reduce dependency on foreign workers, any changes should be announced in advance and be gradual to allow companies enough time to adjust, the manufacturing group said. 

"Changes, and especially hefty changes with significant impact on business costs, should not be made overnight," it said. The government needs to study business sustainability in totality, and not in isolation of issue by issue, it said. "All issues put together become an insurmountable economic fire which could overwhelm and consume businesses, employees and suppliers throughout out the supply chain."

BLOOMBERG

    
 

US small business borrowing sank in 2015

US small business borrowing fell in December from a year earlier, data released Monday showed, a fresh sign that economic growth may weaken in the coming months. 

PHOTO: BLOOMBERG

FEB 1, 20166:42 PM

[USA] US small business borrowing fell in December from a year earlier, data released Monday showed, a fresh sign that economic growth may weaken in the coming months.

The Thomson Reuters/PayNet small business lending index registered 132.4 in December, up from a downwardly revised November reading of 127.3 but below the December 2014 reading of 134.1. Lending had risen sharply earlier in the year.

"What started as a full gallop in 2015 is barely trotting along now," said Bill Phelan, President of PayNet.

"We are barely replacing worn-out assets here."

Dropping oil prices and slowing world growth are taking a toll on US economic growth, which slowed to a 0.7 per cent annual pace in the last quarter of 2015.

Small business borrowing is a key barometer of growth because it is the little firms that tend to do much of the hiring that fuels economic growth.

Lending slowed sharply to small businesses in mining and agriculture, as well as in wholesale trade, transportation and construction, the figures showed. Texas was particularly hard hit.

The PayNet index typically corresponds to US gross domestic product growth a quarter or two ahead, with Monday's figures spelling further slowing, but probably not recession in the first part of this year, Mr Phelan said.

The delinquency rate on loans more than 30 days past due ticked down in December to match a record low of 1.44 per cent, separate data from PayNet showed.

Small businesses "are settling in for a long time in waiting for what they view as a difficult situation to come to an end," Mr Phelan said.

"I don't think it's time to break the glass and pull the alarm yet, because financial health got better." PayNet collects real-time loan information such as originations and delinquencies from more than 325 leading US lenders.

REUTERS

    
 

China's economic struggles are of particular concern to Europe: Nowotny

The global economy remains on a moderate recovery track but China's slowdown is of particular concern as it raises the risk of crisis returning to developed nations, European Central Bank policymaker Ewald Nowotny said on Monday. 

PHOTO: AFP

FEB 1, 20166:49 PM

[BUDAPEST] The global economy remains on a moderate recovery track but China's slowdown is of particular concern as it raises the risk of crisis returning to developed nations, European Central Bank policymaker Ewald Nowotny said on Monday.

China's growth, though seemingly still rapid, is "meagre"compared to its social and demographic challenges, and its transformation will hurt its trading partners in the short term, said Nowotny, who is also the head of the Austrian central bank.

"The most urgent issue here is the financial volatility and economic weakness in various emerging market economies," Nowotny told a conference in Budapest. "Recent developments in China - since last year, world's largest economy in terms of GDP based on purchasing power parity - are of particular concern." The eurozone has struggled with weak growth and ultra-low inflation for years and its problems have been exacerbated by Chinese growth slowing to its lowest level in 25 years.

The ECB eased policy with a rate cut and an expansion of its asset purchase programme in December and signalled last month it may have to ease policy further in March.

Nowotny said Europe is playing a role in aggravating China's difficulties as the 19-nation euro area is also failing to do its part to foster global growth.

"In other words, the emerging markets now bring the crisis back to us - and at the same time remind us of the interdependence in the global economy," Nowotny added. "We should not be astonished about dampened global demand and deflationary tendencies if the euro area posts a current account surplus way above 3 per cent of GDP." Although household consumption has been showing tentative signs of recovery, corporate borrowing and investment remain low by historic standards.

High debt ratios and a large stock of bad loans spread across eurozone banks will continue to hold back economic growth for years as potential growth is seen below 1 per cent, well below historic norms.

