asia lng $4bn deal prices rise for fi rst time
TRANSCRIPT
BUSINESSGULF TIMES
Delivery Hero to buy S Korean fi rm Woowa
Prices rise for fi rst timesince October
$4BN DEAL | Page 3ASIA LNG | Page 2
JOB-CRUSADER : Page 8
Powell signals long policy pauseamid low infl ation
‘US sets China trade dealterms, but Beijing mum’ReutersWashington/Beijing
Washington has set its terms for a trade deal with China, off ering to suspend some
tariff s on Chinese goods and cut oth-ers in exchange for Beijing’s buy-ing more American farm goods, US sources said on Thursday.
Beijing has yet to confi rm wheth-er it is on board with the proposal, although offi cials will hold a press briefi ng later yesterday local time to update progress on the talks, the State Council Information Offi ce said.
Offi cials from the state planner, ministry of fi nance, foreign ministry, agriculture ministry and ministry of commerce will attend.
In the hours since US sources said terms for a phase-one deal were in place, Beijing’s silence had raised questions over whether the two sides can agree a truce in their trade war before a new round of tit-for-tat tar-iff s takes eff ect tomorrow.
A source briefed on the status of bilateral negotiations said the Unit-ed States would suspend tariff s on $160bn in Chinese goods expected to go into eff ect tomorrow and roll back existing tariff s.
In return, Beijing would agree to buy $50bn in US agricultural goods in 2020, double what it bought in 2017, before the trade confl ict began, two US-based sources briefed on the talks said.
China’s yuan jumped to a four-and-a-half-month high against the US dollar and Chinese shares rallied yesterday on hopes the two sides will avoid further escalation of the trade war.
US equity index futures whipsawed yesterday morning as investors fret-
ted over the lack of offi cial confi rma-tion.
Neither Washington nor Beijing made offi cial statements about a deal, however, raising questions about whether the terms had been agreed by both sides.
New Chinese tariff s on US goods are due to take eff ect at 0401 GMT tomorrow and new US tariff s on Chi-nese goods will apply at 0501 GMT.
Both would need to make formal announcements to postpone or can-cel the tariff s.
Washington had off ered to cut ex-isting tariff s on Chinese goods by as much as 50% and suspend the new tariff s scheduled for tomorrow to se-cure phase one of deal fi rst promised in October, two people familiar with the negotiations had said earlier on Thursday.
One of those people told Reuters that US President Donald Trump and his top advisers agreed on the terms for a proposal, possibly a fi nal off er, and were now waiting for Beijing to sign off in writing.
A Beijing-based US business com-munity offi cial also told Reuters he viewed the reported deal more as a “fi nal off er” that has been approved by Trump but not yet affi rmed by Beijing.
Chinese foreign ministry spokes-woman Hua Chunying, asked about the status of the trade talks during a daily briefi ng yesterday, did not com-ment on whether an agreement has been reached or specifi c terms of any deal with the United Sates.
“China is committed to construc-
tive dialogue to resolve and manage our diff erences, and believe... the deal must be mutually benefi cial,” she said.
Some analysts doubted China could deliver such a dramatic in-crease in agricultural purchases.
Ramping up purchases of other US farm products such as beef would be hard, too, they said.
“There’s just no logistical way that they can double imports in a year,” said Darin Friedrichs, senior Asia commodity analyst at INTL FCStone.
‘Made in Bangladesh’ exhibition official logo launch tomorrowThe off icial logo of the upcoming
Made in Bangladesh exhibition will be
launched during a ceremony at Oryx
Rotana Doha tomorrow, it has been
announced.
The exhibition will be held at the
Doha Exhibition and Convention Cen-
tre from January 28 to 30, 2020.
It is being organised by the Bangla-
desh embassy in Doha and Bangladesh
Forum Qatar under the patronage of
the Export Promotion Bureau of Bang-
ladesh and Qatar Chamber.
“Exhibitors from diff erent potential
sectors of Bangladesh will participate
in the exhibition.
They will showcase their products
and services and build bridges be-
tween businessmen, investors and en-
trepreneurs from Bangladesh and their
counterparts in Qatar,” the Bangladesh
embassy said in a press statement.
Ashud Ahmed, ambassador of
Bangladesh to Qatar, will release the
off icial logo of the ‘Made in Bangladesh’
exhibition. The exhibition will feature a
number of events over the three days.
The first day will have a formal
opening ceremony, seminars, a cultural
show under the theme ‘Rhythm of
Bangladesh’ and a fashion show
highlighting Dhakai Jamdani and
Katan fabrics. The second day’s events
will include seminars, a cultural show
themed ‘Seasons of Bangladesh’ and
an instrumental fusion and tribute to
the musical legends of Bangladesh.
The third and closing day will
feature seminars, a cultural show
under the theme ‘The Bengal Beats’,
a folk festival and a formal closing
ceremony and gala dinner. ‘Made in
Bangladesh’ is the “first initiative in
Qatar to enhance Bangladesh-Qatar
co-operation” in the areas of trade and
investment, leveraging the potential
of the socio-economic progress Bang-
ladesh has witnessed over the past
decade, the statement notes.
Turkish industrial output rises for 2nd month in a row in OctReutersIstanbul
Turkish industrial production rose for the second month in a row in October after a year of declines as the economy recovers from recession, though the expansion in output from a year earlier was lower than expected at 3.8%, off icial data showed yesterday.Industrial output was expected to have risen 6.2% annually in October on a calendar-adjusted basis, according to a Reuters poll.The lira weakened slightly to 5.7875 against the dollar at 0843 GMT from 5.7780 before the data was released.After three consecutive quarters of year-on-year contraction, Turkey’s economy grew 0.9% in the third quarter, shaking off a recession which followed a currency crisis last year when the lira lost nearly 30% of its value.Industrial production, widely regarded as an indicator of broader Turkish growth, rose a revised 3.6% in September after 12 months of contraction.The production increase in September had previously been given as 3.4%.“Thanks to the recent increase in credit growth, it seems that industrial
production will increase in the coming period as well,” said Yatirim Finansman economist Hilmi Yavas.“This is supported by the fact that there are no negative developments in exports.”On a month-on-month basis, industrial production fell 0.9% in October on a calendar and seasonally adjusted basis, the
Turkish Statistical Institute (TUIK) said. Month-on-month growth will likely return in the coming months as the data is always volatile, Yavas said, adding that the lower-than-expected industrial output in October did not point to a negative outlook for growth.Turkey’s central bank has slashed interest rates in recent months to
revive the economy, most recently cutting its policy rate by 200 basis points to 12% on Thursday.The key rate had stood at 24% in July.The data showed the manufacturing index rose 3.7% year-on-year in October, while mining and quarrying increased 6.5%, TUIK said.Manufacturing output fell 1.1% from a month earlier.
US President Donald Trump (right), shakes hands with Liu He, China’s Vice Premier, during a meeting in the Oval Off ice of the White House in Washington (file). A source briefed on the status of bilateral trade negotiations said the US would suspend tariff s on $160bn in Chinese goods expected to go into eff ect tomorrow and roll back existing tariff s. In return, Beijing would agree to buy $50bn in US agricultural goods in 2020, double what it bought in 2017, before the trade conflict began.
UK’s do-good businessesexpect election certainty to create opportunitiesReutersLondon
Britain’s new government could provide
“the opportunity of a generation” for the
nation’s ethical business sector by ending
years of political and economic uncertainty
that held it back, experts said yesterday.
British Prime Minister Boris Johnson’s
Conservative Party triumphed in a land-
slide election victory on Thursday with a
promise to get Brexit done after more than
three years of deadlock.
Securing a large majority should allow
the government to forge ahead on issues
that aff ect the country’s social enterprises,
Kevin Armstrong, policy lead at UnLtd, a
British charity, told the Thomson Reuters
Foundation by phone.
“There will be some good confidence
the Conservatives will deliver on their key
commitments to social entrepreneurs,
such as the cutting of business rates for
small businesses and the expansion of
startup loans,” he said. Johnson, who led
his party to the biggest election victory
since Margaret Thatcher in 1987, said in his
speech that he will work hard to secure the
support of first-time Conservative voters,
many of whom were in Labour heartland.
Helping communities that feel left
behind could present the “opportunity of a
generation” for social enterprises – which
tackle problems like hunger and homeless-
ness – said Peter Holbrook, chief executive
of Social Enterprise UK, a trade body.
“(Social enterprises) have a fundamental
and integral role to play if (these communi-
ties) are going to be socially healed – the
future has to be positive and optimistic,”
said Holbrook.
“We have survived and thrived over the
last 10 years and they have been diff icult,
so whatever government, national politics,
throws in our way, we are optimistic and we
will make it work – because that’s what we
do,” he added.
Britain’s social enterprise sector – with
more than 100,000 social enterprises con-
tributing £60bn ($78bn) to the economy
– has been sidelined politically in recent
years, particularly as a result of Brexit,
experts have said.
The second poll of experts on the best
countries for social entrepreneurs by the
Thomson Reuters Foundation recently
found Britain had slumped to 13th place
among the world’s 45 biggest economies
from third slot three years ago.
Saturday, December 14, 2019Rabia II 17, 1441 AH
BUSINESS
Gulf Times Saturday, December 14, 20192
ReutersLondon
Asian spot prices for liquefi ed natural gas (LNG) edged up this week after almost two months of
declines on new demand and amid signs that the US was close to reaching a trade deal with China.
The average LNG price for January delivery into northeast Asia is esti-mated at about $5.65 per million Brit-ish thermal units (mmBtu), up 15 cents from the previous week, sources said.
The February price is estimated at around $5.50/mmBtu.
The Asian market is still at its lowest level seasonally.
“There was a bearish sentiment in the market for a long time, so probably peo-ple are realising now that prices have come off too much to withhold from buying,” one LNG trader said.
Much of the demand came from Turkish state energy company Botas which is seeking around 30 cargoes for December to March delivery.
“The reason (for the tender) is simply the attractive LNG prices rather than a demand increase,” Botas told Reuters.
A gas trader in Turkey said that the price for Russian pipeline gas is around $3.00/mmBtu more expensive that the spot LNG price, but added that the premium is seen as decreasing after the fi rst quarter 2020.
There were also a few buying enquir-ies in the Far East and India within ten-ders and on the bilateral basis, market sources said.
Indian Oil Corp purchased a cargo slightly above $5.00/mmBtu for De-cember 22 delivery, one trader said.
Bharat Petroleum Corp Ltd, another Indian buyer, was in the market for a mid-January cargo.
Taiwan’s CPC had a tender open for a limited number of participants look-ing for a cargo to be delivered between late January and early February, trade sources said.
Japan’s Tohoku Electric Power has bought a cargo in a tender for late Janu-ary delivery at around $5.60/mmBtu,
two sources said. There was also a buy tender from Malaysia’s producer Petro-nas for a cargo to be delivered to Japan in the fi rst half of January, they added.
China, world’s second-largest buyer of LNG, had to deal with high inventory levels amid weak demand, however.
About fi ve to seven LNG cargoes were being off ered for resale in a month by
Chinese buyers, with the majority of off ers coming from China National Off -shore Oil Corp (CNOOC), sources said.
The energy complex was supported on Thursday on hopes the US was close to reaching a trade deal with China, which has refl ected in a rise in Euro-pean gas prices and Asian Japan Korea Marker (JKM).
Gas prices in Europe were also bu-oyed by the possible threat of sanctions by the United States aimed at hamper-ing the completion of the Nord Stream 2 pipeline linking Russia and Germany.
However, European prices plummet-ed next day as the European market re-mains oversupplied and there are hopes that Russia and Ukraine will conclude a
new deal on a transit of Russian gas to Europe. The current deal expires at the end of December.
Ukrainian President Volodymyr Zel-enskiy said this week Kiev and Moscow could reach an agreement on a new deal before the end of the year, seeing scope for compromise between their respec-tive demands.
Asian LNG prices rise for fi rst time since Oct
Oil consumption tracking is all about AsiaBy John KempLondon
Oil market analysts must make sense of
a bewildering array of statistics about
production, consumption and invento-
ries, compiled and published with vary-
ing definitions and degrees of accuracy
and timeliness.
The challenge is to form an accu-
rate and nuanced picture of the whole
market capable of generating useful
forecasts, without becoming lost in the
insignificant details.
The World Bank identifies around
200 economies in the world, but on the
consumption side, at least, only a hand-
ful are individually important for market
analysis.
The oil market is best thought of as a
complex adaptive system (“Persistence
of instability in the oil market”, Reuters,
September 15, 2016).
