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Sat, 22nd July 2017

Anirudh Sethi Report

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Archives of “Economy” Category

Moody’s say measures from China’s financial work conference are credit positive

US rating agency Moody’s out with a note on China 21 July

  • highest level endorsement by Xi and top policy makers of measures are credit positive for sovereign
  • scrutiny from highest levels of govt on financial stability, SOE leverage, pace of debt growth in economy, among SOEs is likely to slow
  • forecast debt will continue to rise, inc for govts, household and non-financial corps#

Meanwhile EURUSD 1.1630, AUDUSD 0.7896, GBPUSD 1.2970 USDJPY 111.96

Greece Brain Drain: 33% Of Unemployed Looking For Jobs Abroad Vs 11% In 2015

The  Unemployment Rate in Greece is down to 21.7% in April from a record 27.9% in July of 2013 and a record low of 7.3% in May of 2008.

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Despite the falling rate, the percentage of those unemployed seeking jobs abroad has risen from 11% in 2015 to 33% this year.

The message seems to be “get me the hell out of here”.

The Greek Reporter notes Brain Drain Gathers Pace as One in Three Greeks Looks for a Job Abroad.

 According to the annual survey by the firm Adecco titled “Employability in Greece,” the brain drain phenomenon has been increasing over the last three years.

In 2015 only about 11% of unemployed respondents said that they were actively looking for a job abroad. This figure increased to 28% in 2016 and reached 33% this year.

The responses show that the unemployed have different reasons to seek work abroad. Whereas in 2005, the main reason was the prospect of a better wage, in 2016 and 2017 the main reason given were better career opportunities.

The study conducted for the third year running, in collaboration with polling company LMG, was based on a sample of 903 people from the age of 18 to 67.

According to other findings, 37% of respondents say that they have been out of the labor market for at least 12 months.

BOJ announce: No change to monetary policy, upgrade economic outlook

The Bank of Japan July monetary policy meeting has finished – statement out now. Pretty much as expected.

Maintains short-term interest rate target at -0.1 pct

Maintains 10-year jgb yield target around zero pct

Pushes back timing for hitting 2 pct inflation target (likely to see inflation reach 2 pct around fiscal 2019)

Leaves unchanged pledge to buy JGBs so that its holdings increase at annual pace of around 80 trln yen

BOJ’s quarterly report:

Recent moves in CPI have been relatively weak

Rise in medium to long term inflation expectations has been lagging behind somewhat

Inflation expectations projected to rise as firms gradually raise wages, prices

CPI  likely to continue uptrend, increase toward 2 pct

  • Projected rate of increase in CPI is lower mainly for the first half of 3 year projection period in BOJ’s quarterly report
  • Risks to economy, prices are skewed to downside
  • Momentum toward hitting price target is maintained but not yet sufficiently firm
  • BOJ to make policy adjustments as appropriate with view to maintaining momentum toward achieving price target

ADB upgrades emerging Asia’s growth outlook to 5.9%

The Asian Development Bank on Thursday upgraded its outlook for emerging Asia’s growth rate of gross domestic product for this year to 5.9% from the previous figure of 5.7%, citing better-than-estimated Chinese economic growth.

The GDP growth rates in 2015 and 2016 were 6.0% and 5.8%, respectively.

 The key driver for the upgrade is China, up 0.2 points to 6.7%, backed by increased domestic consumption and exports. The Chinese government earlier announced that January-June GDP growth was 6.9%.

The previous outlook was published in April. On Thursday, the ADB also upgraded the growth outlook for 2018 to 5.8% from 5.7%.

The ADB’s outlook covers 45 countries and regions in the Asia-Pacific region, and excludes developed nations.

Japan – Trade balance for June: Y 439.9BN (expected Y 488.0bn) exports notch seventh straight month of growth

Trade data from Japan, a headline miss but positives in there:

  • Trade balance for June: Y 439.9bn …  expected Y 488.0bn, prior was Y -204.2bn
  • Trade balance (adjusted) for June: Y 81.4bn … expected Y 127.5bn, prior was Y 133.8bn
  • Exports for June 9.7%y/y: … expected 9.5%, prior was 14.9%
  • Imports 15.5% y/y in June … expected 14.4%, prior was 17.8%
Exports to:
  • USA, up 7.1% y/y
  • China, up 19.5% y/y
  • Asia +13.6% y/y
  • EU, up 9.6% y/y
More;
  • Exports for the month at +9.7% y/y for the 7th consecutive month of gains. External demand has been a solid driver of Japanese growth.

India :Stock markets soaring, but economy sluggish; know what is in store in future

Even as stock prices climb to new highs, the data on the ground shows the economy is not gaining momentum. At 32,000, the Sensex now trades at 18.5 times the estimated one-year forward earnings. That’s a huge 20% premium to the long-term historical price-earnings multiple that India has traded at.

However, earnings growth and other high frequency indicators don’t quite match the optimism in the stock markets. Analysts expect earnings for the broader universe to fall in the June quarter.

Capex is crawling. New project announcements in Q1FY18 fell 8% year-on-year, slipping for the second quarter in a row to Rs 1.4 lakh crore. This is much lower than the average quarterly investments of the past three years, data from CMIE reveals.

Export growth is slowing. Although exports may have risen in the past ten months, they come off a low base. In June, the pace of exports moderated to just 4.4% y-o-y with non-oil exports slowing for the third consecutive month.

Loan growth remains tepid. While there is an increase in money mopped up via the bond markets, non-food growth is growing at just 6-7% and borrowings via CPs too are slowing.

China June Industrial Prdn. 7.6%y/y (expected 6.5%), Retail sales %y/y (10.6%) + more

China data for June 2017

Industrial Production 7.6% y/y for a huge beat
  • expected 6.5%, prior was 6.5%
  • For the m/m up 0.81%
Industrial production YTD 6.9% y/y  beat
  • expected 10.3%, prior was 10.3%
Fixed Assets (excluding rural) YTD 8.6% y/y, beat
  • expected 8.5%, prior was 8.6%
Retail Sales 11.0% y/y, big beat
  • expected 10.6%, prior was 10.7%
Retail Sales YTD 10.4% y/y, beat
  • expected is 10.3%, prior was 10.3%
From China’s National Bureau of Statistics:
  • June steel output at a record high
  • Real estate investment in China rose 8.5 percent in the first half of 2017 from the same period a year earlier, easing slightly from 8.8 percent growth in the first five months
  • New construction starts measured by floor area were up 10.6 percent in the first half of the year, compared with a 9.5 percent rise in the first five January-May
  • Property sales measured by floor area grew 16.1 percent in January-June from the same period a year earlier, up from 14.3 percent in the first five months of the year

CHINA Q2 GDP: 6.9% y/y (expected 6.8%)

April to June gross domestic product data from China

6.9% for a beat
  • expected 6.8%, Q1 6.9%
1.7% q/q (sa) in line
  • expected 1.7%, prior 1.3%
YTD GDP 6.9% y/y
  • expected 6.8%, prior 6.9%
Comments from China’s stats department after the data:
  • Economy continues steady, improving momentum in first half of 2017
  • H1 economic growth lays a solid foundation for achieving the full-year GDP target
  • Economy still faces uncertainties – international uncertainties, domestic structural problems