REUTERS

    
 

CAD, MAS seize 'large number' of bank accounts linked to money-laundering and other offences probes

By

Kelly Taykellytay@sph.com.sg@KellyTayBT

THE Commercial Affairs Department (CAD) and the Monetary Authority of Singapore (MAS) have seized a "large number" of bank accounts in connection with investigations into possible money-laundering and other offences carried out in Singapore, said the two bodies on Monday evening. 

PHOTO: SPH

FEB 1, 20168:16 PM

THE Commercial Affairs Department (CAD) and the Monetary Authority of Singapore (MAS) have seized a "large number" of bank accounts in connection with investigations into possible money-laundering and other offences carried out in Singapore, said the two bodies on Monday evening.

The CAD and the MAS released the following joint statement, in response to 1Malaysia Development Berhad-related (1MDB-related) queries: "Singapore does not tolerate the use of its financial system as a refuge or conduit for illicit funds. Since the middle of last year, CAD and MAS have been actively investigating possible money-laundering and other offences carried out in Singapore.

"In connection with these investigations, we have sought and are continuing to seek information from several financial institutions, are interviewing various individuals, and have seized a large number of bank accounts.

"Singapore is also cooperating closely with relevant authorities, including those in Malaysia, Switzerland and the United States. We have responded to all foreign requests for information and have requested information from relevant counterparts to aid in our investigations."

The CAD and the MAS added that they are unable to provide more details at this stage, as investigations are still ongoing.

    
 

U.S. consumer spending softens; savings hit three-year high

3

Lucia Mutikani, Reuters
10:06 AM, E.T. | February 1, 2016
Retail

Tags: Consumer Spending

 

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U.S. consumer spending was unchanged in December, but a jump in savings to a three-year high suggested consumption could rebound in the months ahead.
The Commerce Department said on Monday the unchanged reading in consumer spending followed an upwardly revised 0.5 percent increase in November. Spending on long-lasting manufactured goods such as autos dropped 0.9 percent. Purchases of nondurable goods also declined 0.9 percent.
Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, edging up 0.1 percent in December after a previously reported 0.3 percent gain in November.
ADVERTISINGWhen adjusted for inflation, consumer spending edged up 0.1 percent after a 0.4 percent gain in November.
Consumer spending increased 3.4 percent in 2015 after advancing 4.2 percent in 2014.
That data was included in last Friday's fourth-quarter gross domestic product report, which showed consumer spending growth slowed to a 2.2 percent annual rate from the third quarter's brisk 3 percent pace.
Moderate consumer spending, weak export growth and ongoing efforts by businesses to reduce unsold merchandise piled up in warehouses helped restrict economic growth to a 0.7 percent pace in the fourth quarter. More cutbacks in investment by energy firms struggling with lower oil prices also hurt GDP growth.
The dollar slightly pared losses against a basket of currencies after the data, while U.S. stock index futures were trading lower. Prices for shorter-dated U.S. Treasuries fell.
ROBUST SAVINGS
In December, income rose 0.3 percent after a similar gain in November. Wages and salaries increased 0.2 percent after shooting up 0.5 percent in November. Income in 2015 was up 4.5 percent, the largest increase since 2012, after rising 4.4 percent in 2014.
Income at the disposal of households after accounting for inflation in 2015 recorded its biggest increase since 2006.
With income outpacing spending in December, savings surged to $753.3 billion, the highest level since December 2012, from $717.8 billion in November.
Higher savings and rising house prices should help to soften the blow to household wealth from a recent stock market sell-off and drive spending in early 2016.
With consumption soft, inflation retreated in December.
A price index for consumer spending slipped 0.1 percent after ticking up 0.1 percent in November. In the 12 months through December, the personal consumption expenditures (PCE) price index, however, rose 0.6 percent after increasing 0.4 percent in November.
That was the largest increase since December 2014. Year-over-year inflation rates are rising as the weak readings during the year drop out of the calculation.
Excluding food and energy, prices were unchanged after rising 0.2 percent in November. The so-called core PCE price index increased 1.4 percent in the 12 months through December after a similar gain in November.
Core PCE is the Federal Reserve's preferred inflation measure and remains well below the U.S. central bank's 2 percent target.

