China seen delaying Shenzhen stock link until 2016 amid turmoil

China will probably delay the start of a Shenzhen stock-exchange link until next year as authorities focus their efforts on stabilizing the mainland share prices in the wake of a $5 trillion selloff, according to analysts in a Bloomberg survey. 

PHOTO: REUTERS

SEP 10, 20157:27 PM

[TAIPEI] China will probably delay the start of a Shenzhen stock-exchange link until next year as authorities focus their efforts on stabilizing the mainland share prices in the wake of a $5 trillion selloff, according to analysts in a Bloomberg survey.

Ten of the 13 respondents said the link with Hong Kong is likely to be pushed back to 2016, while the rest predicted a start by year-end. China Securities Regulatory Commission Chairman Xiao Gang and Hong Kong Chief Executive Leung Chun-ying both said earlier this year that the connect may open in 2015.

Efforts to make China's stock market more attractive to international money managers have been put on the back burner as policy makers intervene to combat a rout that's eroding confidence in the ruling Communist Party's economic management. Foreign investors have sold a net US$4.8 billion of mainland shares through an exchange link with China's biggest bourse in Shanghai since early July, amid doubts over the government's pledge to give markets a more central role in the world's second-largest economy.

"Regulators haven't got the time and energy to consider market reforms and will only push forward after the market stabilizes," said Zhang Gang, a strategist at Central China Securities Co in Shanghai. "It's more likely that the Shenzhen link will start next year, maybe after the second quarter."

Chinese authorities have gone to extreme lengths to prop up the stock market as both the Shanghai Composite Index and the Shenzhen Composite Index lost more than 40 per cent from their June highs. They've banned major shareholders from selling stakes, armed a state-run margin trader with billions of dollars to buy equities, allowed hundreds of companies to halt their shares and placed curbs on bearish bets in the futures market.

The rout in stocks is hampering efforts to link mainland markets to the rest of the world, Hong Kong Exchanges & Clearing Ltd. Chief Executive Officer Charles Li said at a conference in Singapore on Monday.

"Psychologically, this is not the time to talk a lot about mutual market access when you've just put out a fire," he said.

Authorities could use an announcement on the program's launch to help revive investor confidence, said Wu Kan, a Shanghai-based fund manager at JK Life Insurance Co who predicts the link will begin in 2015. The connect could also help authorities realize their goal of winning entry for mainland shares in MSCI Inc's global indexes, which was denied three months ago in part because the country restricts foreign access to its domestic market.

"Since MSCI deferred A share inclusion in June, China may want to further open up its stock markets to the world this year," said Cedric Ma, a Hong Kong-based senior investment strategist at Convoy Asset Management Ltd, which oversees about US$500 million.

China's leadership probably views market stability as a precursor to starting the link, and that may take until at least the first half of 2016 given the country's weak economic outlook, according to Francis Cheung, the head of China strategy at CLSA Ltd in Hong Kong. Chinese exports and imports both declined in August, highlighting tepid demand at home and abroad.

The Shanghai Composite dropped 1.4 per cent on Thursday, paring this week's gain to 1.2 per cent.

"Turbulence in the market makes launching a program of that complexity challenging," said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co in Shanghai. "I would assume we need to wait until the market has fully normalized, and that could take some time."

Brokerages and money managers that participated in the survey include Macquarie Securities, Xiangcai Securities Co, Bocom International Holdings Co, Delta Asia Securities Ltd, CMB International Securities Ltd, Dongxing Securities, Hengsheng Asset Management Co and Wanjia Asset Management Co.

BLOOMBER
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Japan must boost consumption to counter China slowdown: panel

Japanese Prime Minister Shinzo Abe's top economic advisory panel, concerned about China's economic slowdown, will recommend the government to counter that weakness by boosting domestic demand, a draft report shows. 

PHOTO: BLOOMBERG

SEP 10, 20158:24 PM

[TOKYO] Japanese Prime Minister Shinzo Abe's top economic advisory panel, concerned about China's economic slowdown, will recommend the government to counter that weakness by boosting domestic demand, a draft report shows.

"China's economy is displaying weaker movements and a sense of uncertainty," the Council on Economic and Fiscal Policy said in a draft report, seen by Reuters on Thursday.