Complex systems are “large networks
of components with no central control
and simple rules of operation that give
rise to complex collective behaviour”
(“Complexity: a guided tour, Mitchell,
2009).
From the demand side of the oil
market, however, the only countries
worth tracking individually are those
with consumption large enough to aff ect
the market as a whole and changing fast
enough to alter equilibrium.
Just ten countries account for well
over half of global oil consumption
and three-quarters of the incremen-
tal growth over the last decade, and
these are the ones it is crucial to follow
closely.
Other countries are too small to
have an individual impact, though they
can make a diff erence in groups when
consumption changes collectively in
response to common global influences
such as price spikes and recession.
Key oil consumers
The most important influence on
global oil consumption growth comes
from China and India, which are large
and fast-growing consumers.
China’s oil consumption hit 13.5mn
barrels per day (bpd) in 2018 and had
grown by an average of 5.5% per year
over the previous decade, according to
data from BP.
India’s oil consumption hit 5.1mn bpd
in 2018 and had increased by an aver-
age of 5.1% over the previous ten years
(“Statistical Review of World Energy”,
BP, 2019).
China and India accounted for 19% of
all oil consumption worldwide last year
and 58% of all consumption growth over
the last decade.
The two Asian giants play an increas-
ingly dominant role in consumption
analysis and stand in a category of their
own.
The United States is next in impor-
tance, with consumption of 20.5mn bpd,
roughly 50% higher than China and
300% higher than India, but with growth
of just 0.5% per year in 2008-2018.
The United States accounts for
roughly 20% of global consumption,
slightly larger than China and India
combined, but its slow rate of growth
means it has a much less decisive impact
on price formation.
(US influence on oil prices is felt
mostly from the production side, as a
result of its role as the world’s largest
and fastest growing oil supplier).
Beyond the United States, come Saudi
Arabia, Brazil, South Korea and possibly
Russia, all medium-sized oil consumers
which exhibited fast growth in 2008-
2018.
Finally, Japan and Germany, medium-
sized oil consumers which exhibited
relatively rapid rates of declining oil use
over the last decade.
Canada is a similar-sized oil consumer
but exhibited only very slow growth in
2008-2018, making it relatively unimpor-
tant analytically.
These ten countries accounted for
60% of all global consumption in 2018
and 76% of all consumption growth in
2008-2018.
Tracking global oil consumption is
mostly about following closely what
is happening in these key consuming
countries.
Common infl uences
The remaining 190 economies con-
sumed 40% of global oil but accounted
for less than a quarter of the decade
growth. These economies are too small
to have a significant influence on oil
consumption and prices individually,
though they can have important eff ects
in aggregate.
Oil price spikes and slumps have a
synchronised and significant impact on
consumption on these other economies,
big enough to help move the market.
Global and regional business cycles
also tend to have a common impact on
consumption in these economies that
can be significant in aggregate.
And commodity price cycles (includ-
ing both oil and non-oil commodities)
can have a significant common impact
on commodity-dependent exporting
countries that shows up in their collec-
tive oil consumption.
In most cases, the influences on the
smaller consuming economies from oil
prices, the macroeconomic cycle and the
commodity cycle are the same as for the
major consuming economies.
John Kemp is a market analyst. The
views expressed are his own.
Valve control wheels are seen at ENN Energy Holdings Ltd’s liquefied natural gas terminal on Zhoushan Island, Zhejiang province. About five to seven LNG cargoes were being off ered for resale in a month by Chinese buyers, with the majority of off ers coming from China National Off shore Oil Corp, sources said yesterday.
Chinese businesses boost self-reliance as trade war rolls onAFPBeijing
Whether Beijing and Washington reach a trade deal or not, China is already speeding up eff orts to break its reliance on a country that is one of its biggest economic partners but also its biggest adversary.The eff ort has gained greater urgency for Beijing after more than a year and a half of protracted negotiations, painful tariff s and US sanctions against leading Chinese technology companies.Negotiators are working towards a potential “phase one” deal but tensions could escalate again if President Donald Trump goes through with a planned tariff hike on Sunday.To fortify themselves for future levies or political waves, Chinese companies are looking to new markets, adapting supply chains, sourcing homegrown
parts and shifting to domestic suppliers.President Xi Jinping issued his own directive in May, calling for self-reliance in “key core technologies” while warning of a “Long March” against foreign challengers – a reference to a now-legendary 1934-35 strategic retreat by China’s Communist revolutionaries.A manager surnamed Liang at Weipai Industrial Ltd, a tablet computer maker in the southern tech hub of Shenzhen, said the company was diversifying supply chains to reduce reliance on US parts, and looking for a Chinese company to provide semiconductors. But other industries have also had to rethink their plans. A sales executive surnamed Lu at textile exporter Zhejiang Zhuang En said after shipments to the US almost halved this year they were targeting European and African fashion brands instead.
Tech leads the drive
Samm Sacks, China digital economy fellow at think tank New America, said the trade war “has added fuel to the fire of the Chinese government’s ambitions to duplicate industries inside China that they in the past got from the outside world”.Joerg Wuttke, president of the EU Chamber of Commerce in China, said the two countries were in the process of “decoupling” – a term that has regularly sprung up during the trade war.“China has realised that it can’t rely on some of the foreign suppliers,” Wuttke told reporters on Monday.“And the US has deliberately decided to contain China in many ways and decided to withhold technologies which they deem is beneficial to the Chinese industrial military complex.”Sunday’s potential tariff hike would target Chinese goods that were
not previously hit by US duties – including about $12bn worth of Chinese toy imports, plus cellphones, laptops and tablet computers.Electronics and technology companies are at the forefront of China’s drive to become self-sufficient.Chinese tech giant Huawei launched its own operating system Harmony OS in August, as it faces the threat of losing access to Android systems with US-China tensions escalating.The company was swept into the trade war in May when it was blacklisted by Trump owing to suspicions its equipment could provide a backdoor for Chinese intelligence services, something the firm denies.Another tech firm, ZTE, nearly collapsed after US companies were prevented from selling it vital components over its continued dealings with Iran and North Korea.
‘A critical battle’
Sacks said the ZTE case was a “watershed moment” for the Chinese government, and gave “a glimpse of what things might actually be like if they were cut off from global suppliers”. Trump later allowed ZTE to resume imports under tough conditions. The trade war is now “a critical battle of ideology, value systems, and morality”, said Larry Ong, senior analyst with political risk consultancy SinoInsider.This week state news agency Xinhua reported that two Chinese companies were to jointly build a domestic operating system, seemingly in a bid to unseat the dominance of US giant Microsoft’s Windows.Xinhua quoted one CFO as saying there was an “urgent need to develop a domestic independent operating system with a unified technical system and ecosystem”.
But experts have warned it is not easy to entirely cut out the world’s biggest economy, particularly in the technology sector.“You open up a ZTE phone – and the same can be said for Huawei – and you’re looking at components from all around the world,” said Sacks.“In many ways this nationalistic rhetoric doesn’t conform to the reality, which is very tightly woven interdependence (for technology).”But Beijing’s drive to reduce economic reliance on the US is one sign of the hardening tensions between the two in what some have called a “new Cold War”. Max Zenglein, head of economic research at MERICS, warned the two countries were “at the beginning stages of decoupling”.“The outcome of the current negotiations will only have an impact on the speed and scale of the decoupling process, but not reverse the trend.”
Japan sets $41bn in extra spending for stimulus
BloombergTokyo
Japan will spend an extra ¥4.5tn ($41bn) this fi scal year to boost an economy that’s facing
sputtering growth and a diffi cult recovery from recent natural dis-asters, according to documents released by the fi nance ministry yesterday.
The extra spending comes amid a rising awareness around the world that more government help is needed to keep economies growing in the face of a global slowdown that is exposing the limits of relying on central banks to do the heavy lifting of economic management.
Japan’s economy has slowed all year and is forecast to shrink 2.6% this quarter as a sales tax hike weighs on consumer spend-ing, which has been a key prop to growth amid slumping exports.
About ¥4.4tn ($40bn) in new bonds will have to be issued to fund the package, the government said. Of that, ¥2.19tn will come from new construction bonds. Another ¥2.23tn will be raised with debt covering bonds, which are used to cover revenue shortfalls.
Some ¥1.3tn in funding will come from savings accrued from lower-than-expected debt-fi -nancing costs in the government’s initial fi scal-year budget.
The diversion of monies won’t reduce the punching power of the stimulus package, a government offi cial said. Some ¥170bn of the package is earmarked for unspeci-fi ed expenditures.
Japanese machinery orders dropBloombergTokyo
The double punch of a super
typhoon and a sales tax hike
that hit Japan in October contin-
ues to confound economists,
who have repeatedly underesti-
mated the damage wrought by
the two factors.
Machinery orders, a leading
indicator of capital spending
plans, fell 6% in the month, ac-
cording to data released Thurs-
day from the Cabinet Off ice.
Economists had expected a
0.5 increase.
Once again, analysts were
left scratching their heads as
they tried to extrapolate the
underlying trend from data
distorted by the impact of the
weather and the tax hike.
Orders have now fallen for
four consecutive months, some-
thing that hasn’t happened
since the financial crisis, and a
cause for concern if the factors
behind it aren’t temporary.
The ministry cut its assess-
ment of the data, saying orders
were at a standstill.
The worse-than-expected
result adds to evidence that the
sales tax hike may be weighing
more heavily on growth than
economists and policy makers
had hoped.
BUSINESS3Gulf Times
Saturday, December 14, 2019
ReutersSeoul/Frankfurt
Germany’s Delivery Hero agreed a $4bn deal to buy South Korea’s top food delivery app owner
Woowa Brothers, ratcheting up con-solidation in the industry as it expands in Asia’s fast-growing but crowded market.
The deal, announced yesterday by Woowa, follows a wave of others in the rapidly expanding sector but is the big-gest so far.
Woowa said it fell into the arms of its rival as “a survival strategy” in an in-tensely competitive market.
For Delivery Hero, now worth over €11bn ($12bn) after listing at a value of €4.4bn two and a half years ago, buying Woowa expands its presence in Asia as Europe becomes more competitive.
Its shares leapt 18.9% to a record €59.64 apiece.
Analysts at Barclays said that given the gross merchandise value it acquired, Delivery Hero had agreed “a good price for an asset that gives DH clear leader-ship in a very attractive market”.
Profi tability in Korea should also ease concerns by some investors over the company’s cash burn rate, they said.
South Korea, with a dense population and high smartphone use, is the world’s fourth biggest market for online food orders.
A huge jump in the number of single people living on their own has propelled the boom in food delivery services.
Delivery Hero’s Yogiyo app ranks sec-ond behind Woowa’s Baedal Minjok in South Korea, but the sector leader faces stiff competition from rivals such as e-commerce fi rm Coupang, backed by Ja-pan’s deep-pocketed SoftBank Group.
“The (food) delivery market has been fl ooded with gigantic Japan-backed capital and infl uential online platforms, leading Woowa to factor in partnership as a survival strategy,” said a spokesman at Woowa Brothers.
Uber Technologies Inc’s UberEats restaurant delivery business pulled out of South Korea earlier this year.
Delivery Hero CEO Niklas Oestberg said in an analyst call he expects no ma-jor antitrust hurdles to the deal, citing keen competition by players including Coupang.
South Korea’s online market for food delivery and pickup has more than dou-bled over the past fi ve years to $5.9bn – bigger than Japan and Germany’s mar-kets combined, and trailing only China, the United States and the United King-dom, Euromonitor data showed.
Euromonitor expects the South Ko-rean market to jump to $9bn by 2023.
Delivery Hero’s Oestberg said he would commit new resources to Woowa to enable it to hold its own and expand.
“We fully support Woowa Brothers to continue making investments and innovate for the benefi t of the wider in-dustry participants, including consum-ers, restaurants, employees and riders,” Oestberg said in a statement.
The initial transaction is expected to close in the second half of next year, giv-ing Delivery Hero an 88% stake in Woowa with the remaining 12% held by Woowa management, which will be swapped for Delivery Hero shares over the next four
years. Delivery Hero said it expected to achieve 100% ownership in Woowa over time for about €1.7bn ($1.9bn) in cash and €1.9bn in shares based on a 20-day average share price of €47.47.
Woowa’s exiting investors include Goldman Sachs, Singapore fund GIC, Hillhouse Capital and Sequoia Capital.
