Japan boost lifts Asia but Shanghai, Hong Kong hit by China data

PHOTO: BLOOMBERG

FEB 1, 201611:35 AM

[HONG KONG] Shanghai and Hong Kong stocks fell Monday after a gauge of Chinese factory activity hit a more than three-year low in January, but most other Asian markets remained buoyed by Japan's decision last week to slash interest rates to negative.

In another example of weakness in China's economy, the official Purchasing Managers Index (PMI) showed the country's key manufacturing sector shrank for the sixth straight month and was now at its weakest since August 2012.

The news follows a string of data indicating that the once-mighty growth rates in the Asian giant are well in the past.

"The manufacturing sector will likely face a tough year ahead on the back of overcapacity, weakening global demand, and the government's plans to tackle pollution," ANZ economists Liu Ligang and Louis Lam said in a report.

Worries about the slowdown in the world's second biggest economy - and its leaders handling of it - were among the key reasons for a rout across global markets in January that wiped trillions of dollars off valuations.

"Headwinds on traditional manufacturers are clearly increasing rather than fading," Chen Xingdong, chief China economist at BNP Paribas SA in Beijing, told Bloomberg News. "The economy is still weakening."

In early trade Shanghai stocks were down 0.4 per cent and Hong Kong lost 0.1 per cent.

However, Tokyo led most other equities markets higher as the euphoria continued after Friday's shock announcement from the Bank of Japan that it would effectively start charging lenders to park their cash with it.

The move - intended to ramp up lending to people and businesses in order to kickstart the economy and fend off deflation - spurred a rally across world markets and sent the yen tumbling.

The Nikkei index was up 1.8 per cent by lunch while Sydney gained more than one percent and Seoul added 0.2 per cent. There were also gains in Wellington, Taipei and Singapore.

The announcement came as central banks from Asia to the Americas look to support world markets after they took a beating last month. Last month the European Central Bank indicated it was ready to ease monetary policy further in March, while the Federal Reserve held off another interest rate hike last week.

Data showing growth in the US economy slowed sharply in October-December and further reduced the chances the Fed will hike rates anytime soon.

On oil markets US benchmark West Texas Intermediate fell two per cent and Brent lost 1.9 per cent after enjoying a four-day rally at the end of last week, fanned by hopes of talks between the Opec producers' club and Russia on cutting output.

The black gold picked up recently after sinking to more than 12-year lows owing to a perfect storm of overproduction, weak demand, a slowing global economy and a strong dollar.

"Oil has stopped its bullish momentum and most of the reason comes from the relatively strong dollar on light of Japan's surprising negative interest rate decision," said Phillip Futures analyst Daniel Ang.

AFP

    
 

Oil prices halt rise in Asian trade

FEB 1, 201610:58 AM

[SINGAPORE] Oil prices halted their rise in Asia Monday, hurt by the strengthening US currency which makes the dollar-price commodity more expensive.

The greenback rose after Japan's central bank shocked markets Friday with a decision to adopt a below-zero interest rate policy in a bid to spur bank lending and drive up inflation.

Bank of Japan chief Haruhiko Kuroda cited recent financial market turmoil and a China slowdown for ushering in a -0.1 per cent rate on new reserves, and said the bank may go even further into negative territory.

By 0240 GMT, US benchmark West Texas Intermediate for delivery in March was down 49 cents, or 1.46 per cent, to US$33.13.

Brent crude for April, a new contract, was trading 53 cents, or 1.47 per cent, lower at US$35.46 a barrel.

The March contract ended on Friday under a revised scheme in which Brent now expires at the end of each month instead of every 15th.

"Oil has stopped its bullish momentum and most of the reason comes from the relatively strong dollar on light of Japan's surprising negative interest rate decision," said Phillip Futures analyst Daniel Ang.

As oil is traded in dollars, a rise in the greenback will make crude more expensive for holders of weaker units, dampening demand and hurting prices.

Oil prices closed higher last week to end a turbulent January in which prices plunged to 12-year lows in the face of a global oversupply.

Speculation that Russia and the Organization of the Petroleum Exporting Countries will meet to discuss oil output cuts to push up prices supported sentiment last week.

The news, however, drew skepticism that such a meeting or agreement would take place, limiting its impact.

Ang said crude supply glut is likely to continue limiting any oil price gains.