Global factories parched for demand, need stimulus

1

Jonathan Cable and Wayne Cole, Reuters
7:36 AM, E.T. | February 1, 2016
Economy

Tags: Manufacturing

 

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January surveys of global factory activity released on Monday showed the new year began much as the old one ended - with too much capacity chasing too little demand.
China was again the epicentre of Asian disappointment. The official measure of manufacturing fell to its lowest since mid-2012. The weakness also encompassed such bellwethers of high-tech trade as South Korea and Taiwan.
Manufacturing growth also slowed in the euro zone at the start of 2016. Incoming orders showed no meaningful increase, even though companies cut prices at the deepest rate for a year.
British factories did enjoy a faster start to the year than expected, but companies cut staff at the fastest rate in three years and export orders fell despite a weaker sterling.
"It wasn't the best start to the year, but it wasn't awful. Markets are pricing in a worst-case scenario and we are not seeing that yet," said Peter Dixon, an economist at Commerzbank.
Stock markets, commodities and oil prices have been battered since the start of the year by concern the Chinese economy, the world's second largest, is struggling.
Such concern has eroded expectations for how fast the Federal Reserve will raise U.S. interest rates, after its first increase in almost a decade in December. Forecasts for Bank of England tightening have also been pushed well back.
A dearth of demand and resulting downward pressure on inflation was why the Bank of Japan felt moved enough to cut interest rates below zero last week.
Meanwhile, having failed to get inflation anywhere near its target - and with demand so low - the European Central Bank is likely to cut its deposit rate in March, and possibly increase its monthly asset purchases.
"It's less to do with what is happening with the real economy and more to do with inflation. It's more of an inflation story than a growth one," Dixon said.
Markit's manufacturing Purchasing Managers' Index for the euro zone will bolster those expectations. It sank to 52.3 from December's 53.2, in line with an earlier flash estimate and above the 50 mark that separates growth from contraction.
January's weakening came as companies offered steep discounts on their goods. A sub-index measuring output prices plummeted to its lowest reading since January 2015.
Consumer prices rose just 0.4 percent last month on a year earlier, official data showed on Friday, nowhere near the ECB's target of close to but just below 2 percent.
Monday's data foreshadow a U.S. survey later in the day. A contraction in manufacturing is expected, although a strong outcome from the Chicago region last week suggests the result may beat forecasts.
Markets got February off to a cautious start after a rocky January, as expectations of more cheap money from some of the world's top central banks were validated by the fresh signs of weak global growth.
ASIAN WOES
The official version of China's PMI survey for manufacturing slipped to 49.4 in January from 49.7 the month before, missing forecasts of 49.6. The services index also disappointed, challenging hopes consumption would take over from industry as the driving force.
A private survey, the Caixin/Markit China Manufacturing PMI, underscored the trend by showing factory activity shrinking for an 11th month.
Japan's results were more encouraging. Its factory barometer slipped only a tick to 52.3 in January as exports picked up. The gains in exports relied on a weak yen, hinting at another reason the BOJ acted so boldly when easing policy last week.
India also recorded an unexpected return to growth. Its erratic PMI jumped to a four-month high after slumping to a 28-month low in December.
Other countries in the region were not so fortunate. South Korea's manufacturing index slipped into contraction. Its exports suffered their sharpest annual fall since August 2009.
China is South Korea's largest market, taking about a quarter of its exports. Smartphones, cars, semiconductors and flat-screen displays all fell in January, boding ill for the companies that usually prop up the economy.
The story was much the same for another electronics hub, Taiwan, where factory growth slowed amid lacklustre demand.
Steep falls in selling prices and input costs also underlined the risks of deflation across the region and the need for yet more stimulus.
"Shipments being this weak means a recovery in consumption is urgently needed. If you look at the economy as a whole, this might boost the need for policy easing," said Lee Sang-jae, chief economist at Eugene Investment & Securities.

China arrests 21 in suspected $7.6 billion Ponzi scheme

• Lianna Brinded
 

• 8h
• 3,163
 
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ReutersA Chinese acrobatic troop.

Chinese authorities have arrested 21 people involved with the country's largest peer-to-peer lending service, Ezubao, which is accused of conducting a Ponzi scheme.