Established in 2010 as a food delivery fi rm, Woowa Brothers – ‘woowa’ means elegant in Korean – grew fast to become the country’s top online food delivery services fi rm, taking over 30mn orders per month, and expanded into the busi-ness of providing shared kitchen space for restaurateurs as well as moving into Vietnam. Founder and chief executive
offi cer Kim Bong-jin, 43, will head up a newly formed joint venture with Deliv-ery Hero, based in Singapore.
Regional players like Singapore-based Grab and Indonesia’s Gojek are already well implanted.
Analysts said Woowa and Delivery Hero will be able to build up prominence in Southeast Asia, but Woowa needs to map out a more localised agenda to have a chance of success.
“While Woowa Brothers has been ex-panding in South Korea as a local com-pany with a kitsch marketing strategy which exactly suits South Korean taste, it will be necessary for the fi rm to have more local views and strategies which
suit Southeast Asian consumers,” said Jade Lee, an analyst at research fi rm Eu-romonitor.
The growing global food delivery trade has triggered dealmaking, stock market listings and rising valuations.
The purchase of British-based Just Eat is set to top the Delivery Hero-Woowa deal: Dutch fi rm Takeaway.com is in talks to buy Just Eat in a transac-tion that values the latter at £4.3bn ($5.52bn), an off er that Dutch-based technology group Prosus recently topped. Delivery Hero sold its German food delivery businesses to Takeaway.com last year in exchange for cash and an equity stake in the buyer.
Germany’s Delivery Hero in $4bn deal to buy Woowa
The logo of online food ordering and delivery giant Delivery Hero is seen at its global headquarters in Berlin. The German takeaway giant said it had agreed to buy South Korea’s largest food delivery app Woowa in a $4bn deal aimed at beefing up its presence in Asia.
Surging inflation to keep India’s central bank on pause modeBloombergMumbai
India’s inflation galloped to its highest
level in more than three years, giving
monetary policy makers reason to
keep interest rates on hold despite flag-
ging economic growth.
Consumer price inflation acceler-
ated to 5.54% in November from a year
earlier, higher than the 5.3% median
estimate in a Bloomberg survey of 39
economists.
It’s the highest print since July 2016
and way above the Reserve Bank of
India’s 4% medium-term target.
With food prices, led by onions,
showing little signs of easing and tel-
ecommunication companies recently
raising tariff s, inflation will likely remain
sticky, making it diff icult for the central
bank to off er more stimulus.
The RBI last week cited inflation
risks as the main reason for a surprise
pause after 135 basis points of rate cuts
this year.
“The inflation trajectory will likely
hover above the RBI’s comfort level
of 4%, implying that further rate cuts
will be diff icult,” Upasna Bhardwaj, an
economist with Kotak Mahindra Bank
Ltd in Mumbai, said before the data.
India isn’t the only emerging
economy grappling with surging food
prices.
China is confronted with rising meat
prices, while supply problems are driv-
ing up food costs in Turkey and Nigeria.
Data from the United Nations show
that global food prices rose at the
fastest pace in October in more than
two years. In India, prices have reached
a level where it’s making the inflation-
targeting central bank wary of more
easing, even though it retained an
accommodative policy stance.
Interest rate swap markets are now
pricing out any rate cuts in the coming
months.
That isn’t surprising since the RBI
expects food prices to remain elevated
in the near term, especially for items
such as milk, pulses and sugar.
The central bank raised its inflation
projection for the second half of the
financial year ending March to a range
of 4.7%-5.1% from 3.5%-3.7% previously.
Separate data showed factory
output contracted 3.8% in October gov-
ernor Shaktikanta Das last week said
it would be prudent to wait for more
clarity on inflation despite a strong
case to look through the current food
price spike.
He expects the onset of the winter-
crop sowing season as well as ample
reservoir levels to help stabilise food
prices.
The government has also stepped
up imports of onions to curb price
pressures.
Core inflation – which strips out
volatile food and fuel prices – remains
subdued, a reflection of weak demand
in an economy that grew at its slow-
est pace in more than six years last
quarter.
“We think weak growth in household
spending will keep price rises in other
household goods and services sub-
dued,” Rahul Bajoria, senior economist
at Barclays Bank Plc said before the
data was released.
Pakistan bank gets £190mn settlement from UKInternewsIslamabad
The State Bank of Pakistan (SBP) has confi rmed that £190mn from the UK’s
National Crime Agency (NCA) had been received by the National Bank of Pakistan (NBP) on ac-count of a settlement with prop-erty tycoon Malik Riaz Hussain’s family, but declined to share de-tails.
Testifying before the Senate Standing Committee on Finance and Revenue, SBP’s deputy gov-ernor Jameel Ahmad said: “The payment has been received by the National Bank of Pakistan, but the question about the account in which it has been kept should be addressed to the government of Pakistan.”
The disclosure followed a heated discussion among the par-ticipants of the meeting presided over by Senator Farooq H Naek, who instructed SBP governor Dr Reza Baqir to attend the commit-tee’s next meeting to respond to various questions being raised by senators.
Finance ministry spokesper-son Omar Hameed Khan was not available to explain in which ac-count the funds received from NCA had been kept.
Another senior offi cial said that the ministry was unaware about the funds, their sources and na-ture, except that these had been received in the NBP’s branch in Supreme Court of Pakistan, Is-lamabad. Last week, special as-sistant to the prime minister Shahzad Akbar had said the funds would be transferred to the Su-preme Court’s NBP account and the federal government had re-quested the court to transfer the money to its account for spending on social welfare.
The matter came up for discus-sion when Senator Mushahidullah Khan of the PML-N asked if the proceeds coming from the NCA purportedly “on account of some crime settlement” were going to the Supreme Court or the SBP and why they were not being depos-ited in Account No 1 of the State of Pakistan.
In response, SBP’s deputy gov-ernor said the funds had nothing to do with his organisation and questions about the issue at hand should be referred to the govern-ment. He, however, said he could confi rm that the funds had come directly to the NBP.
At this, Senators Khan and Talha Mehmood asked whether or not every foreign transaction was required to be reported and trans-ferred through the central bank and more so when this pertained to the State of Pakistan.
Ahmed said the transactions could also be routed through the banks that in turn were required to report it to the SBP in gen-eral terms. In such cases the SBP might not be informed in which accounts such funds were kept.
“We cannot share with you more information on this,” he added. Senators Mehmood, Mian Ateeq Shaikh and Dilawar Khan retorted that it was unacceptable for an institution to refuse to share certain information with parlia-ment and that they might bring a privilege motion because all agen-cies, departments and institutions were bound to share “anything and everything” with the parlia-mentary panels.
Pakistan rupee getting strong, likely to hit 150 to dollarInternewsKarachi
Pakistan rupee is strongly expected to
maintain its uptrend in the short run
and peak out at around 150 to the US
dollar over the next three to four months,
which will provide an opportunity to the
central bank to build the country’s foreign
currency reserves by absorbing excess
supply of the greenback in the market.
An economist at a leading bank, a
currency dealer and a textile exporter,
in diff erent conversations, said that the
continuously strengthening rupee would
peak out at around 150 to the US dollar by
the end of March 2020.
Later, the rupee is anticipated to return
to its depreciation phase around the
fourth quarter (April-June) of the current
fiscal year. “The rupee may return to 164-
165 by the end of FY20,” the economist
said on condition of anonymity.
So far, the rupee has regained 5.52%
of its value or Rs9.07 in around past
six months to 154.98 to the greenback
compared to the all-time low close of
164.05 in the inter-bank market on June
27, 2019, according to the State Bank of
Pakistan (SBP).
“The recovery of the rupee came
following a significant increase in the
supply of dollars in the market and drop
in demand amid a notable reduction in
imports, improvement in exports and
steady inflow of worker remittances,” the
economist said.
The import of petroleum oil on de-
ferred payments worth $3bn per annum
from Saudi Arabia since July, accumula-
tion of dollars from the retail market
by the central bank and receipt of loan
tranches from multilateral and bilateral
lenders including the International Mon-
etary Fund (IMF) and the Asian Develop-
ment Bank (ADB) also played a pivotal
role in strengthening the rupee.
Moreover, the foreign investment of
over $1.2bn in the government sovereign
papers, mostly treasury bills, since July,
gradual return of foreign investors to
the stock market and improvement in
foreign direct investment (FDI) in diff er-
ent sectors of the economy like oil and
gas exploration, power and agriculture
also improved dollar supply and helped
strengthen the rupee.
To recall, the central bank made a ma-
jor change to the rupee-dollar exchange
rate regime in May.
It ended state control of the rupee and
made it partially free.
Market participants, mostly banks,
determine the rupee-dollar parity, consid-
ering the supply and demand of dollar in
the inter-bank market.
However, the SBP, the regulator, still
has a role of monitoring the trend in the
currency market and can take action if
any market participant is found manipu-
lating the situation.
Forex Association of Pakistan (FAP)
president Malik Bostan recalled that a
parliamentary committee, set up by the
prime minister to determine the causes
of high inflation, had reported earlier that
the massive unwanted depreciation of the
rupee left it undervalued and caused the
inflation. “The appreciation of the rupee
may be seen in that backdrop,” he said.
Earlier, diff erent governments from De-
cember 2017 to June 2019 let the rupee
depreciate a massive 55.5% to an all-time
low of 164.05 to the greenback on June
27, 2019 compared to 105.5 in the early
days of December 2017.
Besides, tightening of regulations
for the import of luxury goods, imposi-
tion of regulatory duty on the import
of a number of items, turnaround in the
current account balance from deficit to
surplus in October and supply of dollars
by currency dealers to the government
also helped strengthen the rupee, he said.
“Currency dealers in open markets
have provided $1.8bn to the government
in the past six months,” he said.
The economist said the rupee may
return to the depreciation phase in the
fourth quarter – April-June – of FY20,
believing the government would soften
some regulations to let economic activi-
ties happen in the country.
The expected measures may create
demand for dollars for the import of raw
material and finished goods, he added.
Apart from these, the country is sched-
uled to make two big debt repayments
over the next two quarters.
The payments may build pressure on
the rupee.
“Pakistan is estimated to repay a total
of around $9bn-$10bn worth of debt in
FY20.
Of this, it has already repaid $4.4bn in
the past four months,” he said.
The economist said the central bank
may continue to make extensive buying
of dollars in the open market to build the
foreign currency reserves.
The SBP will also engage in this exer-
cise to meet the IMF condition of building
reserves to $12bn sometime in the fourth
quarter.
A shopper is seen at a supermarket in Mumbai. Consumer price inflation in India accelerated to 5.54% in November from a year earlier, higher than the 5.3% median estimate in a Bloomberg survey of 39 economists.
European markets surge on Johnson election triumph, US trade deal reportsAFPLondon
London stocks and the British pound jumped yesterday after an election triumph for Conserva-
tive Prime Minister Boris Johnson that analysts said will bring clarity to Brexit proceedings and unlock stronger eco-nomic growth.
Other European stock markets — although lagging buoyant London, which rose over 2% at one point — also powered ahead, supported by confi r-mation of a partial trade deal between the United States and China.
“Investors might have two early Christmas presents this week: a phase one trade deal between the US and China, and Brexit getting done,” said Jasper Lawler, head of research at trad-ing fi rm London Capital Group.
Johnson, whose governing Con-servative Party swept to a decisive win, will now push ahead with Britain’s scheduled exit from the European Un-ion on January 31 as he seeks to dispel three years of uncertainty and political deadlock, with a post-Brexit, prob-ably expansionary, budget planned in March.
“The UK general election has pro-vided a clearer path towards a resolu-tion to Brexit and looser fi scal policy, which should boost economic activity and push up sterling, UK equities, and Gilt yields,” said Hubert de Barochez, an economist with Capital Economics.
But he also warned that “as long as there remains the possibility of some-thing like a ‘no deal’, those gains ought
to be limited”. European leaders wel-comed also what appeared to be an end to Brexit paralysis, but also warned Britain against becoming “unfair com-petitor”.
The sheer scale of Thursday’s victo-ry — the biggest Conservative majority since Margaret Thatcher’s heyday in the 1980s — sent the pound soaring to an 18-month dollar peak and to highs against the euro not seen since the June 2016 Brexit referendum.
The broader FTSE 250 index, which is more weighted with domestic com-panies than the FTSE 100 which is dominated by multinationals, surged to a record high.
Investors expressed relief that John-son roundly defeated main opposition leader Jeremy Corbyn’s Labour Party — which had vowed to renationalise formerly state-owned companies.
“The threat to businesses from the Labour policies has been removed and there has been a collective sigh of re-lief,” said Maurice Pomery, founder of trading group Strategic Alpha.
The pound held at elevated levels yesterday but pulled back somewhat from the multi-month peaks forged overnight.
