Opec said to be split on need for long-term oil-price forecasts

Saudi Arabia and its Gulf allies are at odds with Iran and other Opec members over whether the organization should include oil-price forecasts in its long-term strategy report, according to three of the group's delegates. 

PHOTO: REUTERS

SEP 2, 20154:52 PM

[KUWAIT] Saudi Arabia and its Gulf allies are at odds with Iran and other Opec members over whether the organization should include oil-price forecasts in its long-term strategy report, according to three of the group's delegates.

The Gulf kingdom, which has led the Organization of Petroleum Exporting Countries in a battle against rival producers, is seeking to exclude price assumptions from the report, according to the delegates, who asked not to be identified because the document isn't public. The disagreement reflects internal divisions over whether Opec policy should focus on prices or the stability of the oil market, one of the delegates said.

Oil prices plunged to a six-year low last month as Opec kept its taps open in an effort to pressure competitors such as US shale drillers to cut production. A draft of the report predicted that low oil prices will deepen the challenges Opec's rivals face in growing their supply this decade.

Opec's strategy review is due for completion later this year. The previous edition produced in 2010 estimated crude would trade in a range of $70 to $86 a barrel through to 2020, then climb to $106 by 2030.

"I haven't received the formal report for the position of Saudi Arabia," Iran Oil Minister Bijan Namdar Zanganeh said when asked about the disagreement in an interview in Tehran Tuesday. While it may take some months for members to exchange views, they are mature enough to resolve differences and "after ups and downs Opec will reach an agreement for managing the market."

The US, Canada, Brazil and Russia - the biggest sources of supplies outside Opec - face an array of technological and regulatory obstacles that will be compounded by the drop in crude prices, according to a preliminary draft of the long-term strategy report obtained by Bloomberg News. Some smaller US shale drillers could be forced "out of business," Brazil will face "extreme technological challenges," and Russia's best hope may be to prevent output declining, it said.

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EU regulators clear Shell purchase of BG Group

Royal Dutch Shell gained EU antitrust approval on Wednesday for its 47-billion-pound acquisition of BG Group after regulators said the deal did not pose any competition issues. 

PHOTO: BLOOMBERG

SEP 2, 20159:30 PM

[BRUSSELS] Royal Dutch Shell gained EU antitrust approval on Wednesday for its 47-billion-pound acquisition of BG Group after regulators said the deal did not pose any competition issues.

The European Commission said the transaction would not grant Shell market power in oil and gas exploration, the liquefaction of gas and the wholesale supply of liquefied natural gas.

The merged company, which will be the world's top liquefied natural gas company, will be better able to compete with world No 1 oil major ExxonMobile.

REUTERS

India says to sell small oil, gas fields to private companies

India will auction 69 small and marginal oil and gas fields surrendered by state explorers, oil minister Dharmendra Pradhan said on Wednesday, expecting private companies to boost output from the areas that hold resources of more than US$10 billion. 

PHOTO: AFP

SEP 2, 20153:52 PM

[NEW DELHI] India will auction 69 small and marginal oil and gas fields surrendered by state explorers, oil minister Dharmendra Pradhan said on Wednesday, expecting private companies to boost output from the areas that hold resources of more than US$10 billion.

India, the world's No 4 oil consumer, meets only a fraction of its demand through local sources and wants to boost private and foreign participation in its industry, dominated by state-run Oil and Natural Gas Corp and Oil India , and privately held Reliance Industries.

Mr Pradhan expects bidding to start in three months for the fields that were given up by ONGC and Oil India as they were uneconomical due to size, geography and state-set low sale prices.

The fields have reserves of about 89 million tonnes worth 700 billion rupees (S$14.95 billion), Mr Pradhan said at a press conference.

REUTERS

China signs off on US$5b loan to boost Venezuela oil output: Maduro

Conventional wisdom is that falling oil prices provide significant economic stimulus, but many Asian countries appear to be missing out on much of the benefit. 

PHOTO: AFP

SEP 2, 20154:59 PM

[CARACAS] Venezuela and China have signed a deal for a US$5 billion loan designed to increase the Opec country's oil production, Venezuelan President Nicolas Maduro said.

Mr Maduro, speaking from China in a program broadcast on Venezuelan state television late on Tuesday, said the loan was destined "to increase oil production in a gradual way in coming months," without providing further details.