A Ponzi scheme is basically a pyramid scheme in which an investment operation pays returns using money from new investors. To attract investment, the returns are normally unusually high.

The Xinhua newspaper, the mouthpiece for the Chinese government, reported that the fintech company was suspected of conning 900,000 investors out of about 50 billion yuan (£5.3 billion, $7.6 billion).

Peer-to-peer lending in China is like the Wild West right now. Most of the malpractice happens on a small scale at the bottom of the market, which partly explains why it has failed to generate big headlines.

Despite the huge number of platforms going bust there are still an estimated 2,000 online lenders in China, with just 50 representing about half of the market. And online lending remains a tiny fraction of China's financial services overall.

But this would be the largest scam to emerge from the country yet. According to the Xinhua report, the police used two excavators to "uncover some 1,200 account books that had been buried deep below ground."

The Xinhua report said Ding Ning, the chairman of the holding firm Yucheng Group, which launched Ezubao in 2014, used money from new investors to fund his own real-estate projects and to pay off existing investors. It also mentioned that state investigations revealed that more than 95% of the investment offerings on the site were fake.

Investors have already lost a whole heap of money on P2P lending services in China.

In October, Henry Yin, managing director of CreditEase, one of China's biggest platforms, said Chinese investors, most of them unsophisticated individuals playing with savings, have lost an estimated $1.2 billion (£780 million) putting money into Chinese P2P lending platforms, largely over the past 18 months.

In late summer last year, the Chinese government pledged to crack down on the industry.

NOW WATCH: London's new 'anti-gym' chain 1Rebel features music curated by top DJs and free beer

More: China Fraud Scam Ezubao 

Credit Suisse and Barclays will pay $154.3 million over 'dark pools'

• AFP

• 8h
• 795
 
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REUTERS/Toby MelvilleA Barclays sign hangs outside a branch of the bank in the City of London July 30, 2014.

Washington (AFP) - Barclays and Credit Suisse will pay $154.3 million combined to settle charges that they violated federal securities laws over their so-called "dark pools," the US Securities and Exchange Commission said Sunday.

They agreed to record individual settlements for operating alternative trading systems, known as "dark pools," the SEC said in a statement. 

Barclays admitted wrongdoing and will pay a total of $70 million, while Credit Suisse will pay a total of $84.3 million.

Dark pools allow clients to trade large volumes of shares anonymously with prices posted only after the transaction is finished, avoiding the open reporting of ongoing bid and offer prices required on public exchanges.

"Dark pools have a significant role in today's equity marketplace and the firms that run these venues must ensure that they do not make misstatements to subscribers about their material operations," said Andrew Ceresney, director of the SEC's Enforcement Division.

"These largest-ever penalties imposed in SEC cases involving two of the largest ATSs show that firms pay a steep price when they mislead subscribers."

Regulators say more oversight is needed for trading venues like dark pools, which have captured an increased share of overall share trading in recent years.

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More: AFP Credit Suisse Barclays Dark Pools

CHINA PMI MISSES

• David Scutt, Business Insider Australia
 

• 14h
• 1,855
 
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China’s official performance of manufacturing index (PMI) for January is out, and it’s a miss.

The index printed at 49.4, down from 49.7 in December and missing market expectations of a read of 49.6.

It was also the sixth month in succession that the index came in below the 50 level that separates expansion from contraction, and marked the steepest decline in activity seen since August 2012.

As the chart below reveals, the stretch of sub 50 readings is unprecedented.Business Insider Australia

Keeping with the trend established in 2015, the nation’s services sector continued to outperform, although the improvement in activity levels also cooled compared to a month earlier.

The NBS’ non-manufacturing PMI gauge fell to 53.5, down on the 54.4 level seen in December.

While activity levels continued to expand, the 0.9 point decline indicates that the pace of growth decelerated in January.Business Insider Australia

Market attention will now turn to the separate Caixin-Markit manufacturing PMI report for January that will be released at 12.45pm AEDT.

It is focused on smaller manufacturing firms, and is a private sector survey.

Read the original article on Business Insider Australia. Copyright 2016.