“Further delays to Brexit look un-likely now, meaning households and businesses can plan accordingly.
This is exactly why the markets have reacted in the way they have,” Forex.com analyst Fawad Razaqzada told AFP by e-mail.
Global investor sentiment was given another shot in the arm by Beijing and Washington announcing they have reached agreement on a long-awaited
trade deal. China announced yester-day a “phase one” trade deal with the United States that includes a progres-sive rollback of tariff s and the protec-tion of intellectual property rights, but the two sides have yet to sign the agreement.
The announcement came a day af-ter President Donald Trump tweeted that the world’s two biggest economies were very close to a “BIG DEAL” in their protracted trade dispute.
The agreement means the two sides avoid an escalation of the trade war as additional tariff s and counter-tariff s had been due to go into force over the weekend.
Trade tensions between the world’s biggest economies have been a huge drag on global growth, with most countries being sucked into the stand-off , sending some into or close to re-cession.
“A trade deal, if agreed, could al-leviate some of the growth concerns,” said Razaqzada, adding that “this is a big deal given how important China is to the global economy”. Despite the confi rmation of an agreement on a text for the deal, US stocks were down in midday trading on the day US lawmakers took the grave step of approving two charges against Don-ald Trump, setting up a full House of Representatives vote to impeach the president for abusing his powers and obstructing Congress.
In London, the FTSE 100 closed up 1.1% to 7,353.44 points; Frankfurt — DAX 30 ended up 0.5% to 13,282.72 points and Paris — CAC 40 closed up 0.6% to 5,919.02 points yesterday.
Apple IncAmerican Express Co
Boeing Co/TheCaterpillar Inc
Cisco Systems IncChevron Corp
Walt Disney Co/TheDow Inc
Goldman Sachs Group IncHome Depot Inc
Intl Business Machines CorpIntel Corp
Johnson & JohnsonJpmorgan Chase & Co
Coca-Cola Co/TheMcdonald’s Corp
3M CoMerck & Co. Inc.
Microsoft CorpNike Inc -Cl B
Pfizer IncProcter & Gamble Co/The
Travelers Cos Inc/TheUnitedhealth Group Inc
United Technologies CorpVisa Inc-Class A Shares
Verizon Communications IncWalgreens Boots Alliance Inc
Walmart IncExxon Mobil Corp
272.94
123.04
345.20
146.38
45.58
118.60
146.85
53.71
225.06
211.40
134.63
58.20
140.58
136.86
54.21
196.22
169.16
88.66
154.00
97.90
38.20
124.68
135.66
285.44
149.16
184.78
60.39
58.22
119.79
69.81
0.55
0.33
-0.31
-0.27
-0.20
-0.18
-0.62
-1.36
-0.44
-0.30
-0.51
1.12
-0.54
-0.84
0.13
-0.05
0.36
-1.02
0.50
0.18
-0.90
0.09
0.04
0.65
-0.17
1.17
-1.28
-0.61
0.03
-0.75
2,524,651
117,073
256,617
228,488
2,141,301
267,227
434,903
240,315
193,958
457,752
158,520
2,330,838
301,016
671,238
640,561
200,807
155,129
548,321
2,580,100
360,295
880,846
330,518
60,417
289,468
192,217
613,095
711,249
319,160
351,478
999,569
DJIA
Company Name Lt Price % Chg Volume
Anglo American PlcAssociated British Foods Plc
Admiral Group PlcAshtead Group Plc
Antofagasta PlcAuto Trader Group Plc
Aviva PlcAstrazeneca PlcBae Systems Plc
Barclays PlcBritish American Tobacco Plc
Barratt Developments PlcBhp Group Plc
Berkeley Group Holdings/TheBritish Land Co Plc
Bunzl PlcBp Plc
Burberry Group PlcBt Group Plc
Coca-Cola Hbc Ag-DiCarnival PlcCentrica Plc
Compass Group PlcCroda International Plc
Crh PlcDcc Plc
Diageo PlcDirect Line Insurance Group
Evraz PlcExperian Plc
Easyjet PlcFerguson Plc
Fresnillo PlcGlencore Plc
Glaxosmithkline PlcGvc Holdings Plc
Hikma Pharmaceuticals PlcHargreaves Lansdown Plc
Halma PlcHsbc Holdings Plc
Hiscox LtdIntl Consolidated Airline-Di
Intercontinental Hotels Grou3I Group Plc
Imperial Brands PlcInforma Plc
Intertek Group PlcItv Plc
Johnson Matthey PlcKingfisher Plc
Land Securities Group PlcLegal & General Group PlcLloyds Banking Group Plc
London Stock Exchange GroupMicro Focus International
Marks & Spencer Group PlcMondi Plc
Melrose Industries PlcWm Morrison Supermarkets
National Grid PlcNmc Health Plc
Next PlcOcado Group Plc
Paddy Power Betfair PlcPrudential Plc
Persimmon PlcPearson Plc
Reckitt Benckiser Group PlcRoyal Bank Of Scotland Group
Royal Dutch Shell Plc-A ShsRoyal Dutch Shell Plc-B Shs
Relx PlcRio Tinto Plc
Rightmove PlcRolls-Royce Holdings PlcRsa Insurance Group Plc
Rentokil Initial PlcSainsbury (J) Plc
Schroders PlcSage Group Plc/The
Segro PlcSmurfit Kappa Group Plc
Standard Life Aberdeen PlcDs Smith Plc
Smiths Group PlcScottish Mortgage Inv Tr Plc
Smith & Nephew PlcSpirax-Sarco Engineering Plc
Sse PlcStandard Chartered Plc
St James’s Place PlcSevern Trent Plc
Tesco PlcTui Ag-Di
Taylor Wimpey PlcUnilever Plc
United Utilities Group PlcVodafone Group Plc
John Wood Group PlcWpp Plc
Whitbread Plc
2,131.00
2,592.00
2,212.00
2,318.00
936.40
574.60
417.50
7,233.00
576.60
184.04
3,052.50
764.20
1,745.00
5,148.00
624.80
2,058.00
462.80
2,123.00
202.30
2,471.00
3,319.00
88.08
1,845.50
4,882.00
3,002.00
6,446.00
3,047.00
314.40
381.00
2,456.00
1,461.50
6,676.00
576.40
226.25
1,726.00
871.20
1,895.50
1,972.00
2,079.00
576.40
1,372.00
629.80
4,892.50
1,075.00
1,774.60
801.60
5,524.00
153.10
2,917.00
223.20
1,003.50
306.40
64.69
7,174.00
1,061.80
223.10
1,697.50
236.90
196.55
926.90
2,499.00
7,158.00
1,239.00
0.00
1,392.50
2,817.00
656.40
6,051.00
253.10
2,158.50
2,139.50
1,808.00
4,328.00
642.80
689.80
567.00
427.90
223.10
3,382.00
736.00
869.20
2,768.00
315.50
388.00
1,623.50
526.00
1,739.00
8,595.00
1,425.00
708.60
1,156.50
2,425.00
251.40
977.20
199.75
4,544.50
910.00
146.32
374.80
1,019.00
4,972.00
-1.25
6.54
3.27
-0.86
0.93
7.00
2.81
-0.58
1.16
7.09
1.75
13.89
0.08
14.12
4.45
-0.58
-1.40
3.06
6.88
0.16
0.39
9.14
1.04
0.12
0.40
2.35
-0.42
4.66
3.11
-0.08
7.31
0.39
-2.37
-0.04
-1.04
4.34
-1.69
3.35
0.00
-0.02
2.08
13.15
-0.29
2.87
5.38
3.38
0.44
6.17
2.03
2.39
7.67
6.57
5.84
3.22
3.29
6.59
1.89
2.24
1.31
4.38
-1.15
4.71
2.40
0.00
1.72
12.05
1.55
0.36
8.95
-1.21
-1.22
-0.33
-0.48
4.55
-2.07
4.19
-1.61
2.57
3.55
1.52
3.28
1.10
1.74
1.44
0.84
-0.19
2.47
-1.09
8.82
-1.31
3.31
9.19
3.97
3.74
14.73
0.33
7.26
1.37
3.14
3.43
7.62
2,627,424
810,217
391,181
1,468,222
3,047,936
3,667,559
14,712,442
1,551,709
5,206,444
101,492,702
2,699,222
10,508,689
3,983,774
872,869
7,605,242
578,218
30,043,140
1,257,326
46,085,290
474,581
527,157
31,664,320
2,335,835
249,309
1,019,288
180,889
4,034,848
4,439,778
2,757,127
1,102,538
3,421,057
371,061
1,166,212
23,249,580
6,610,637
2,144,418
336,314
1,416,971
477,700
20,818,982
510,634
20,051,197
469,498
1,345,980
2,493,968
1,421,949
175,628
27,127,568
702,578
6,222,430
3,735,293
30,521,472
576,292,233
556,793
868,857
16,597,965
1,514,920
10,826,167
6,764,539
19,450,931
233,222
637,076
1,367,176
-
5,569,952
3,498,318
1,486,840
1,127,761
62,859,450
8,029,701
7,324,384
3,847,375
2,627,314
2,190,168
3,152,490
2,799,192
3,515,628
7,364,830
371,386
1,605,190
2,330,677
215,441
5,488,133
5,301,129
438,734
3,511,220
1,990,374
323,684
8,520,362
5,790,620
2,716,317
1,656,924
26,020,323
2,643,827
70,880,795
1,938,678
4,438,932
44,759,833
3,289,032
2,922,508
1,056,104
FTSE 100
Company Name Lt Price % Chg Volume
Japan Airlines Co LtdRecruit Holdings Co Ltd
Softbank CorpKyocera Corp
Nissan Motor Co LtdT&D Holdings Inc
Toyota Motor CorpKddi Corp
Nitto Denko CorpHitachi Ltd
Takeda Pharmaceutical Co LtdJfe Holdings IncSumitomo Corp
Canon IncEisai Co Ltd
Nintendo Co LtdShin-Etsu Chemical Co Ltd
Mitsubishi CorpSmc Corp
3,367.00
4,103.00
1,452.00
7,508.00
680.50
1,373.00
7,811.00
3,218.00
6,410.00
4,295.00
4,426.00
1,518.00
1,671.00
3,081.00
8,300.00
44,930.00
12,555.00
2,945.00
52,460.00
-0.12
1.94
-0.21
2.67
1.86
2.85
2.40
0.59
4.23
2.51
0.39
3.05
2.17
1.02
4.17
0.13
4.32
1.31
2.94
1,936,900
7,254,100
9,590,500
2,549,000
16,678,000
3,900,100
7,191,100
8,982,200
1,568,700
4,396,900
5,372,600
4,784,400
6,316,900
5,616,200
2,776,400
1,764,500
2,682,300
8,437,100
286,000
TOKYO
Company Name Lt Price % Chg Volume
Nidec CorpIsuzu Motors Ltd
Unicharm CorpNomura Holdings Inc
Daiichi Sankyo Co LtdSubaru Corp
Sumitomo Realty & DevelopmenNtt Docomo Inc
Sumitomo Metal Mining Co LtdOrix Corp
Asahi Group Holdings LtdKeyence Corp
Mizuho Financial Group IncSumitomo Mitsui Trust Holdin
Japan Tobacco IncSumitomo Electric Industries
Daiwa Securities Group IncSoftbank Group Corp
Panasonic CorpFujitsu Ltd
Central Japan Railway CoNitori Holdings Co Ltd
Ajinomoto Co IncDaikin Industries Ltd
Mitsui Fudosan Co LtdOno Pharmaceutical Co Ltd
Toray Industries IncBridgestone Corp
Sony CorpAstellas Pharma Inc
Hoya CorpNippon Steel Corp
Suzuki Motor CorpNippon Telegraph & Telephone
Jxtg Holdings IncMurata Manufacturing Co Ltd
Kansai Electric Power Co IncDenso Corp
Sompo Holdings IncDaiwa House Industry Co Ltd
Dai-Ichi Life Holdings IncMazda Motor Corp
Komatsu LtdWest Japan Railway Co
Kao CorpMitsui & Co Ltd
Daito Trust Construct Co LtdOtsuka Holdings Co Ltd
Oriental Land Co LtdSekisui House Ltd