"I don't think oil prices will continue rising without changes in fundamentals," he told AFP.

AFP

    
 

Singapore developers' sentiment weakened further in Q4 2015: survey

By

Lee Meixianleemx@sph.com.sg@LeeMeixianBT

Developers' sentiment weakened further in Q4 2015, according to the results of the NUS-Redas Real Estate Sentiment Index survey. 

SPH

FEB 1, 20168:17 AM

DEVELOPERS' sentiment weakened further in Q4 2015, according to the results of the NUS-Redas Real Estate Sentiment Index (RESI) survey.

The Current Sentiment Index fell to 3.6 from 3.7 in Q3 2015, while the Future Sentiment Index fell to 3.4 from 3.7 in Q3 2015.

A score under five indicates deteriorating market conditions, while scores above five indicate improving conditions.

The three sectors with the lowest net balance scores in Q4 2015 were the office, suburban residential and prime retail sectors.

The office sector was the worst performing one with a current net balance of -43 per cent and a future net balance of -67 per cent.

The net balance is the difference between the proportion of respondents who selected positive sentiments, and the proportion who selected negative options.

Nine in 10 of the respondents anticipate a slowing down in the global economy, and three in four expect that rises in inflation and interest rates will adversely impact market sentiment in the next six months.

More than six in 10 indicate that the property market will face further tightening in terms of finance and liquidity, while seven in 10 of the developers expect new launches to increase moderately and hold at the same level in the next six months.

One fifth indicated that they will launch moderately fewer units - 20 per cent more than the respondents who said so in the last quarter.

On price changes, six in 10 of the developers anticipate a moderate decrease in residential property prices in the next six months.

On translational effects to the stock market, 54.1 per cent of the respondents felt that there will be moderate impact on Reit (real estate investment trust) stock performance, especially with the recent interest rate hike by the US Federal Reserve.

But the impact on land bidding prices is expected to be minimal. About six in 10 of the respondents felt that the H1 2016 Government Land Sales (GLS) programme will have minimal impact on the demand in residential and commercial property sectors. Over half have indicated it will have moderate impact over the competitiveness in the GLS land bidding.

    
 

Chinese airline passengers to start transiting Taiwan

      

FEB 1, 201612:53 PM

[TAIPEI] Chinese passengers will be able to transit through Taiwan and fly onwards to a third destination starting on Monday, signalling a step toward greater transportation links between the two political enemies.

The plan had been discussed for years and China announced early last month it would start the transit programme with three trial cities in China.

The move came just before national elections in Taiwan swept in the independence-leaning Democratic Progressive Party, which is seen as less friendly toward Beijing.

Taiwan has been self-ruled since 1949 when the defeated Nationalists fled to the island after a civil war with the Chinese Communists. Beijing deems Taiwan a wayward province to be taken by force if necessary, especially if it makes moves toward independence.

Taiwan's China-friendly ruling Nationalist government, which steps down in May, supported the transit plan as a way to deepen ties between the two sides.

Allowing Chinese passengers flying from China to transit in Taiwan benefits the development of the civil aviation industry and deepens exchanges between Taiwan and China, the island's quasi-governmental Straits Exchange Foundation said in a statement Monday.

Taiwan's state news agency reported that the first Chinese air travellers would stop over on Monday evening from Kunming, Yunnan province, before taking a flight to the United States.

China in early January said passengers from the Chinese cities of Nanchang, Kunming and Chongqing would be allowed to transit through Taiwan's main international airport.

The transit passengers will not be able to leave the airport and must have valid onward travel documents, according to the transit regulations.

REUTERS

      

Singapore market bearish on credit quality of energy and commodity firms: Moody's

By

Lee Meixianleemx@sph.com.sg@LeeMeixianBT

FEB 1, 201610:20 AM

THE Singapore and Hong Kong markets are most bearish on the credit quality of commodities and energy companies, credit rating agency Moody's said in a report on Monday.

It had asked market participants which sectors - among commodities, energy, real estate, financial institutions, infrastructure and utilities, automotives, retail, and telecommunications, media and technology - will be most exposed to downside risks in 2016.

Of the participants who responded, 88 per cent and 65 per cent of audiences in Singapore and Hong Kong respectively, were most worried about the commodities and energy sectors in terms of credit quality in 2016.

