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Sun, 22nd January 2017

Anirudh Sethi Report

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Archives of “Economy” Category

Singapore Q3 GDP Crashed : 0.6% y/y (expected +1.7%) (Also, MAS statement)

Singapore third quarter GDP )’advanced’ estimates, i.e the first estimate)

0.6 % y/y
  • expected 1.7%, prior 2.1%
 -4.1 % q/q (annualised)
  • expected 0%, prior 0.3%
Big miss on both y/y and q/q. The q/q annualised is very poor indeed. I’m seeing some analysts suggest the Singapore economy is ‘crashing’ … this from the usual sort of suspects, but they’ve got a point on this data.
Simultaneously the Monetary Authority of Singapore’s Monetary Policy Statement
Headlines via Reuters:

India needs $1 trillion for housing, infrastructure projects: Report

India will require investments of $1 trillion over the next 5-7 years to meet demand from infrastructure and housing with banks, private equity and NBFCs likely to be main sources of funds, says a report.

Around 70-80 per cent of the demand for investments will be from housing, while the balance from smart city projects, infra-linked real estate projects like airports, railways, urban transport and development of industrial corridors, according to the report based on a survey jointly conducted by PwC, Naredco and APREA.

PwC is a leading consultancy firm, while Naredco and APREA are real estate-related bodies.

The report titled ‘Building the Economy Block by Block’, released at the Real Estate and Infrastructure Investors’ Summit 2016 organised by Naredco, said banks, private equity, NBFCs and REITs (Real Estate Investment Trusts) are expected to be the major sources for financing infrastructure projects.

“Constant percentage of banks’ commercial real estate credit to total credit over the years is an indicator of the lack of intent on the part of banking institutions to increase their exposure in the real estate sector development, hence making it necessary for developers to explore other sources for financing,” the report said.

Sept CPI Inflation at 4.3% (Useless Data For Traders )

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has revised the Base Year of the Consumer Price Index (CPI) from 2010=100 to 2012=100 with effect from the release of indices for the month of January 2015.

  1. In this press note, the CPI (Rural, Urban, Combined) on Base 2012=100 is being released for the month of September 2016. In addition to this, Consumer Food Price Index (CFPI) for all India Rural, Urban and Combined are also being released for September 2016. All India Inflation rates (on point to point basis i.e. current month over same month of last year, i.e., September 2016 over September 2015), based on General Indices and CFPIs are given as follows:

All India Inflation rates (%) based on CPI (General) and CFPI

Indices September 2016 (Prov.)August 2016 (Final)September 2015 (Final)
RuralUrbanCombd.RuralUrbanCombd.RuralUrbanCombd.
CPI (General)4.963.644.315.874.225.055.053.614.41
CFPI4.432.883.886.325.105.914.053.453.88

Chinese Banks Will Need $1.7 Trillion To Cover Bad Debt Deluge, S&P Calculates

Just last week we noted that in the latest shocker to emerge out of corporate China, at least a quarter of Chinese companies were unable to generate enough cash to cover their interest expense: as we noted previously this is the Ponzi Finance stage of China’s debt curve, the one that comes just before the inevitable “Minsky Moment” at which point all bets are off.

The implications of this, for the nation with nearly $20 trillion in corporate debt as well as a grand total of 300% in debt to GDP are staggering: it means that sooner or later, up to a quarter of bank loan exposure will have to be discharged, restructured, equitized or otherwise eliminated due to its non-performing nature, dramatically impacting not just the asset side of the bank ledger, but the liabilities as well, namely deposits, which could see a drop in the trillion.

Overnight, in a report published by S&P Global, the rating agency’s analysts noticed not only the latest deterioration in corporate China, but also the relentlessly growing leverage, noting that rising debt levels will worsen the credit profiles of China’s top 200 companies, requiring the country’s banks to raise $1.7 trillion in capital to cover a likely surge in bad loans. Read More 

GST lends more weight to India’s 8 per cent growth projection: S&P

Calling GST as the most important structural reform till date by the Modi government, S&P Global Ratings today said the passage of the indirect tax law gives it additional conviction of India clocking 8 per cent growth in the next few years.

“India’s GST passage gives us additional conviction around our 8%-ish GDP growth forecast over the next few years,” it said in a report titled ‘Asia-Pacific steadies while China goes silent’.

The rating agency had last month projected India to clock a “steroid-free” growth of 8 per cent in coming years.

“The GST passage is arguably the most important structural reform to date by the Modi government and will improve efficiency, cross-state trade and tax buoyancy,” it said today.

It saw a reasonably firm pick-up in Asia-Pacific’s macro momentum indicators, with pick-up in retail sales offering the clearest sign in most of the region’s economies. This, it said, stems from rising income, which in turn is part of the region’s evolving growth dynamics, with consumption playing a larger role.