To cushion the blow from China's slowdown, Japan should take steps to boost consumption to 70 per cent of gross domestic product from about 60 per cent now, the panel said in the draft proposals, to be presented to Mr Abe on Friday.

The draft offers no specifics on how to raise domestic demand as a portion of gross domestic product, but recommends improving working and income conditions, and boosting aid for raising children.

It also calls for investment to improve productivity and steps to encourage more women, young people and elderly people to work.

REUTERS

    
 

US import prices post biggest drop in seven months

US import prices in August recorded their biggest drop in seven months as the cost of petroleum and a range of goods fell, indicating that a strong dollar and soft global demand continued to put downward pressure on imported inflation. 

PHOTO: ST FILE

SEP 10, 20158:41 PM

[WASHINGTON] US import prices in August recorded their biggest drop in seven months as the cost of petroleum and a range of goods fell, indicating that a strong dollar and soft global demand continued to put downward pressure on imported inflation.

The Labour Department said on Thursday import prices fell 1.8 per cent last month, the largest decline since January, after an unrevised 0.9 per cent drop in July. Import prices have now declined in 12 of the last 14 months.

Economists had forecast import prices falling 1.6 per cent.

In the 12 months through August, prices declined 11.4 per cent, the largest drop since September 2009.

Very low inflation, in the face of a tightening labour market and strengthening economic growth, poses a challenge for Federal Reserve officials as they contemplate raising interest rates for the first time in nearly a decade.

The Fed's policy-setting committee will meet on Sept 16-17. Economists are divided on whether the U.S. central bank will raise rates at that meeting in the wake of recent volatility in global financial markets, which was sparked by fears of slower growth in China and other major emerging markets.

Last month, imported petroleum prices tumbled 14.2 per cent, the biggest drop since January, after falling 5.9 per cent in July. Import prices excluding petroleum slipped 0.4 per cent, reflecting the impact of the dollar's 17.5 per cent rise against the currencies of the United States' main trading partners since June 2014.

In August, imported food prices rose 0.3 per cent after being flat in July. Prices for imported capital goods fell 0.2 per cent, as did prices for imported automobiles.

The report also showed export prices fell 1.4 per cent, also the largest drop in seven months. Export prices slipped 0.4 per cent in July. They were down 7.0 per cent in the 12 months through August, the biggest drop since July 2009.

REUTERS

    

ECB to extend QE beyond Sept 2016 to battle low inflation: Reuters poll

The European Central Bank will officially extend its asset purchase programme beyond September 2016 in yet another attempt to drive up inflation and rekindle growth, a Reuters poll found. 

PHOTO: AFP

SEP 10, 20159:03 PM

[LONDON] The European Central Bank will officially extend its asset purchase programme beyond September 2016 in yet another attempt to drive up inflation and rekindle growth, a Reuters poll found.

Launched just six months ago, the 60 billion euros a month sovereign bond buying scheme, originally set to end a year from now, has so far failed to pull inflation meaningfully higher or even weaken the euro for a sustained period.

After the financial market rout in August, triggered by concerns China's economy is slowing rapidly, speculation the ECB would ease policy again started to mount - especially with the central bank's policymakers suggesting such a move.

ECB President Mario Draghi signalled as much at a news conference after last week's monetary policy meeting, and most economists in the survey predicted he would eventually announce a new end-date for the quantitative easing programme.

Many others said the ECB would extend the programme and increase the amount of monthly purchases at the same time, while a few forecast the programme would be increased in size only.

"The likelihood of a change in the ECB's monetary policy stance continues to increase due to developments in China and lower energy prices," said Nick Matthews, senior European economist at Nomura.

"We expect the ECB to act again within the next six months by extending QE beyond September 2016. It could increase the amount but we think an extension would impact the longer end of the money market curve by pushing further out when the ECB could begin raising policy rates."

At a time when expectations are high for a US interest rate hike soon, followed by Britain early next year, the ECB is faced with a weak economy that is plagued by very little domestic demand and is hardly generating inflation.

But what benefit an enhanced QE programme, either in duration or size, would have is still unclear.

Japan has pumped trillions of yen into the economy through various stimulus programmes for over a decade but inflation showed signs of rising only recently and remains far from what policymakers want to achieve.