Secom Co LtdTokio Marine Holdings Inc
Aeon Co LtdAsahi Kasei Corp
Kirin Holdings Co LtdMarubeni Corp
Mitsubishi Ufj Financial GroMitsubishi Chemical Holdings
Fanuc CorpFast Retailing Co Ltd
Ms&Ad Insurance Group HoldinKubota Corp
Seven & I Holdings Co LtdInpex Corp
Resona Holdings IncFujifilm Holdings Corp
Yamato Holdings Co LtdChubu Electric Power Co Inc
Mitsubishi Estate Co LtdMitsubishi Heavy Industries
Sysmex CorpShiseido Co Ltd
Shionogi & Co LtdTerumo Corp
Tokyo Gas Co LtdTokyo Electron Ltd
East Japan Railway CoItochu Corp
Ana Holdings IncMitsubishi Electric Corp
Sumitomo Mitsui Financial Gr
15,540.00
1,394.00
3,583.00
557.60
7,508.00
2,830.50
3,924.00
3,025.00
3,660.00
1,843.00
5,181.00
40,050.00
170.70
4,295.00
2,501.50
1,690.50
551.30
4,388.00
1,058.00
10,055.00
22,275.00
17,610.00
1,827.00
16,225.00
2,714.00
2,461.50
765.20
4,331.00
7,443.00
1,888.50
9,895.00
1,770.50
4,728.00
5,613.00
503.20
6,671.00
1,265.00
5,152.00
4,487.00
3,439.00
1,872.50
977.00
2,740.00
9,619.00
8,928.00
1,985.00
13,605.00
4,956.00
14,765.00
2,369.50
9,697.00
6,218.00
2,250.00
1,271.50
2,503.50
837.70
599.70
836.50
21,945.00
67,280.00
3,711.00
1,791.50
4,077.00
1,099.50
493.80
5,261.00
1,880.00
1,554.00
2,005.00
4,246.00
7,549.00
7,661.00
6,518.00
3,925.00
2,706.00
24,895.00
9,961.00
2,534.00
3,707.00
1,558.00
4,056.00
1.11
4.54
1.65
0.47
2.78
0.93
1.21
-0.49
4.81
1.29
1.99
3.20
2.03
3.47
0.14
3.27
0.80
1.25
2.07
-0.64
1.11
0.66
1.25
3.44
1.55
1.44
1.19
1.17
1.94
2.08
2.04
1.64
1.83
-0.30
1.90
1.35
2.18
2.47
2.07
0.91
3.54
3.72
2.26
0.76
2.41
1.64
0.59
1.47
-0.30
-0.19
0.57
2.27
1.35
2.38
1.36
2.80
3.38
1.62
2.81
4.39
1.75
3.14
1.22
1.95
2.41
0.34
0.21
1.73
-2.43
1.60
0.72
1.52
1.75
4.44
2.09
5.87
1.28
1.16
0.60
2.67
2.45
TOKYO
Company Name Lt Price % Chg
Ck Hutchison Holdings LtdHang Lung Properties Ltd
Ck Infrastructure Holdings LHengan Intl Group Co Ltd
China Shenhua Energy Co-HCspc Pharmaceutical Group Lt
Hang Seng Bank LtdChina Resources Land Ltd
Ck Asset Holdings LtdSino Biopharmaceutical
Henderson Land DevelopmentAia Group Ltd
Ind & Comm Bk Of China-HWant Want China Holdings Ltd
Sun Hung Kai PropertiesNew World Development
Geely Automobile Holdings LtSwire Pacific Ltd - Cl A
Sands China LtdWharf Real Estate Investment
Clp Holdings LtdCountry Garden Holdings Co
Aac Technologies Holdings InShenzhou International GroupPing An Insurance Group Co-H
China Mengniu Dairy CoSunny Optical Tech
Boc Hong Kong Holdings LtdChina Life Insurance Co-H
Citic LtdGalaxy Entertainment Group L
Wh Group Ltd
74.25
16.68
55.85
54.15
15.50
17.78
163.00
37.65
54.30
10.34
38.70
82.65
5.80
7.09
118.30
10.62
15.40
73.35
39.65
44.00
82.55
11.84
66.15
108.40
93.10
31.35
142.70
27.60
21.60
10.30
57.95
8.15
4.65
1.21
4.20
5.15
0.52
-0.45
2.71
1.48
3.13
0.19
1.98
3.64
2.29
1.14
3.14
1.92
0.26
3.02
5.31
1.62
1.73
1.89
0.68
1.31
1.97
1.62
2.44
2.79
3.60
2.39
6.92
2.26
9,627,285
3,644,991
7,210,297
6,026,798
17,091,491
38,685,216
3,157,574
11,243,866
7,743,776
27,972,701
6,123,519
32,959,062
257,570,361
14,697,480
7,003,111
25,178,142
40,820,529
1,881,285
23,129,457
3,532,610
4,190,571
35,087,894
13,820,168
4,272,796
34,382,267
9,349,163
7,006,903
24,071,861
72,600,483
15,345,223
27,711,251
56,105,540
HONG KONG
Company Name Lt Price % Chg Volume
Hong Kong & China GasBank Of Communications Co-HChina Petroleum & Chemical-HHong Kong Exchanges & Clear
Bank Of China Ltd-HHsbc Holdings Plc
Power Assets Holdings LtdMtr Corp
China Overseas Land & InvestTencent Holdings Ltd
China Unicom Hong Kong LtdLink Reit
Sino Land CoChina Resources Power Holdin
Petrochina Co Ltd-HCnooc Ltd
China Construction Bank-HChina Mobile Ltd
15.14
5.42
4.53
255.40
3.26
60.35
56.15
46.40
29.20
361.00
7.02
80.50
11.54
10.60
3.83
11.78
6.51
61.60
1.20
2.26
2.03
2.24
1.88
2.99
0.81
0.22
1.39
3.44
1.59
1.07
0.35
1.53
3.51
2.79
1.72
2.16
25,202,366
28,581,939
94,311,365
7,323,135
370,561,711
44,146,504
3,118,109
8,354,658
13,677,441
32,786,978
27,107,135
9,653,842
7,892,645
4,700,157
150,876,908
84,466,841
431,149,103
19,490,699
HONG KONG
Company Name Lt Price % Chg Volume
Adani Ports And Special EconAsian Paints Ltd
Axis Bank LtdBajaj Finance Ltd
Bharti Airtel LtdBharti Infratel Ltd
Bajaj Auto LtdBajaj Finserv Ltd
Bharat Petroleum Corp LtdCipla Ltd
Coal India LtdDr. Reddy’s Laboratories
Eicher Motors LtdGail India Ltd
Grasim Industries LtdHcl Technologies Ltd
Housing Development FinanceHdfc Bank Limited
Hero Motocorp LtdHindalco Industries Ltd
Hindustan Petroleum CorpHindustan Unilever Ltd
Icici Bank LtdIndiabulls Housing Finance L
Indusind Bank LtdInfosys Ltd
Indian Oil Corp LtdItc Ltd
Jsw Steel LtdKotak Mahindra Bank Ltd
Larsen & Toubro LtdMahindra & Mahindra Ltd
Maruti Suzuki India LtdNtpc Ltd
Oil & Natural Gas Corp LtdPower Grid Corp Of India Ltd
Reliance Industries LtdState Bank Of India
Sun Pharmaceutical IndusTata Steel Ltd
Tata Consultancy Svcs LtdTech Mahindra Ltd
Titan Co LtdTata Motors Ltd
Upl LtdUltratech Cement Ltd
Vedanta LtdWipro Ltd
Yes Bank LtdZee Entertainment Enterprise
376.95
1,743.95
752.00
4,071.95
427.80
252.40
3,232.90
9,210.30
496.75
461.25
196.25
2,821.50
22,034.75
119.80
782.30
543.15
2,354.50
1,263.85
2,338.15
208.25
267.40
2,006.20
537.05
309.05
1,485.40
711.30
128.25
241.60
257.60
1,692.75
1,305.30
516.20
7,214.95
115.65
126.50
185.70
1,582.90
332.55
439.25
428.40
2,071.25
761.85
1,186.15
176.70
565.00
4,082.60
149.40
243.85
46.65
279.70
1.19
-0.38
4.14
0.36
-2.47
0.08
-0.88
0.45
1.02
0.04
3.21
-2.90
0.37
0.71
1.05
1.27
1.55
0.02
0.18
3.38
0.45
-0.06
0.32
6.11
2.86
1.31
0.12
1.28
0.78
-1.33
2.00
0.84
3.07
1.05
0.48
0.51
0.94
3.32
1.17
2.32
2.49
0.71
-0.16
1.93
-0.87
2.27
3.75
1.84
2.87
-1.62
SENSEX
Company Name Lt Price % Chg
WORLD INDICESIndices Lt Price Change
GCC INDICESIndices Lt Price Change
Dow Jones Indus. AvgS&P 500 Index
Nasdaq Composite IndexS&P/Tsx Composite Index
Mexico Bolsa IndexBrazil Bovespa Stock Idx
Ftse 100 IndexCac 40 Index
Dax IndexIbex 35 Tr
Nikkei 225Japan Topix
Hang Seng IndexAll Ordinaries Indx
Nzx All IndexBse Sensex 30 Index
Nse S&P Cnx Nifty IndexStraits Times Index
Karachi All Share IndexJakarta Composite Index
28,116.92
3,164.03
8,730.22
16,960.33
44,095.58
112,109.90
7,369.84
5,920.96
13,277.34
9,563.80
24,023.10
1,739.98
27,687.76
6,844.59
1,880.80
41,009.71
12,086.70
3,214.05
29,320.16
6,197.32
-15.13
-4.54
+12.90
+13.43
+900.38
-89.80
+96.37
+36.70
+55.70
+95.30
+598.29
+27.15
+693.62
+33.75
-11.17
+428.00
+114.90
+19.38
+278.41
+57.92
Doha Securities Market
Kuwait Stocks Exchange
Oman Stock Market
10,256.93
4,821.28
4,019.67
-82.43
+6.78
+5.63
“Information contained herein is believed to be reliable and had been obtained from sources believed to be reliable. The accuracy and completeness cannot be guaranteed. This publication is for providing information only and is not intended as an off er or solicitation for a purchase or sale of any of the financial instruments mentioned. Gulf Times and Doha Bank or any of their employees shall not be held accountable and will not accept any losses or liabilities for actions based on this data.”
2,076,400
4,832,000
1,637,200
26,181,400
2,899,200
3,482,500
2,068,500
6,273,500
2,930,600
6,085,700
2,124,100
864,400
210,742,000
2,253,200
7,692,600
4,101,600
8,712,100
18,401,500
9,843,400
827,800
536,200
267,200
2,574,200
1,430,900
3,925,400
1,677,800
7,517,700
4,136,300
8,866,500
9,098,800
1,560,600
5,533,100
2,244,300
3,599,800
20,756,900
4,983,000
5,526,300
2,226,500
1,283,900
3,690,400
6,596,800
5,409,400
7,196,600
808,700
2,624,300
8,366,200
311,000
1,732,900
762,300
3,456,300
1,400,100
2,276,200
2,633,900
4,691,300
3,652,500
10,936,600
124,523,900
7,399,500
1,988,500
1,479,100
1,956,800
4,615,600
2,462,800
4,989,900
19,024,000
1,891,500
2,729,800
2,697,700
7,249,800
1,912,700
562,800
2,940,600
1,803,300
5,199,400
1,819,200
2,715,400
1,360,100
6,039,700
1,006,000
6,996,900
14,641,000
2,699,035
960,033
14,834,140
861,656
13,074,677
7,635,565
360,095
215,357
7,629,757
1,213,599
5,851,149
1,368,418
140,133
5,753,924
1,454,897
2,889,796
2,557,242
5,887,593
924,706
14,246,993
2,356,235
1,212,988
17,884,861
73,596,154
3,512,530
10,302,412
5,428,475
8,205,457
12,372,614
3,527,634
3,655,956
4,066,433
1,199,360
4,293,299
6,663,052
7,305,323
5,791,522
40,955,226
5,386,394
21,628,183
5,711,133
2,019,424
1,624,478
93,019,636
1,888,212
548,283
20,297,117
4,311,833
201,459,985
12,476,782
Volume
Volume
The walkway seen outside the London Stock Exchange building in Paternoster Square. The FTSE 100 closed up 1.1% to 7,353.44 points yesterday.
BUSINESS
Gulf Times Saturday, December 14, 20194
BUSINESS
Gulf Times Saturday, December 14, 20196
China suff ers biggest state fi rm dollar bond default in 20 yearsBloombergHong Kong
A major Chinese commodities trader became the biggest dollar bond defaulter among the na-
tion’s state-owned companies in two decades, in a moment of reckoning for Beijing as it struggles to contain credit risk in a weakening economy.