A source at Venezuelan state-run oil company PDVSA told Reuters in March that China was set to extend a "special" US$5 billion loan that would likely stipulate hiring Chinese companies to boost output in the company's mature oil fields.

Venezuela has borrowed US$50 billion from China through an oil-for-loans agreement created by late socialist leader Hugo Chavez in 2007, which has helped Chinese companies expand into Venezuelan markets amid chronic shortages of consumer goods there.

That financing has been especially crucial for Caracas since last year's oil market rout, which aggravated the country's severe economic crisis.

Eulogio del Pino, the oil minister and president of PDVSA , and Finance Minister Rodolfo Marco Torres were among key Venezuelan figures present at the president's "In Contact with Maduro" show, which broadcast this week from Beijing.

Speaking in front of a huge portrait of Chavez, Mr Maduro also said that Venezuela currently sends about 700,000 barrels-per-day of oil to the Asian giant.

Chinese Foreign Ministry spokeswoman Hua Chunying would not confirm whether China had indeed agreed to the loan.

"We believe China's cooperation, including financial cooperation, with countries including Venezuela, is done on the basis of realizing mutually beneficial goals and will contribute to economic and social development in the relevant countries and places," she told a daily news briefing.

Chinese President Xi Jinping told Mr Maduro that China was willing to look at new areas of financial cooperation, according to the Chinese government's account of the meeting.

During the show aired in Venezuela, which usually lasts for hours and often includes live music and folk dance, Mr Maduro lauded traditional Chinese medicine and art.

He is visiting China to participate in events marking 70 years since the end of World War Two in Asia, culminating in a military parade in Beijing on Thursday.

REUTERS

    
 

India's local wealth managers push to grow as foreign rivals struggle

India's homegrown wealth managers are hiring more staff and expanding in smaller cities, seeking to attract rising numbers of newly minted millionaires as high costs and regulatory restrictions drive some global rivals to scale down. 

PHOTO: REUTERS

SEP 2, 20156:31 PM

[MUMBAI] India's homegrown wealth managers are hiring more staff and expanding in smaller cities, seeking to attract rising numbers of newly minted millionaires as high costs and regulatory restrictions drive some global rivals to scale down.

India last year was the world's fastest growing wealth management market, according to a CapGemini and RBC Wealth Management study published in June, spurred largely by rising personal income as well as a boom in e-commerce start-ups that has also attracted foreign investors such as Japan's SoftBank Corp and Singapore's Temasek Holdings.

To take advantage of this growth, local firms such as IIFL Wealth Management and Kotak Wealth Management, which have long dominated the industry, said they plan to add more branches and bankers within months.

New players are also set to break in, with the State Bank of India saying it plans start offering wealth management services this year for the first time.

"The business itself is pretty robust and growing well," said Rajesh Iyer, head of investments at Kotak Wealth, which estimates the combined net worth of wealthy Indians to triple to about US$6 trillion in the next five years.

IIFL Wealth, which manages assets worth about US$12 billion, plans to increase the number of its client-facing staff to 200 from 160 in the next couple of months, said Executive Director Yatin Shah.

IIFL and Kotak are among the top three wealth managers in India in terms of assets under management, outperforming the local units of banks such as Barclays, Julius Baer and Deutsche Bank, several bankers said.

These local firms already control some 75 per cent of the market, industry executives say, and their expansion plans will put more pressure on the global banks, which are already struggling with higher wages and a narrower client base.

Some banks, like Royal Bank of Scotland, are also selling their onshore India private banking units as part of a global restructuring.

Earlier this year, bankers and consultants had told Reuters foreign private banks would hire wealth managers and increase their headcount by a fifth, compared with a 10-15 per cent fall over the past two years, to cash in on the Internet start-up boom and signs of an economic revival.

Many of these global banks, however, have struggled to compete with the locals firms, which typically have a lower investment threshold and can tap clients from their offices in smaller cities such as Ahmedabad, Vadodara and Chandigarh - places global banks can't set up a cost-effective presence.

Local firms are also not subject to the same stringent global regulations of international private banks, which allows them to invest their clients' money into sectors such as real estate, where the rules remain obscure by global standards.