The polling result was consistent with Moody's view that rated Asian corporates with commodity exposure remain in a precarious position. Specifically, Moody's holds negative outlooks for Asia's coal and steel sectors.

On Jan 22, 2016, Moody's placed the ratings of 120 oil and gas companies and 55 mining companies globally on review for downgrade, reflecting a mix of declining prices, weakening demand and a prolonged period of oversupply.

In addition, the Moody's report also included polling results taken from Moody's annual Asia Pacific Outlook Briefings in Singapore and Hong Kong in January 2016.

The events brought together the largest investors, intermediaries and debt issuers across both regional hubs, with more than 300 people attending.

Of the market participants polled during the events, a significant majority in Singapore (58 per cent of respondents) and Hong Kong (53 per cent) agreed with Moody's that a sharper-than-expected slowdown in the Chinese economy represents the greatest risk to Asia's growth prospects in 2016.

Rahul Ghosh, a Moody's vice president and senior research analyst, expects the flat or slower growth in most Asian economies' credit and capital flow volatility to weigh on the region's rated debt issuers, particularly in the corporate sector in 2016.

"Foreign exchange exposures are partly mitigated by the prevalence of domestic financing for sovereigns and banks and natural or financial hedges for rated corporates. However, weak growth and commodity price declines will interact with foreign currency volatility to raise credit risk across the region."

On Moody's-rated non-financial corporates in particular, the report said that corporate credit quality will decline in 2016 as it did in 2015, leading to further rating pressure and defaults, especially for Moody's-rated speculative-grade companies.

However, accommodative monetary policy, solid funding conditions in local bond markets and banking systems, and manageable refinancing needs should prevent defaults from spiking materially.

As for Asian banks, while their asset quality and profitability will deteriorate, the banks demonstrate rating cushions. Problem loans will continue to rise in most banking systems, as slower growth exposes corporate and household leverage concerns.

On Asian sovereigns, Moody's says that the sovereigns' growth prospects, policy flexibility and limited external vulnerabilities underpin Moody's generally stable ratings outlooks for them.

However, the credit buffers that the sovereigns have built will be tested in a more adverse macroeconomic environment, as volatility in capital flows affects balance of payments positions, and also as governments use a combination of monetary and fiscal measures in response to both slower domestic growth and external shocks.

    
 

Gold extends gains after best month in a year

FEB 1, 201611:37 AM

[MANILA] Gold advanced at the start of the month on Monday, extending gains after ending January with its biggest monthly gain in a year, amid a softer dollar and uncertainty over the global economy.

Inflows into the world's largest gold-backed exchange-traded fund were also the strongest in a year last month as investors moved into gold due to volatility in other assets including equities.

Spot gold was up 0.3 per cent at US$1,120.75 an ounce by 0312 GMT. Bullion gained 5.4 per cent last month, its largest gain since January 2015.

Strong inflows into gold exchange-traded funds, Chinese buying ahead of the Lunar New Year and support from the volatility in other asset classes combined to boost gold in January, said Mark Keenan, head of commodities research in Asia at Societe Generale. "But in the context of a rising interest rate outlook in the US, it's going to be very difficult for gold to hold on to these gains," he said.

Societe Generale sees gold averaging at US$1,040 in the first quarter and US$955 in the last quarter of the year.

US gold for April delivery was up 0.5 per cent at US$1,121.60 an ounce, with the US dollar down slightly versus a basket of currencies.

Hedge funds and money managers boosted their bullish bet in COMEX gold to a 12-week high in the week to Jan 26, US Commodity Futures Trading Commission data showed on Friday.

Holdings of the largest gold-backed exchange-traded-fund, New York's SPDR Gold Trust, increased about 4 per cent in January, the most in a year.

Spot gold touched a 12-week high of US$1,127.80 on Wednesday, after the Fed said it was closely watching the global economy and financial markets and their impact on the US economy.

Risks from China remained after an official survey on Monday showed activity in the Chinese manufacturing sector contracted at its fastest pace in almost three-and-a-half years in January, missing market expectations.

US economic growth braked sharply in the last quarter of 2015, expanding at an annual 0.7 per cent rate.

The data underpinned hopes that the Federal Reserve would slow the pace of future US rate increases, aiding gold.

Spot silver rose 0.2 per cent to US$14.29 an ounce, platinum slipped 0.4 per cent to US$867.68 and palladium was up 0.2 per cent at US$499.55.