Tewoo Group Corp announced re-sults of its unprecedented debt re-structuring, which saw a majority of its investors accepting heavy losses. This is expected to reshape inves-tors’ perceptions about government-owned borrowers whose identity has for years off ered a relatively strong sense of security.
It’s also seen off ering a road-map for resolving similar debt crises in the future as the prospect of more fail-ures by state-backed fi rms looms. The one-time Fortune Global 500 company from the northern port city of Tianjin
said dollar bond investors representing 57% of the total $1.25bn have agreed to be paid just 37 to 67 cents on the dollar, depending on the maturity of the debt.
Bondholders representing 22.6% of these bonds voted to exchange their debt for new bonds with sharply lower coupons to be issued by Tewoo’s off -shore debt manager, a state asset man-ager from Tianjin.
“This is one form of default based on our definition,” said Ivan Chung, a Hong Kong-based analyst at Moody’s Investors Service, noting that the debt revamp has resulted in losses for investors.
The debt restructuring plan, fi rst of its kind for a Chinese state-run enter-prise in the dollar bond market, came ahead of $300mn dollar bond maturity on December 16, one of the four notes covered by Tewoo’s debt restructuring plan.
Tianjin State-owned Capital In-vestment and Management, its off -shore debt manager, said on an inves-
tor call late last month that Tewoo is very likely to default on this paper. For investors who turned down the off ers, their dollar bonds will be grouped into a comprehensive debt plan involving
Tewoo’s onshore debt, according to Tianjin State-owned Capital. Tewoo said settlement of the debt restruc-turing off ers are expected to be on or about December 17.
Tewoo’s failure in the dollar bond market, the biggest for a Chinese SOE since the collapse of Guangdong Inter-national Trust and Investment Corp in 1998, is a sign that the worst economic slowdown in three decades is limiting Beijing’s capacity to bail out its weaker state fi rms.
As a result, the authorities appear increasingly willing to use a more market-oriented approach to clean up the mess. “Tewoo’s default is a land-mark case, and demonstrates a grow-ing tolerance for defaults by distressed SOEs,” Cindy Huang, an S&P Global Ratings credit analyst said in a note. Tianjin “is not an exception” and other local governments with deteriorating fi scal conditions might also see erod-ing support for their less competitive SOEs, it said.
Setting Precedent Tewoo’s crisis came as a wake-up call for investors. “This is a poor outcome for investors that bought the bonds at par. That said, there is now some track record as to the
severity of loss for an SOE-related en-tity,” said Charles Macgregor, head of Asia at Lucror Analytics.
“Hopefully, these types of restruc-tures will bring more discipline to the market and result in investors prop-erly pricing for the apparent risk,” he added. Tewoo is owned by the Tianjin government and operates in a number of industries including infrastructure, logistics, mining, autos and ports, ac-cording to its website.
It also has footprints in countries including the US, Germany, Japan and Singapore.
The trader ranked 132 in 2018’s For-tune Global 500 list, higher than many other conglomerates including service carrier China Telecommunications Corp and fi nancial titan Citic Group Corp.
It had an annual revenue of $66.6bn, profi ts of about $122mn, assets worth $38.3bn, and more than 17,000 em-ployees as of 2017, according to For-tune’s website.
China’s unfazed yuan traders bet tariffs won’t be hiked
BloombergShanghai
China yuan traders are un-
daunted by Sunday’s looming
start of fresh US tariff s even as
investors elsewhere are piling
into protection.
As President Donald Trump’s
December 15 deadline for more
duties on Chinese imports
draws closer, one-week risk re-
versals – a measure of demand
for bearish yuan bets relative
to bullish calls in the options
market – have been at their low-
est since July.
And while volatility gauges
for the currency have jumped in
the past week, they remain well
below levels reached in August,
when the yuan weakened
through 7 per dollar for the first
time since 2008 amid trade
worries. An unusual sense of
tranquillity has descended on
China’s financial markets the past
month, in part on investors await-
ing clearer insight on the state of
the US-China trade fight amid a
near-daily dose of headlines.
While the off shore yuan weak-
ened slightly on Wednesday
after White House trade adviser
Peter Navarro said he has “no
indication” whether the looming
tariff s will be implemented as
scheduled, market sentiment
was supported by people famil-
iar with the discussions saying
that Chinese off icials expect the
duties to be delayed.
Yuan traders anticipate the
same, said Khoon Goh, head of
Asia research at Australia & New
Zealand Banking Group Ltd in
Singapore. “Volatility spikes have
been nothing out of the ordinary
and the spot market is still calm,”
he added. “I guess all the head-
lines about how both sides are
really close to a deal have given
them some comfort.”
Some Chinese banks have
chosen to reduce their long and
short dollar positions ahead of
the tariff deadline, according to
three traders. Most firms have
reached their year-end perform-
ance targets, so there’s no need
to take fresh risk at this time,
the traders added, asking not to
be named as they’re not author-
ised to speak with the media.
Amid the trade uncer-
tainty in recent days, one-week
volatility in both the onshore
and off shore yuan is back to
October levels. But “volatility
is rising from a very low place,”
said Stephen Innes, chief Asia
market strategist at AxiTrader.
“It’s cheap relative to the risks
that lie ahead.”
The yuan has traded in a
roughly 1% range the past month,
sticking close to the 7 per dollar
level. Citigroup Inc told its clients
last week that while it doubted
new tariff s will be enacted
December 15, the yuan could
weaken to 7.2 to 7.35 per dollar in
off shore trading if the levies get
priced into the market.
Meanwhile, the volatility
spread between the onshore
and off shore yuan has widened
to the most since October.
That’s largely on dwindling
mainland trading momentum
ahead of year-end, said Frank
Zhang, deputy general manager
for global markets at Bank of
Hangzhou Co.
EM equities hit 7-month highReutersLondon
Developing world stocks topped an over seven-month peak yesterday
as reports of a Sino-US trade deal, as well as the prospect of a smooth Brexit, saw risk ap-petite running rampant across the globe.
Positive headlines over two prolonged pain points for mar-kets saw widespread moves into risk assets, with the MSCI’s emerging markets stock index jumping as much as 1.5%.
Asian stocks tracked over-night gains on Wall Street fol-lowing reports of the deal, al-though no offi cial statement was received from either Wash-ington or Beijing.
The news came just days be-fore a December 15 deadline on further US tariff action against China.
European equities were also stronger after a landslide elec-tion victory for British Prime Minister Boris Johnson, which implies a smooth exit for Lon-don from the European union.
The emerging market stock index was set for its best week since mid-June, having also been supported by buying in the face of a dovish US Federal Reserve.
Russian stocks rose ahead of
a likely interest rate cut by the country’s central bank, while the rouble touched its strongest to the dollar since August 2018.
The Russian central bank is expected to cut rates by at least 25 basis points later in the day, according to a Reuters poll.
The cut would be the bank’s fi fth this year, as improving laggard infl ation in the country remains a key focus.
“Given that the market is pricing in at least 25 basis points cut, the worst-case outcome would be if the bank leaves the policy rate unchanged,” Credit Suisse analysts said in a note.
“There is a small likelihood that the bank will cut the policy rate by 50bps (we think that there are more than enough reasons in favour of this step), but probably it would not fi t the bank’s reaction function.”
Chinese stocks marked their best day in nearly four months, while the yuan fi rmed to above the key 7 to-a-dollar level.
South Africa’s rand was at its strongest level against the dol-lar since early August, despite data showing that the country logged less foreign direct in-vestment in the third quarter as compared to the second.
Sensex joins global rally on trade hopes
Bloomberg, ReutersMumbai
The Sensex joined global rally yesterday on renewed
optimism over a trade deal between US and China.
Sentiment also got a boost as Boris Johnson and
his Conservative Party look set for a big victory
in the UK elections, paving the way out of a Brexit
deadlock.
The benchmark Sensex was 1.05% higher or 428
points up at 41009.71 points, while Nifty gained
0.96% or 114.90 points to 12086.70 points.
Gains in the domestic market were led by bank-
ing, auto and metal stocks.
Banking stocks gained after report that the gov-
ernment is considering increasing the government
bond investment limit of foreign portfolio investors
(FPIs) to at least 10% of the outstanding, from 6%
now, with an aim to incorporate local bonds into
global bond indices, Axis Bank, PNB, RBL Bank, State
Bank of India, Yes Bank, Indusind Bank were up 2-4%.
Metal stocks gained after Bloomberg report said
that the US President Donald Trump had signed off
on a phase-one trade deal with China. Vedanta Ltd,
Hindalco Industries Ltd, Tata Steel, JSW Steel and
NALCO were up 1-4%.
The companies with exposure to the UK gained.
Tata Motors gained around 2%. Bharat Forge was up
3.5% and Motherson Sumi gained 4.2%.
In Auto stocks, Ashok Leyland, TVS Motors, Mahi-
ndra & Mahindra, Maruti Suzuki India, Eicher Motors
were up 1-3.5%.
Dr Reddy’s Laboratories fell 2.7%. According to
a report by Jeff eries India, Amneal Pharma’s entry
into the market for generic birth-control product
NuvaRing does not bode well for Dr. Reddy’s Lab’s
earnings.
BGR Energy Systems hits 20% upper circuit after
the company got order worth Rs4472.75 crore from
Tamil Nadu Generation and Distribution Corp Ltd
for the execution of 660 megawatt Supercritical
‘Ennore Thermal Power Station Expansion Project’
under EPC basis.
“With a sharp jump in retail inflation and modest
improvement in industrial performance, the possibil-
ity of the RBI maintaining the rate pause in FY20 is
strengthened. While we expect industrial growth to
improve from the ytd rate of 0.5%, acceleration of
credit flow and further fiscal stimulus are likely to
play crucial roles in fructification of the same. Fur-
ther transmission of policy rate cuts into the lending
rate is also required”, said Anand Rathi in a note to
its investors.
“Market continued its winning streak fuelled by
trade deal optimism and positive cues from UK
election. Global growth sentiment helped domestic
indices to subside weak CPI & industrial data in
the near term. Mid & small cap also participated
in today’s rally, we believe this potential change in
risk appetite may help investors to look beyond the
polarised market.” said Vinod Nair, Head of Research
at Geojit Financial Services.
Meanwhile, the Indian rupee strengthened for
eight consecutive day tracking gains in Asian cur-
rencies on renewed optimism over a US-China trade
deal. According to a Bloomberg report, US President
Donald Trump has signed off on a phase-one trade
deal with China. The rupee traded at 70.65, up 0.27%
from its previous close of 70.84 a dollar.
The yield on the 10-year government bond hit a
five-month high on Friday as hopes of rate cut by the
Reserve Bank of India (RBI) dimmed after India’s re-
tail inflation jumped the most in over three years. In
early deals, the yield on 10-year bond was at 6.827%,
a level last seen on 3 July, and up 5 basis points from
its previous close of 6.775%.
Bonds have been under pressure over the past
few sessions after global rating agency S&P warned
that it may downgrade India’s debt and as the RBI
unexpectedly kept rates on hold.
Since December 4, a day before the announce-
ment of the policy statement-10-year bond yields
have jumped 35 basis points.
Asian markets surge on trade, Brexit optimismAFPHong Kong
Christmas came early to Asian markets yesterday as equities and the pound surged on reports
China and the US had reached a trade agreement and exit polls predicted a landslide election win for British Prime Minister Boris Johnson that will allow him to push through Brexit.
Investors fl ocked back into stocks around the world on news that Donald Trump had signed off on a long-await-ed pact between the world’s economic superpowers that will see the cancella-tion of fresh US tariff s due at the week-end and the rolling back of previous measures.
After months of high-level talks, negotiators presented the president with a deal that will see China ramp up its purchases of agricultural goods, Bloomberg News reported. The mood was already buoyant after Trump said an agreement was close on the fi rst part of a wider pact.
“Getting VERY close to a BIG DEAL with China.
They want it, and so do we!” Trump tweeted earlier in the day, which helped fuel a rally on Wall Street that saw the S&P 500 and Nasdaq hit new records.
While the pact has yet to be fi nalised, the news will come as a massive relief to investors after weeks of toing and fro-ing, with the two sides off ering some-times positive, sometimes downbeat comments on the talks’ progress.
Trade tensions between the world’s biggest economies have been a huge drag on global growth, with most coun-
tries being sucked into the stand-off , sending some into or close to recession.
“Does it mean we get a comprehen-sive deal in 2020? Hard to say, but it this has created the necessary Christmas cheer for a decent Santa Rally,” said Neil Wilson at Markets.com.
The trade headlines came just as a closely watched exit poll forecast John-son’s ruling Conservative party would win a huge 86-seat majority in a crucial general election.