"As a foreign bank, I have to take approval not just from the local regulators but also from the regulators back home,"said the country head of a European private bank who declined to be named because he is not authorised to speak to the media. "Local wealth managers have the flexibility to offer a wide range of things."

REUTERS

    
 

Germany moves to ease banking access for people granted asylum

SEP 2, 20159:46 PM

[FRANKFURT] Germany plans to ease the path for hundreds of thousands of people granted asylum in the country to set up bank accounts, while ensuring anti-money laundering measures remain in place, the head of financial watchdog Bafin said on Wednesday.

Bafin and the German finance ministry have worked to draw up draft changes to banking laws covering the documentation and procedures necessary for refugees, some 800,000 of whom are expected to seek asylum in Germany this year.

"We're going to allow banks to accept a broader spectrum of documents to open bank accounts," Felix Hufeld told Reuters on the sidelines of a banking conference.

"Banks need to have legal certainty about how they should work in achieving this balance between preventing money laundering and giving access to bank accounts," Mr Hufeld said.

Bafin issued temporary guidelines in August facilitating account openings by refugees, many who arrive without documentation such as passports and birth certificates. That has made it difficult for banks to comply with anti-money laundering measures that require them to verify account-holders'identities.

The savings bank sector, which is publicly owned or controlled, has been the first port of call for most new arrivals, partly because such lenders already provide services to recipients of social services, said Alexander von Schmettow, spokesman for the savings bank lobby group DSGV.

"They are our clients and our fellow citizens," Mr von Schmettow said. "It's not only an economic question, it's our moral duty. Sparkassen are not profit oriented and we would do this even if it was a loss-making proposition, but I can hardly imagine that to be the case."

Europe is struggling as its worst refugee crisis since World War Two polarises the 28-member EU, which has no effective system to cope with the arrival of hundreds of migrants.

In the community of Fulda in south-central Germany, the pace of account openings by refugees has risen rapidly in recent months, stretching some savings banks to their limits, said Wolfgang Goeb, head of the Fulda branch network.

"It's really hit us hard," Mr Goeb said on the sidelines of the conference. "These may not represent the most lucrative clients for a bank but I'm totally convinced that it is necessary to make this happen with the right policies."

REUTERS

    
 

Swiss freeze millions amid Malaysian 1MDB fund probe

Swiss authorities said on Wednesday they had frozen funds in Swiss banks amid a probe into people linked to Malaysia's troubled state investment fund, 1Malaysia Development Berhad (1MDB), on suspicion of corruption and money laundering. 

PHOTO: REUTERS

SEP 2, 20159:25 PM

[ZURICH] Swiss authorities said on Wednesday they had frozen funds in Swiss banks amid a probe into people linked to Malaysia's troubled state investment fund, 1Malaysia Development Berhad (1MDB), on suspicion of corruption and money laundering.

"The Office of the Attorney General of Switzerland (OAG) has frozen assets amounting to several tens of millions of US dollars on Swiss bank accounts," an OAG spokeswoman said by email in response to an enquiry.

"At this early stage of the procedure, the OAG is analysing and consolidating evidence. The OAG is already in contact with the Malaysian authorities. International cooperation with foreign countries, in particular with Malaysia, will probably be necessary to establish the facts," she added.

REUTERS

Qatar raises US$4.1 billion in bond sale after oil slump

Qatar issued 15 billion riyals (S$5.66 billion) of bonds on Tuesday as the country takes advantage of low borrowing costs to replenish funds eroded by the decline in oil prices. 

PHOTO: AFP

SEP 2, 20157:55 PM

[DOHA] Qatar issued 15 billion riyals (S$5.66 billion) of bonds on Tuesday as the country takes advantage of low borrowing costs to replenish funds eroded by the decline in oil prices.

The sale, intended to boost the local capital market, was four times oversubscribed, central bank Governor Abdullah Bin Saoud Al Thani told reporters in Doha, without commenting on the bond's duration or pricing.

Qatar follows Saudi Arabia in raising money from local banks as the slump in oil prices buffets the finances of the Middle East's largest oil and gas exporters. Saudi Arabia said it tapped local markets in June and August and has raised at least 35 billion riyals from local bond markets this year, the first time it has issued securities with a maturity of over 12 months since 2007. Qatar needs an oil price of US$59.1 dollars a barrel to balance its budget, according to the IMF, and on Saturday said its trade surplus fell 56 per cent in July. Crude dropped below US$45 a barrel on Wednesday.