Germany ZEW survey Oct current situation 59.5 vs 55.5 exp

Germany October ZEW survey now published 11 Oct

  • 55.1 prev
  • expectations 6.2 vs 4.0 exp vs 0.5 prev
  • Eurozone expectations 12.3 vs 5.4 prev

More from the ZEW :

  • improved sentiment is sign of robust economic activity
  • industry and exports providing impulse for German economy
  • risks concerning German banking sector are weighing on economic outlook

Much better than expected data but euro barely raising an eyebrow suggesting some decent sell in interest still floating around.

It is a survey of sentiment/intentions though rather than actual fact and markets are a lot more fussy recently about what matters and what doesn’t. Not so long ago that headline would have sent euro pairs spiking higher.

EURUSD 1.1114 EURGBP 0.9044 EURJPY 115.44    

India : August IIP shrinks; stands at -0.7% versus -2.5% in July

The Index of Industrial Production (IIP) for the month of August contracted (-)0.7% versus (-)2.5% in July. The General Index for the month of August 2016 stands at 175.3, which is 0.7 percent lower as compared to the level in the month of August 2015. The cumulative growth for the period April-August 2016 over the corresponding period of the previous year stands at (-) 0.3 percent, said a Ministry of Statistics & Programme Implementation release.

The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of August stand at 113.5, 184.3 and 194.6 respectively, with the corresponding growth rates of (-) 5.6%, (-) 0.3% and 0.1%. The cumulative growth in these three sectors during April-August 2016 over the corresponding period of 2015 has been 0.6%, (-) 1.2% and 5.7% respectively.

In terms of industries, seven out of the twenty two industry groups in the manufacturing sector have shown negative growth. “The industry group ‘Electrical machinery & apparatus n.e.c.’ has shown the highest negative growth of (-) 49.4 percent followed by (-) 22.4 percent in ‘Furniture; manufacturing n.e.c.’ and (-) 6.6 percent in ‘Wearing apparel; dressing and dyeing of fur’,” the release said. While Basic goods sector grew at 3.3%, capital goods contracted (-)22.2.%. Intermediate goods grew at 3.6%.

October 2016 Eurozone Sentix index 8.5 vs 6.3 exp

October 2016 Eurozone Sentix index

  • Prior 5.6
  • Current conditions 6.3 vs 4.5 prior
  • Expectations 10.8 vs 6.8 prior

Says Sentix;

” The Eurozones’s economy, according to investors, has now overcome the Brexit induced shock. However, the economy remains just on a moderate recovery path”.

EURUSD rockets up about 3 pips to 1.1183.

Greece Expects to Receive $3.14-Bln Tranche From EU on October 10 – Source

On September 27, the Greek Parliament approved a reform bill, stipulating a number of social welfare cuts and privatizations demanded by EU and International Monetary Fund (IMF) creditors. The bill will proceed for an evaluation by a Eurogroup working group, which will then present its recommendations to EU finance ministers.

“The overall picture is that the [Greek] government’s strategy to fulfill conditions [to receive next bailout tranche] has produced positive results, though with a little delay, and we expect that things will go well on Monday as we are done with [implementing] conditions,” the source said. In May, Eurogroup finance ministers held marathon talks on new loans for debt-ridden Greece, finally agreeing on a 10.3 billion-euro ($11.5 billion) aid package, which is part of the 86 billion-euro package. In June, the European Stability Mechanism (ESM) disbursed about 7.5 billion euros to Greece. Greece was told to fulfill 15 conditions in order to get remaining $3.14 billion. The Greek debt crisis erupted in 2010 with a number of austerity packages adopted by the parliament and several bailout payments provided by the European Commission, the European Central Bank (ECB) and the IMF. The loans, however, only resulted in increasing country’s debt.

China can control risks in banking sector even as bad loans increase

Reuters reporting comments by Peoples Bank of China governor Zhou published on their website today 9 Oct

  • risks in China’s banking system are controllable even as bad loans increase,
  • lenders have adequate capital
  • credit growth is fast, and that is a reflection of China’s efforts in boosting growth amid a weak global economy
  • but as the global economy gradually heads towards a recovery, China will have to control credit growth

 The PBOC published the comments, made at a G20 meeting in Washington earlier this week, on its website earlier today.

Chinese banks extended 948.7 billion yuan ($142bln) in net new yuan loans in August, more than double the figure of the previous month. and much can be attributed to strong mortgage demand.

Chinese property prices have risen sharply in the past year, drawing the attention of the central government, and a major price correction would add to strains on banks already wrestling with souring loans.