The PM is set to have suffi cient power to fi nally drive his EU Brexit deal through parliament, the stuttering pas-
sage of which has caused years of un-certainty in Britain.
Commentators also suggested that the large majority meant Johnson was not beholden to the extreme anti-EU members of his party and would give him the ability to push for a softer Brexit, which would be better for the economy.
The news sent the pound briefl y soaring to $1.3514 — its highest since mid-2018 — from $1.3163 before the poll was released.
It also rallied to 82.80 pence per euro — a level not seen since just after the Brexit referendum in 2016. “The mar-
ket is getting two Christmas presents early,” said Tai Hui at JP Morgan Asset Management.
The one-two of positive news for markets sent equities surging in Asia.
Tokyo soared 2.6%, Hong Kong piled on more than 2%, Shanghai clocked up 1.8%, Seoul surged 1.5% and Sydney rose 0.5%. There were also big gains in Mumbai, Singapore, Taipei, Manila and Jakarta.
The soothing of tensions and remov-al of some uncertainty helped higher-yielding, riskier currencies rally.
The Chinese yuan jumped 1% against
the dollar, while the South Korean won and South African rand were both 1.5% higher. Australia’s dollar, the Indone-sian rupiah, Mexican peso and Russian rouble also saw big advances as inves-tors grew in confi dence.
“The global recovery (fear of missing out) trade of the last two months got a turbo-charged boost, naturally,” said OANDA’s Jeff rey Halley.
“Stock markets leapt to record highs on Wall Street, emerging-market and China-centric currencies have surged, as has oil. In fact, you could have bought almost anything in the last eight hours, and it would be higher now.”
However, while the mood heading into Christmas is of optimism, Hui pointed out there was still a long way to go on both issues.
“The UK government will need to fi nalise the details on Brexit and start a marathon of trade negotiation with the EU,” he said. “This is expected to be complicated and time-consuming, while new uncertainties could emerge for the business sector.”
And on the China-US trade deal, “our view has always been that the two sides would agree on phase one, but these represent some of the lowest-hanging fruits in the negotiation.
“The future stages of negotiation is going to be much more challenging when it starts to involve China’s indus-trial policy and technological develop-ment,” he added.
In Tokyo, the Nikkei 225 closed up 2.6% to 24,023.10 points; Hong Kong — Hang Seng ended up 2.4% to 27,631.76 points and Shanghai — Composite closed up 1.8% to 2,967.68 points yesterday.
A pedestrian walks past the Tokyo Stock Exchange building in Japan. The Nikkei 225 closed up 2.6% to 24,023.10 points yesterday.
BUSINESS7Gulf Times
Saturday, December 14, 2019
Norway’s Telenor picks Ericsson for 5GReutersOslo
Telenor has picked Sweden’s Ericsson as the key technology provider for its fifth-generation (5G) telecoms network in Norway, it said yesterday, gradually removing China’s Huawei after a decade of collaboration over 4G.Fearing high-tech espionage, and battling with China over trade, the United States has pushed Nato allies such as Norway to exclude Huawei from lucrative 5G deals, and Norwegian security services also warned against the firm.“The 5G era is here.This will be the one technology that will most transform our society in the next decade,” Telenor chief executive Sigve Brekke tweeted as he announced that Ericsson will build the 5G radio access network (RAN). He said Telenor had carried out an “extensive” security evaluation as well as considering factors such as technical quality, innovation and modernisation of the network.“Based on the comprehensive and holistic evaluation, we have decided to introduce a new partner for this important technology shift in Norway,” he added.A spokeswoman for Ericsson said the company was “very proud” to be chosen as a partner by Telenor but declined to comment further.State-controlled Telenor is Norway’s biggest telecoms
provider, and is active in the rest of the Nordic region as well as five Asian countries, serving some 183mn customers. The use of Huawei network components in Norway will be phased out over a 4-5 year modernisation period, the head of Telenor Norway, Petter-Boerre Furberg, told Reuters.Huawei has rejected claims that its 5G networks could be used as spy tools, and China has accused Washington of using security arguments to further politicise a conflict that is fundamentally about trade.On Wednesday Telefonica Deutschland picked Nokia of Finland and Huawei to build its 5G network, seeking to get work moving even though Germany has yet to finalise security rules on equipment suppliers.The matter is also a sensitive one for Sino-Norwegian diplomatic relations, which were only re-established in 2016 after being frozen for six years over the award of the Nobel Peace Prize to a Chinese dissident.Norway’s PST security police has said only companies from nations with which Norway has close security cooperation should be allowed to supply 5G technology.Norway has such co-operation with neighbours Sweden and Finland, but not with China.Two smaller firms, Ice and Telia, have picked Nokia and Ericsson respectively for their Norwegian 5G networks.
Chip analysts struggle to get excited about 2020 after 52% rallyBloombergSan Francisco
After a year in which semicon-ductor stocks defied conven-tional wisdom with a seem-
ingly unstoppable rally in the face of gloomy fundamentals, analysts are loathe to go all in.
With signs of a rebound in de-mand still scant, the key question for the new year is where chip-maker shares can go when they’re trading at the highest price to fu-ture earnings multiples in nearly a decade.
Most analysts expect business to improve in 2020, aided by things like 5G technology and cloud infra-structure spending.
But valuations are cause for con-cern, especially when accounting for lingering tariff uncertainty. “It is challenging to argue that a good amount of the future return poten-tial hasn’t simply been pulled for-ward on hope,” said Bernstein ana-lyst Stacy Rasgon.
At the end of 2018, most of Wall Street saw little to get excited about in the semiconductor industry. Chipmakers had begun axing fore-casts as customer orders slowed and inventories swelled as the US-China trade war heated up.
Despite all of that, the Philadel-phia semiconductor index embarked on a relentless advance, logging just
two down months the entire year. The gauge that tracks 30 semicon-ductor-related stocks has risen 52% so far in 2019.
It closed at a fresh record on Wednesday, putting the index on track for its biggest gain annual in a decade.
That eye-popping number was aided by a brutal market sell-off at the end of 2018 that hit technol-ogy stocks particularly hard. To keep the rally going, semiconductor
companies will need to start posting better-than-expected financial re-sults, according to Morgan Stanley analyst Joseph Moore, who was one of the first analysts on Wall Street to get cautious on the group in the second half of 2018.
Moore now advocates holding a select group of stocks including In-tel Corp and Nvidia Corp, which he expects to benefit from higher cloud spending in 2020.
“The period where stocks are
going to go up on bad numbers is largely behind us,” he said in an in-terview. “If the numbers come up, then we can have some good per-formance. I don’t think there’s room for these multiples to come up too much more.”
In that regard, the third quarter was a good start.
With results in from all members of the chip benchmark except for Broadcom Inc, more than three-quarters of companies beat profit and revenue estimates, according to data compiled by Bloomberg. Still other indicators are worrisome.
Inventory levels for many chip-makers remain elevated, according to Moore, and tariffs haven’t been resolved.
US goods on some electronics imported from China are set to in-crease on December 15.
Despite the trade uncertainty, 2020 is “looking decent” from a fundamental standpoint, according to Bloomberg Intelligence analyst Anand Srinivasan.
He expects cloud spending to im-prove, 5G spending to kick in, and stability in mobile devices and per-sonal computers.
“The growth themes that we have been positing are going to be mani-fested in 2020, particularly in the second half,” he said.
“We think it still could be a bumpy ride from a stock perspective but we feel optimistic about 2020.”
Europe moves to expand tradearsenal withfocus on TrumpBloombergBrussels
Europe is arming itself for a more
lawless world of trade – and the
bloc’s sights are on the US Euro-
pean Union trade chief Phil Hogan
on Thursday sought an upgrade
to EU legislation on enforcing
international commercial rules.
His proposal would allow the
EU to impose sanctions against
countries that illegally restrict
commerce and simultaneously
block the World Trade Organiza-
tion’s dispute-settlement process.
Phil Hogan The timing of the
initiative in Brussels is no coinci-
dence.
On Wednesday, the WTO’s
much-prized appellate body
ceased to be able to handle new
cases because a US veto of any
appointments to the panel left it
without the minimum three mem-
bers required for verdicts.
The body is the WTO’s supreme
authority, issuing binding deci-
sions that give winning parties in
disputes the right to apply trade
penalties such as higher tariff s
against law-breaking countries.
Since before Donald Trump’s
presidency, the US has accused
the appeals panel of overstepping
its mandate and has demanded
changes to the body’s practices.
“It’s unacceptable that the EU
cannot enforce its rights through
adjudication,” Hogan said at a
press conference in the Belgian
capital where he presented the
proposal. “Our actions today are
fully compatible with international
public law.” The EU is asserting
itself more in a bid to prevent
Trump’s “America First” agenda
and protectionism from undermin-
ing the rules-based global order to
which Europe is committed.
Over the past three years, Trump
has angered Europe by hitting its
steel and aluminium with tariff s
based on controversial national-se-
curity grounds, dangled the threat
of similar levies on foreign cars and
drawn up plans to target French
goods with levies as retaliation over
a digital tax in France.
The US president has also
sought to restrict European trade
with Iran after pulling out of an
international agreement to control
the country’s nuclear activities and
backed out of a landmark UN ac-
cord to fight climate change. The
US steel and aluminium duties, in-
troduced in 2018, prompted the EU
to complain to the Geneva-based
WTO. The bloc also scrambled to
put its own trade defences in place
for steel to prevent the American
levies from diverting global ship-
ments to the European market and
flooding it.
The amended EU legislation
that Hogan put forward comes
less than two weeks after he
took off ice as part of a new
leadership team at the European
Commission, the bloc’s execu-
tive arm, under President Ursula
von der Leyen. The proposal,
which requires the support of EU
governments and the European
Parliament in a process that will
last into next year, has political
momentum.
Hogan said he expected EU
capitals and the bloc’s Parliament
to endorse the measure by mid-
2020. At a scheduled meeting in
Brussels on Thursday afternoon
and Friday, the EU’s national lead-
ers will ask its legislative actors
“to examine, as a matter of prior-
ity, the commission’s proposal,”
according to a draft summit state-
ment seen by Bloomberg.
The government chiefs are
also due to express support for
a stopgap arbitration system
that the commission is pursuing
with EU trade partners such as
Canada and China pending any
revival of the WTO appellate body.
The proposal from Hogan – an
amendment to 2014 European
legislation – would eff ectively
serve as a third line of defence for
the EU as it seeks to uphold the
WTO system.
The extra tool would come
into play in a scenario in which
the WTO appellate body is still
sidelined and the bloc wins a case
against a country that doesn’t
accept the initial ruling (by ap-
pealing “into the void”) and hasn’t
signed up to the stopgap arrange-
ment for handling appeals. In that
event, the EU would be in a posi-
tion to impose countermeasures.
The planned change to the
European legislation would also
empower the commission to
calculate the level of penalties – a
ceiling normally set by the WTO. In
that context, the proposal may en-
courage more countries to join the
makeshift appeals system that the
commission is advocating. That
model would essentially replicate
the work of the defunct appellate
body. “Many, many countries now
are beginning to realise this week
that this is more urgent than they
thought,” Hogan said. “They are
looking for the leadership of major
geographical blocs.”
He also repeated calls on the
Trump administration to work
with the EU to revamp the WTO
including its appellate body,
saying “we’ve asked the US to
engage with us and they have re-
fused to do so to date.” Jacques
Pelkmans, a trade expert and
senior fellow at the CEPS think
tank in Brussels, said the EU
would likely be prudent about
deploying any new sanctions
tool in its policy arsenal.
Lacklustre US retail sales cast shadow on Q4 economic growthReutersWashington
US retail sales increased less than expected in November as Ameri-cans cut back on discretionary
spending despite a strong labour market, raising fears the economy was slowing a bit faster than anticipated in the fourth quarter.
The report from the Commerce De-partment yesterday bucked a recent raft of fairly upbeat data on the labour market, housing, trade and manufac-turing that had suggested the economy was growing at a moderate speed de-spite headwinds from trade tensions and slowing global growth.
The Federal Reserve on Wednesday kept interest rates steady and signalled that borrowing costs were likely to re-main unchanged at least through next year amid expectations the economy would continue to grow modestly and the unemployment rate remain low.
“Just when it looked like the econ-omy was getting stronger, consumers faltered in November,” said Chris Low, chief economist at FHN Financial in New York.”Because consumption accounts for the lion’s share of GDP these days, a con-sumer spending slowdown is a concern, especially in the fourth quarter, when consumption is seasonally strongest.”