"The policy of the central bank is to manage liquidity," Mr Al Thani said. "Interest rates are low in Qatar now so we decided it was the right time to issue these bonds and sukuk." Saudi Arabia, the Arab world's largest economy, is expected to post a budget deficit of almost 20 per cent of gross domestic product this year, according to the International Monetary Fund.

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US small business borrowing down slightly in July: PayNet

Borrowing by US small businesses dipped slightly in July from a record level the previous month, an index released Wednesday showed, but its relative strength was seen as a sign of domestic momentum despite the recent volatility in global markets. 

PHOTO: AFP

SEP 2, 20155:20 PM

[LONDON] Borrowing by US small businesses dipped slightly in July from a record level the previous month, an index released Wednesday showed, but its relative strength was seen as a sign of domestic momentum despite the recent volatility in global markets.

The Thomson Reuters/PayNet Small Business Lending Index edged down to 145.2 from an upwardly revised June reading of 146.4, but the readings marked the index's two highest points since it was launched in 2005.

The July reading, up 13 per cent from the same month a year ago, was driven by robust activity in key sectors like transportation and construction, said PayNet founder Bill Phelan. "This is showing some strength - while foreign markets are falling, while corporations are pulling back on their investments," Phelan said. "We've got this small business economy anchoring the US economy." The small-business borrowing index has historically been a leading indicator of US gross domestic product by two to five months, and is also a good predictor of capital spending and job growth, Mr Phelan said.

GDP expanded at an upwardly revised 3.7 per cent annual rate last quarter, buoyed by consumer spending.

The data comes as the Federal Reserve is weighing whether to increase US interest rates from near zero, where they have been kept since December 2008.

A recent stock market selloff has given some Fed officials pause and prompted investors to cut their predictions of a September US rate hike to about 32 per cent.

But Mr Phelan said the high levels of borrowing, spread evenly throughout the United States and across most industries, augur economic strength and financial health in the small business sector.

Small businesses have "a lot of capital to borrow, a lot of capital to invest more when the opportunity presents itself," Mr Phelan said. "That means there's ... a lot of runway for GDP expansion." PayNet collects real-time loan information such as originations and delinquencies from more than 325 leading US lenders.

REUTERS

    
 

Indonesian consumers more optimistic in August: central bank survey

Indonesian consumers were more optimistic in August than a month earlier, a Bank Indonesia survey showed on Wednesday. 

PHOTO: BLOOMBERG

SEP 2, 20156:32 PM

[JAKARTA] Indonesian consumers were more optimistic in August than a month earlier, a Bank Indonesia survey showed on Wednesday.

The central bank's consumer confidence index rose to 112.6 in August from 109.9 in July.

The increase of 2.7 points from July stemmed from rises in both the Current Economic Index and Consumer Expectation Index. A reading above 100 indicates consumers are optimistic.

However, low job availability in August made consumers preferred to delay purchases of durable goods.

Consumers expected economic conditions to improve in the next six months.

The survey also showed expectations of high price pressures over the next six months, reflecting consumers' concern over the weakening rupiah as well as the government cutting subsidies for electricity, liquid petroleum gas and fuel.

The annual inflation rate in August was 7.18 per cent, easing from 7.26 per cent in July.

REUTERS

Singapore's August PMI contracts further to 49.3

By

Kelly Taykellytay@sph.com.sg@KellyTayBT

SEP 2, 20159:01 PM

SINGAPORE'S Purchasing Managers' Index (PMI) slipped further into contraction mode in August, sinking 0.4 point to 49.3 - although the drop was not unexpected.

Private-sector economists polled by Bloomberg had earlier projected a reading of 49.4, down from July's 49.7.

A reading above 50 denotes growth, while one under 50 points to a contraction in the manufacturing sector.

Said the Singapore Institute of Purchasing & Materials Management (SIPMM), which compiles the index monthly from a survey of more than 150 manufacturing firms' purchasing managers: "The contraction in the overall PMI was attributed to further contraction in new orders, new export orders, production output as well as input prices.

"Inventory, stockholdings of finished goods and imports continued to expand and recorded lower readings."