The poll showed eurozone inflation would rise slightly in the last quarter of this year to 0.5 per cent from August's 0.2 per cent. Next year it is expected to average 1.2 per cent before rising to 1.6 per cent in 2017.

That 2017 inflation consensus is slightly lower than the ECB's forecast of 1.7 per cent and shy of its target of close to but below 2 per cent. The most pessimistic economist forecasts inflation at 1.1 per cent, barely more than half the ECB's target at that time.

"We think the ECB's projections are still on the optimistic side and it would take longer for inflation to come up," said Matthews, who has the second weakest forecast at 1.2 per cent.

Global oil prices, which have fallen 8 per cent since the start of August after an already historic slump over the last year, and a steadily strengthening euro hardly make the case for a spike in inflation.

That, and a sharp slowdown in China is likely to pressure eurozone economies well into the future.

The poll also showed the eurozone economy would expand 0.4 per cent in each quarter from now until the end of next year, exactly the same as expectations last month.

REUTERS

    
 

German econ minister: 1.8% growth this year and next realistic

Germany's economy is on a solid growth path and an expansion of 1.8 per cent both this year and next is realistic, economy minister Sigmar Gabriel said on Thursday. 

PHOTO: BLOOMBERG

SEP 10, 20153:34 PM

[BERLIN] Germany's economy is on a solid growth path and an expansion of 1.8 per cent both this year and next is realistic, economy minister Sigmar Gabriel said on Thursday.

Economic growth is bringing in higher tax receipts than expected, Mr Gabriel told the Bundestag lower house of parliament.

Turning to the influx of refugees pouring into Germany, Mr Gabriel said this was, "probably the biggest national, European challenge since reunification" in 1990.

REUTERS

Asian currencies slide as Fed, China concerns deter risk taking

Asian currencies fell, led by Indonesia's rupiah and South Korea's won, as concern China's economic slowdown is worsening and the prospect of higher US interest rates deterred risk taking. 

PHOTO: BLOOMBERG

SEP 10, 20156:03 PM

[SINGAPORE] Asian currencies fell, led by Indonesia's rupiah and South Korea's won, as concern China's economic slowdown is worsening and the prospect of higher US interest rates deterred risk taking.

Malaysia's ringgit and the rupiah both dropped to their lowest levels since 1998 as stocks slumped worldwide ahead of the Fed's Sept 16-17 meeting. Thailand's baht declined to its lowest level since March 2009.

Jobs data in the US Wednesday boosted the case for the Federal Reserve to raise borrowing costs. Standard & Poor's cut Brazil's sovereign rating to junk and Chinese producer prices tumbled the most in six years, underscoring weakness in the world's second-largest economy. China will report data on retail sales and factory output Sunday. New Zealand cut interest rates for the third time in three months, adding to a global wave of monetary easing as policy makers look to revive growth.

"There's a lot of uncertainty in the market and the Chinese data will most likely disappoint," said Andy Ji, a Singapore- based currency strategist at Commonwealth Bank of Australia. "Brazil's downgrade and the rate cut in New Zealand highlight the challenges for the global economy. The Fed meeting adds to the uncertainty and dollar strength."

The won fell for the first time in three days, losing 0.4 per cent. Overseas funds have pared holdings of Korean equities this week, taking outflows for the quarter to US$6.4 billion. The Bank of Korea will keep its benchmark interest rate at 1.5 per cent at a meeting on Friday, according to 16 of 18 economists surveyed by Bloomberg.

"The won is weaker because of the global market volatility and concern about emerging markets," said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc. "It's also under pressure as foreign investors are selling Korean stocks."

Odds that the Fed will pull the trigger on rate hikes at next week's meeting are 28 per cent, with the chance of an increase in December now at 58.7 per cent, according to Fed funds futures tracked by Bloomberg.

The ringgit weakened 0.1 per cent after dropping as much as 1.2 per cent earlier to 4.3798 a dollar, the lowest level since January 1998 when it reached a record 4.8850. Indonesia's rupiah fell 0.5 per cent and India's rupee slipped 0.1 per cent.