REUTERS

    
 

Shares in Sony surge after swing to profit

[TOKYO] Sony shares surged nearly 16 per cent on Monday after the electronics giant posted a nine-month net profit of almost US$2.0 billion thanks to strong sales of its game console and parts for mobile gadgets. 

PHOTO: BLOOMBERG

FEB 1, 20169:35 AM

[TOKYO] Sony shares surged nearly 16 per cent on Monday after the electronics giant posted a nine-month net profit of almost US$2.0 billion thanks to strong sales of its game console and parts for mobile gadgets.

About 30 minutes after the opening bell, Sony was up 11.77 per cent at 2,820.0 yen, easing from as high as 2,924.0 yen, or 15.89 per cent earlier in the day.

The once-iconic Japanese firm has been working to claw back to profitability under a painful restructuring that has included layoffs and asset sales, including its Manhattan headquarters and laptop division.

Sony, along with rivals Panasonic and Sharp, has struggled in the consumer electronics business that built its global brand, including losing billions of dollars in televisions over the past decade.

The sector has faced fierce competition from lower-cost rivals from South Korea and Taiwan.

In a sign things are on the upswing, Sony said Friday its net profit came in at 236.1 billion yen (US$1.95 billion) for the April-December period, reversing a 19.2 billion yen loss a year earlier.

Operating profit more than doubled to 387.1 billion yen, while sales edged up 0.1 per cent to 6.28 trillion yen.

Strong sales of its PlayStation video games console and image sensors found in mobile gadgets help it move past years of losses, it said.

The benchmark Nikkei 225 index at the Tokyo Stock Exchange was up 1.37 per cent at 17,757.57 in early morning trade, as exporters were lifted by a weaker yen and investors reacted positively to last week's surprise interest cut by the Bank of Japan.

AFP

    
 

China police arrest 21 over US$7.6b online financial scam

[SHANGHAI] Chinese police have arrested 21 people involved in the operation of peer-to-peer (P2P) lender Ezubao, the official Xinhua news agency said on Monday, 

PHOTO: AFP

FEB 1, 201611:22 AM

[SHANGHAI] Chinese police have arrested 21 people involved in the operation of peer-to-peer (P2P) lender Ezubao, the official Xinhua news agency said on Monday, over an online scam it said took in some 50 billion yuan (S$10.8 billion) from about 900,000 investors, Ezubao was a Ponzi scheme, the Xinhua report said, and more than 95 per cent of the projects on the online financing platform were fake.

Among those arrested were Ding Ning, the chairman of Yucheng Group, which launched Ezubao in July 2014.

It was not possible to reach Ezubao officials for comment and it was not clear if Ding had legal representation.

Ezubao's website has been shut down and it appeared Yucheng Group's Beijing office had been closed when Reuters reporters visited before Monday's Xinhua report.

Chinese police said they had sealed, frozen and seized the assets of Ezubao and its linked companies as part of investigations into China's largest P2P online platform by lending figures.

The Ezubao case has underscored the risks created by China's fast-growing US$2.6 trillion wealth management product industry. Many products are sold through loosely regulated channels, including online financial investment platforms and privately run exchanges.

REUTERS

    
 

Millennials splurge on #lifegoals, giving leisure stocks a boost

FEB 1, 20168:31 AM

[LONDON] Alistair Owen pours most of his paycheck into what he calls a travel-and-lifestyle fund.

"I'm not saving up to buy anything," said the 28-year-old engineer, who shares a rented apartment with two flatmates in south London. "I prefer to go out for dinner at a nice place, pay a round at the pub or explore a new area of the world. I feel like I would be losing out on living if I chose to own stuff instead."

The stock market is starting to reflect his priorities and those of his generation - the millennials, those born between 1980 and 2000. Leisure and travel-related stocks, including pubs, airlines and pizza restaurants, have trumped retailers since consumer confidence picked up following the financial crisis. For US and European indexes tracking the industries, the outperformance just reached the highest since at least 2011.

"Experiences help millennials shape their identity and create memories, to a greater degree than for older generations," said Sarbjit Nahal, head of thematic investing at Bank of America Corp. in London. "You'll want to look at companies focused on live sporting events, festivals, online gaming, the sharing economy, travel and even music streaming - all of these are experiences that millennials can share with their friends."