The electronics PMI also stayed below the 50-point mark in August, dropping 0.5 point to 49.0 - exactly at the market's forecast.

The electronics readings indicated a further decline in new orders from domestic and overseas markets. "Production output contracted further and inventory reverted to contraction after having moderated in the earlier month," added SIPMM.

    

HKMA sells HK$12.5b to keep Hong Kong dollar in trading band

The Hong Kong Monetary Authority (HKMA) stepped into the currency market and sold HK$12.478 billion (US$1.61 billion) in Hong Kong dollars on Wednesday as the local currency hit the strong end of its trading range.

PHOTO: BLOOMBERG

SEP 2, 20156:26 PM

[HONG KONG] The Hong Kong Monetary Authority (HKMA) stepped into the currency market and sold HK$12.478 billion (US$1.61 billion) in Hong Kong dollars on Wednesday as the local currency hit the strong end of its trading range.

According to the HKMA, the latest intervention will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the authority - to HK$318.625 billion on Sept 15, when the injected funds will be settled.

The Hong Kong dollar is pegged at 7.8 to the US dollar, but can trade between 7.75 and 7.85. Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85 to keep the band intact.

REUTERS

3-month SOR jumps to 1.54% on continued China economic weakness

By

Siow Li Senlisen@sph.com.sg@SiowLiSenBT

SEP 2, 20156:28 PM

Singapore interest rates have jumped again as Asian currencies get hammered by continued economic weakness in China.

The 3-month swap offer rate (SOR) was quoted at 1.54 per cent on Tuesday, a rate last seen in December 2008. At 1.54 per cent, the 3-month SOR which is used to price commercial loans has jumped 10 per cent from a week ago and has more than tripled from 0.48 per cent on January 19.

The 3-month Singapore interbank offered rate (Sibor) was unchanged at 1.07 on Wednesday though it is higher than 1 per cent from a week ago. Sibor is used to price home loans.

"Fears on the Chinese economy remains the key driver behind persistent Asia FX (foreign exchange) weakness versus the majors (currencies)," said Eugene Leow, DBS Bank economist.

Latest China official Purchasing Managers' Index fell to 49.7 in August from the previous month's reading of 50.0, the weakest showing in three years.

"Buffeted largely by external headwinds and heightened risk aversion, upward pressure on already elevated SORs has not abated," said Mr Leow.

DBS expects the USD/SGD to hit 1.45 by mid-2016. The SGD on Wednesday weakened further to S$1.4131 from S$1.4104 on Tuesday with bets gaining that the Monetary Authority of Singapore may ease policy next month.

"The dynamics governing SOR are largely unchanged; weaker currency expectations, higher US interest rate expectations and exacerbated by episodes of capital outflow fear," said Victor Yong, United Overseas Bank rate strategist.

The market turmoil, fall in commodity prices and China risks have resulted in an adjustment in its major currency forecasts, said ABN Amro Bank research in a September 1 note.

On the SGD, it said that it had initiated short Singapore dollar view against the US dollar since August 18.

"The Monetary Authority of Singapore (MAS) is likely to shift its current modest appreciation of S$NEER (nominal effective exchange rate) policy to neutral in October. The SGD is also vulnerable to a weaker Chinese yuan and firmer short-term yields in the US. We expect the SGD to decline towards 1.46 against the US dollar later this year," said ABN Amro.

In fact ABN Amro said an interim monetary policy meeting by the MAS in September to widen the trading band cannot be ruled out if volatility in currency markets rises after the September 17 US Federal Open Market Committee meeting.

The recent sharp spikes in SOR is reminiscent of the Nov-Dec 2014 period when the 3-month SOR also surged from around 0.25 per cent to 0.93 per cent in early Jan 2015, said Selena Ling, OCBC Bank economist.

Other periods of elevated volatility was in 4Q08 during the Great Financial Crisis, as well as in 2H04 when the US Federal Reserve was embarking on its rate hike cycle, noted Ms Ling.

"A confluence of factors could continue to drive the domestic short-term rates for now - SGD NEER weakness and the market speculation of a further policy easing in October, coupled with paying interest in interest-rate swaps in anticipation of a rising interest rate environment precipitated by the US Fed normalising policy," said Ms Ling.