China's yuan closed little changed after Premier Li Keqiang said he wants to avoid a currency war as he sought to soothe global concern about the nation's devaluation of the yuan and its slowing economy, which he said is operating in a reasonable range even as it faces "downward pressure." China has been "wrongly criticized" for its management of the currency and doesn't want to use depreciation to boost exports, Li said Wednesday at the World Economic Forum's Summer Davos meeting in Dalian, China.

Elsewhere in Asia, the Philippine peso and Vietnam's dong were steady and Taiwan's dollar declined 0.3 per cent.

BLOOMBERG

    
 

China Jan-Aug FDI rises 9.2% y/y, up 22% in Aug: ministry

China attracted 525.3 billion yuan or US$85.3 billion in foreign direct investment (FDI) in the first eight months of 2015, up 9.2 percent from a year earlier, the Commerce Ministry said on Thursday. 

PHOTO: REUTERS

SEP 10, 20154:36 PM

[BEIJING] China attracted 525.3 billion yuan or US$85.3 billion in foreign direct investment (FDI) in the first eight months of 2015, up 9.2 percent from a year earlier, the Commerce Ministry said on Thursday.

FDI inflows in August rose 22 percent from a year earlier to 54.2 billion yuan or US$8.71 billion, the ministry said in a statement on its website.

REUTERS

Update: Chinese Premier Li sees 'painful and treacherous' economic transition

Workers install car parts at their assembly line in a factory in Qingdao, east China's Shandong province on July 15, 2015. 

PHOTO: AFP

SEP 10, 20151:56 PM

[BEIJING] Chinese Premier Li Keqiang said Thursday that change in the world's second-largest economy is fraught with difficulties and uncertainty, but sought to reassure an international audience that the country does not threaten the global economy.

Chinese leaders are overseeing a transition in the country's growth model from the emphasis on exports and investment that saw it boom to a more sophisticated one in which consumer spending plays the dominant role.

"This is going to be a painful and treacherous process," Mr Li said in a speech to a World Economic Forum meeting in the northeastern city of Dalian.

"So ups and downs in economic performance are hardly avoidable", he added, calling that "natural" during a time of change.

Mr Li's comments came as Chinese policymakers have come under increasing pressure to reassure global investors concerned over perceptions the country's economic growth is slowing precipitously, which have helped fuel huge swings in global financial markets.

"China is not a source of risk for the world economy but a source of strength for global growth," Mr Li said, stressing that it accounted for about 30 percent of world economic expansion in the first half of this year.

China's GDP growth growth stood at 7.0 per cent in the first two quarters this year, but on Monday the government lowered its 2014 growth reading to 7.3 per cent, from the 7.4 per cent announced in January.

Mr Li acknowledged that the economy has "come under quite a number of difficulties and downward pressure" but stressed it remained in a "proper range", a favourite phrase.

But he also stressed that China was being affected by economic troubles elsewhere.

"China is an economy that is closely integrated with the international market," he said.

"Given the weak growth of the global economy, China cannot stay unaffected and the deep-seated problems that have built up over the years are also being exposed." Also resorting to commonly used wording, Li said that policymakers would be unmoved in the face of short-term movements in the economy, but stand ready to take action as necessary.

"If there are signs the economy is sliding out of the proper range we have adequate capability to deal with the situation," he said. "The Chinese economy will not head for a hard landing." China has set its annual target for growth in gross domestic product (GDP) at about seven percent for this year, down from last year's objective of around 7.5 per cent.

Mr Li stressed, however that given China's GDP now stands at more than US$10 trillion, growth of seven percent represents a total that "is even bigger than the double-digit" figures of the past, and remains one of the highest in the world.

AFP

    
 

China tightens capital controls after devalution: FT

Chinese 100 yuan banknotes are seen in this file picture illustration taken in Beijing July 11, 2013. 

PHOTO: REUTERS

SEP 10, 20151:29 PM

[SHANGHAI] China is tightening capital controls following a devaluation of its yuan currency, the Financial Times reported, as worries about fund outflows rise.

The State Administration of Foreign Exchange had ordered financial institutions to increase checks and boost controls on foreign exchange transactions, especially over-invoicing of exports which is used to hide capital outflows, the newspaper on Wednesday quoted unnamed sources and an internal memo as saying.

Last month, China moved the yuan almost five percent lower in a week, saying it was part of broader economic reforms aimed at shifting towards a more flexible exchange rate.