What little evidence - it's largely anecdotal - there is, it tends to back up the arm-chair psychology. A survey by market-research firm Harris Poll and Eventbrite Inc, an online marketplace for ticket sales, showed 78 per cent of millennials would rather pay for an experience than material goods.

That compares with 59 per cent for baby boomers. Some 82 per cent of millennials said they went to a live event in the past year - concerts and festivals - and 72 per cent said they plan to increase spending on such outings.

Andrew Oswald, an economics professor at Britain's University of Warwick in Coventry, says today's young consumers feel like they own enough already. With their material desires almost completely exhausted, millennials need alternative roads to satisfaction, he says, referring to research by Thomas Gilovich, a psychology professor at Cornell University.

"It's now experiences that people are short on, not items," says Oswald, whose research focuses on what he calls the economics of happiness.

Underscoring his point, merchants aren't reaping the benefits of all the extra cash that consumers were meant to funnel their way from lower fuel costs. The latest retail sales data missed projections in the UK, US, and in the euro area.US chains ranging from Macy's Inc to Best Buy Co reported slowing holiday sales.

In contrast, sales at companies like pub operator Greene King Plc have been strong. Low-cost airlines Ryanair Holdings Plc and EasyJet Plc have soared almost sevenfold since their crisis-era lows. Ski operator Vail Resorts Inc. is up more than 700 per cent since the US market bottomed in 2009. Airbnb Inc's US$25.5 billion valuation is more than Macy's and Best Buy's combined. Investors will be soon be able to buy an exchange-traded fund focused on millennials, which will include companies involved in social media, e-commerce, mobile technology, healthy lifestyles, travel, leisure and the sharing economy, according to its Dec 11 prospectus.

A sacrifice for all this fun: savings. With incomes shrinking, only 34 per cent of millennials worldwide said they saved enough money each month, according to Nielsen's 2015 Global Generational Lifestyles survey. They're also not that interested in allocating funds to acquire the totems of their parents. Buying a car was a top priority for only 15 per cent of millennials in a Goldman Sachs Group Inc. survey cited in a 2015 report. The number was the same for purchasing a television, and just 10 per cent for a luxury bag.

Even with some cash from selling the flat she'd bought with her now ex-husband, the last thing on Selina Mathews's mind was getting back on the property ladder. The 30-year-old shares a London apartment with two friends and regularly dines out - Nielsen's data show six-in-10 millennials go out to eat at least once a week, twice the per centage of baby boomers.

"I don't put much of my monthly salary aside at all," said Ms Mathews, who works on the trading floor at an American investment bank. It's bonus time, and she's planning trips to the Philippines and Japan.

"I'd rather rent a really nice room, explore the world, have some fun with my friends and enjoy my life rather than own a bunch of things. There's an element of freedom in that."

Jack Huang, a Californian in London, is building his business on that outlook. The 35-year-old founded the website Truly Experiences in 2012, when he couldn't find a suitable wedding gift for a food-loving business school friend. The company sells everything from US$71 whisky tastings to a half- million-dollar trip to the edge of the Earth's atmosphere.

"People want to buy happiness," Mr Huang said at a London cafe in January. "An experience is unique because it gives them that in three stages: the anticipation, the event itself, and the memories after. Not only does that final stage last forever, but you can also share it."

BLOOMBERG

    
 

South Korea's exports record biggest drop since 2009

South Korea's exports, the main driver of the national economy, suffered their sharpest drop in more than six years in January, extending what is now a 13-month losing streak. 

PHOTO: REUTERS

FEB 1, 201610:50 AM

South Korea's exports, the main driver of the national economy, suffered their sharpest drop in more than six years in January, extending what is now a 13-month losing streak.

Government data released Monday showed exports down 18.5 per cent from the same month last year at US$36.7 billion - the steepest decline since August 2009.

The report cited a host of factors, such as slowdowns in major economies, including South Korea's biggest trade partner China which accounts for a quarter of the country's exports.

Falling global oil prices also contributed to the dismal figure, hitting petroleum products that are a mainstay export item for Asia's fourth largest economy.

South Korea's exports declined every single month last year, resulting in the slowest annual economic growth since 2012. Overseas shipments for the entire year were down 8.0 per cent - the first annual contraction for three years. South Korea's economy expanded by 2.6 per cent in 2015, coming in just under the forecast 2.7 per cent.