The suddenness and scale of the devaluation in the normally stable unit sparked worries the world's second-largest economy was performing worse than revealed.

China's foreign exchange reserves fell by a record US$93.9 billion last month to reach US$3.56 trillion at the end of August, as Beijing sold dollars to support the yuan following jitters over the surprise devaluation.

The central bank, the People's Bank of China (PBOC), on Tuesday said it will require banks to pay a 20 per cent deposit on forward sales of foreign exchange, in a move aimed at speculators. A forward sale is a commitment to sell at a predetermined price and date.

But in a statement the PBOC denied the move amounted to a capital control as it did not restrict transaction volumes and did not require approval for individual transactions.

Chinese Premier Li Keqiang on Thursday said on China will keep the currency stable and vowed to push forward making the yuan freely convertible. He also promised to allow foreign central banks to directly trade in the country's currency market.

"We will continue to keep the (yuan) exchange rate basically stable at a reasonable and equilibrium level," he said in a speech at the World Economic Forum in the Chinese city of Dalian.

Addressing business executives attending the forum on Wednesday, Li denied China had sought a competitive devaluation to boost exports as economic growth slows.

"China will not want to see any currency wars," he said.

The yuan closed 0.16 per cent lower against the dollar at 6.3778 on Wednesday.

On Thursday, the central bank set its daily rate for the yuan 0.22 per cent lower from the previous day's fix at 6.3772 to the dollar.

AFP

Chinese inflation is both hot and cold in August

• David Scutt, Business Insider Australia
 

• 11h
• 379

Getty Images

Chinese inflation data for August has come in mixed, with consumer price inflation jumping to a one-year high despite producer price inflation falling to a fresh six-year low.

From a year earlier consumer prices increased by 2.0%, well above the 1.6% pace of July and expectations for an acceleration to 1.8%.

It was the fastest pace recorded since August 2014.

Breaking down the report, much of the increase came from food prices, which jumped 3.7% thanks to a 19.6% surge in pork prices.

Excluding food, prices rose by a more modest 1.1%, unchanged from July.

They don’t dub the CPI release the “China pork index” for nothing.

Business Insider Australia

While CPI accelerated, the PPI fell to a fresh multi-year low, sliding 5.9% from a year earlier, significantly below the 5.5% drop expected. Not only was it an acceleration on July’s 5.4% decline, it marked the fastest pace of deflation since September 2009.

Despite the CPI jump, much of the report’s focus will be on the PPI reading given the former was largely impacted by a sudden jump in pork prices. The continued deceleration in raw material prices will do little to quell concern about sagging domestic demand, nor broader concerns about a slowdown across the Chinese economy.

Read the original article on Business Insider Australia. Copyright 2015.

BANK OF ENGLAND HOLDS RATES

• Mike Bird
 
•  

• 3h
• 132

Matt Dunham - WPA Pool/Getty ImagesMark Carney, the Governor of the Bank of England, speaks during a press conference as he presents the quarterly inflation report at the Bank of England in the City of London, on May 13, 2015.

The Bank of England just released its latest decision and minutes, from the September meeting of the Monetary Policy Committee (MPC). 

They voted once again to hold interest rates, with only one policymaker voting for a hike. Resident hawk Ian McCafferty voted for a 0.25 percentage point increase. 

Bank rate is currently at 0.5%, a record low that it's been at since Spring 2009. 

Analysts were mostly expecting another 8-1 vote in favour of holding rates, like the one seen last month. Some thought it might break 7-2. 

Some also thought that there might be a wild card in the form of a vote to cut rates by Andy Haldane, the Bank's independent-minded chief economist. While‎ everyone else has been gearing up for a rate hike Haldane has been expressing concerns about the disinflation and deflation recorded around the world.

The MPC meeting minutes show what was discussed during the meeting. That included China's astonishing market turmoil, but the MPC judged generally that there's "solid domestic demand and a subdued external environment."

The Bank has been running hot and cold over the prospect of a rate hike, ‎which markets expect will come some months after the US Federal Reserve's first increase.

Sterling surged against the dollar as the decision was announced: 

Read more: http://uk.businessinsider.com/bank-of-england-decisions-and-minutes-september-2015-2015-9#ixzz3lLQeOPVY