Retail sales rose 0.2% last month. Data for October was revised up to show retail sales increasing 0.4% instead of climbing 0.3% as previously reported.
November’s meagre sales gains are at odds with reports from retailers of brisk Black Friday business.
Economists speculated that a late Thanksgiving this year compared to 2018 pushed some sales into December and could have thrown off the model that the government uses to strip seasonal fl uctuations from the data, holding back sales.
Some believed the data would be re-vised higher when the government pub-lishes December’s retail sales report in January.
Economists polled by Reuters had forecast retail sales would accelerate 0.5% in November.
Compared to November last year, re-tail sales increased 3.3%. Excluding au-tomobiles, gasoline, building materials and food services, retail sales edged up 0.1% last month after rising by an unre-vised 0.3% in October.
These so-called core retail sales cor-respond most closely with the consumer spending component of gross domestic product.
Consumer spending, which accounts for more than two-thirds of US econom-ic activity, grew at a 2.9% annualised rate in the third quarter.
As a result of November’s small rise in core retail sales some economists trimmed their GDP growth estimates for the fourth quarter to below a 1.5% rate from around a 1.8% pace.
The economy grew at a 2.1% pace in the third quarter.
“As a result, real consumption growth appears to have slowed to between 1.5% and 2.0% (rate) in the fourth quarter, a little weaker than we had anticipated,” said Andrew Hunter, a senior economist at Capital Economics in London.”The risks to our forecast that overall GDP growth was 1.5% may also now lie slight-ly to the downside.”
Slowing consumer spending is boost-ing inventories at retailers, which could limit the downside to fourth-quarter GDP growth.
In a separate report on Friday, the Commerce Department said retail in-ventories excluding autos, which go into the calculation of GDP, increased 0.7% in October after rising 0.2% in September.
US stocks rose after China announced that major progress had been achieved on a “Phase One” trade deal with the United States.
Long-dated US Treasury yields turned higher while the dollar pared earlier loss-es against a basket of currencies.
Despite the slim gains in retail sales in November, consumer spending likely re-mains supported by a strong labour mar-
ket. The government reported last week that the economy created 266,000 jobs in November and the unemployment rate fell back to 3.5%, its lowest level in nearly half a century.
Last month, auto sales increased 0.5% after rising 1.0% in October.
Higher gasoline prices lifted receipts at service stations by 0.7%. Online and mail-order retail sales increased 0.8% after increasing 0.6% in October.
Sales at electronics and appliance stores increased 0.7%. Receipts at build-ing material stores were unchanged and sales at clothing stores fell 0.6%. Spending at furniture stores edged up 0.1%. Americans cut back on spending at restaurants and bars, with sales falling 0.3%. Receipts at healthcare and groom-ing stores also fell.
Spending at hobby, musical instru-ment and book stores dropped 0.5%. A third report from the Labor Department on Friday showed imported infl ation re-mained subdued in November.
Import prices increased 0.2% last month, lifted by higher prices for petro-leum products, after declining 0.5% in October. Import prices exclude tariff s.
Last month’s increase in import prices was in line with economists’ ex-pectations.
In the 12 months through November, import prices decreased 1.3% after drop-ping 3.0% in October.
Shoppers carry televisions purchased from a store during Black Friday sales in Los Angeles (file). US retail spending was unexpectedly sluggish in November as consumers held back at the start of the holiday shopping period, according to a government report yesterday.
BUSINESSSaturday, December 14, 2019
GULF TIMES
Telecom, industrials and banking counters witness selling pressureQSE WEEKLY REVIEW
By Santhosh V PerumalBusiness Reporter
The Qatar Stock Exchange (QSE) lost a sizeable more than 101 points in key barometer and more than QR5bn in capitalisation this week which also saw Baladna begin its journey in the equity market.Telecom, industrials and banking counters witnessed higher than average selling pressure this week which saw QSE chief executive Rashid bin Ali al-Mansoori disclose that the listing of a real estate firm is expected.Foreign institutions turned net profit takers as the 20-stock Qatar Index settled 0.98% this week which saw Manateq has awarded Al Wukair Logistics Park to Gulf Warehousing.
More than 55% of the traded constituents were in the red this week which saw six of the seven sectors reel under selling pressure.Islamic stocks were seen declining slower than the other indices this week which saw as many as 317,789 Masraf Al Rayan sponsored exchange traded funds QATR valued at QR756,316 trade across 45 transactions.Trade turnover declined amidst higher volumes this week which saw a total of 454 Doha Bank sponsored QETF valued at QR4,630 changed hands across two deals.The Total Return Index fell 0.98%, Al Rayyan Islamic Index 1.04% and All Share Index 0.53% this week which saw a total of 82,300 sovereign bonds valued at QR823mn trade across one transaction.
The telecom index shed 1.57%, industrials (1.41%), banks and financial services (1.14%), consumer goods (0.66%), transport (0.62%) and real estate (0.04%); while insurance was up 0.11% this week which saw market capitalisation fall 0.89% to QR568.27bn.Major losers included Ooredoo, Industries Qatar, Aamal Company, Mesaieed Petrochemical Holding, Gulf International Services, Nakilat, QNB, Qatar Islamic Bank, Commercial Bank, QIIB, Qatar First Bank and Woqod; even as Qatar Oman Investment, Qatari Investors Group, Salam International Investment, Doha Insurance, United Development Company, Ezdan and GWC were among the gainers this week which saw banking and consumer goods sectors constitute more than
64% of the trading volume. The banks and financial services and consumer goods sectors accounted for 32% each of the trading volume, industrials (17%), real estate (10%), telecom (4%), transport (3%) and insurance (2%) this week.In terms of value, banks and financial services accounted for 52%, consumer goods (19%), industrials (12%), telecom (6%), realty and transport (4% each), and insurance (2%) this week.Non-Qatari institutions turned net sellers to the tune of QR0.87mn compared with net buyers of QR73.65mn the previous week.Domestic funds’ net buying declined significantly to QR44.23mn against QR110.65mn the week ended December 1.
However, non-Qatari individuals were net buyers to the extent of QR13.42mn compared with net sellers of QR10.44mn a week ago.Local retail investors’ net profit booking fell noticeably to QR56.88mn against QR173.86mn the previous week.Total trade volume rose 5% to 379.39mn shares, while value fell 13% Q965.78mn but on 1% lower transactions at 31,551.The consumer goods sector’s trade volume quadrupled to 120.21mn equities and value more than doubled to QR182.46mn on a five-fold jump in deals to 9,450.The banks and financial services sector saw 2% jump in trade volume to 122.79mn stocks but on 18% fall in value to QR503.76mn and 10% in transactions to 11,865.
However, the industrials sector’s trade volume plummeted 40% to 62.87mn shares, value by 34% to QR120.21mn and deals by 38% 4,783.The telecom sector reported 35% plunge in trade volume to 16.54mn equities, 42% in value to QR55.86mn and 46% in transactions to 2,171.The real estate sector’s trade volume tanked 32% to 37.29mn stocks, value by 34% to QR42.77mn and deals by 20% to 1,592.There was 24% shrinkage in the transport sector’s trade volume to 13.15mn shares, 31% in value to QR42.6mn and 40% in transactions to 1,066.The insurance sector’s trade volume was down 15% to 6.53mn equities, value by 11% to QR18.13mn and deals by 4% to 624.
Investors slash bets on weaker pound after Johnson’s election winPound jumps to $1.35 after Conservatives’ election win; orderly Brexit in weeks seen more likely; bets on Bank of England rate cuts reduced
ReutersLondon
Sterling was well supported yes-terday as investors rushed to unwind bets on a weaker pound
after a resounding election victory for Prime Minister Boris Johnson’s Con-servative Party.
Johnson’s win will allow him to end three years of political paralysis and take Britain out of the European Un-ion in an orderly manner in a matter of weeks.
The pound was last trading up 1.1% at $1.3324, giving up some of the gains it made overnight when it surged to a 19-month high of $1.3516.
Against the euro, the pound was up 1.3% at 83.43 pence, having sky-rocketed to a 3-1/2-year high of 82.78 pence.
It had jumped more than 2.5% after exit polls pointing to the scale of the Conservatives’ win were published, making it at that time its biggest one-day gain in nearly three years.
This was a remarkable jump for a currency that has become extremely volatile since Britain voted to leave the EU in a referendum in 2016.
Vasileios Gkionakis, global head of FX strategy at Lombard Odier, said he had now sold sterling after increasing his holding in the currency when it was languishing at $1.26.
“From a risk-reward perspective it makes sense to take profi t,” he said.
But Gkionakis believes sterling could rise to $1.40 as there was a chance Johnson could now seek to extend the post-Brexit transition period beyond December 2020 in order to complete
negotiations on a future trade deal with the EU. During the election cam-paign, the prime minister had pledged not to do this.
Moreover, with a strong majority in parliament, “Johnson will not rely on Eurosceptics to hold him hostage,” Gkionakis said.
Analysts from HSBC expect sterling to rise to $1.45 and to 76 pence against the euro by the end of next year, now that the “politically driven undervalu-ation” has been removed.
It had previously forecast targets of $1.37 and 80 pence.
HSBC said that sterling will again be driven by economic data after years of being politically driven.
In the options market, the premium for pound puts over calls — the right to sell pounds versus the right to buy them — during the next week shrank to its lowest since mid-November at nearly 1.75%, a day after it reached its highest since September 2016.
That means fewer investors expect the pound to fall over the coming week.
On top of that, the three-month sterling implied volatility gauges, which include the January 31 Brexit deadline, have fallen to a fi ve-month high of 7.13 vol, suggesting traders have removed protection against un-
expected moves in sterling. Expecta-tions of aggressive rate cuts by the Bank of England were also scaled back as investors bet the lifting of political uncertainty would prompt policymak-ers to take a more optimistic view of the economy.
“The potential for a smooth Brexit removes some of the downside risk for the UK economy, and this should be positive for both business and con-sumer confi dence,” said Guy Foster, head of research at wealth manager Brewin Dolphin.
Along with the pound, the mid-cap stocks index FTSE 250, which is home to many companies with high UK revenues, surged about 5% to record highs.
Britain’s 10-year gilt yield also jumped to a six-month peak of 0.895% and was last up 3 basis points at 0.86%. The gap between Irish and German 10-year government bond yields shrank to its smallest since January 2018.
Russia central bank cuts its key interestrate to 6.25%ReutersMoscow
The Russian cen-tral bank lowered its key interest
rate to 6.25% yesterday amid slowing infl ation and said further rate re-ductions in the fi rst half of 2020 looked possible but not imminent.
Yesterday’s rate cut was in line with market expectations and be-came the fi fth in 2019. A Reuters poll this month predicted the central bank would trim the rate by 25 basis points, tak-ing this year’s cumula-tive rate reduction to 150 basis points.
“We will consider the necessity of further key rate reductions in the fi rst half of 2020,” said Elvira Nabiullina, the central bank governor, as she presented the rate move.
“We still see room for some reduction in the key rate, but in Febru-ary, and at subsequent meetings, we will once again comprehensively assess the justifi cation and timeliness of such a step, based on all the new data we will have by then.”
Unlike in the previ-ous statement, when the central bank cut its key rate by 50 ba-sis points, this time the
bank dropped its word-ing that it would study the necessity of a rate cut at one of the next meetings.
“Our signal does not imply an inevitable rate cut in February, or in the fi rst half of the year,” Nabiullina explained.
A further key rate cut will become possible only if our analysis con-fi rms that this is needed to bring infl ation back to the Bank of Russia’s 4% target, Nabiullina said.
The central bank, which targets infl ation as the key indicator and is set to hold the next rate-setting meeting on February 7, expects in-fl ation to end this year at 2.9-3.2% and to bottom at below 3% in the fi rst quarter of 2020.
“In the second half of the year, infl ation will be returning to around 4%,” Nabiullina said.
Friday’s cut brought the key rate closer to the lower boundary of the 6% to 7% range that the central bank considers neutral from a monetary policy point of view and has no immediate plans to change.
The pace of the cen-tral bank’s future rate cuts is likely to slow, said Tatiana Evdokimo-va, chief economist at Nordea Bank in Moscow, interpreting the bank’s message.
Nabiullina: Signalling further reduction.
Job-crusader Powell signals long policy pause amid lower infl ationBloombergWashington
As head of the Federal Re-serve, the late Paul Volcker earned a reputation as an
infl ation fi ghter. Current chairman Jerome Powell wants to be known as a job crusader.
In a roughly 50-minute press conference after the Fed left inter-est rates unchanged on Wednes-day, Powell repeatedly stressed his belief that the labour market can improve further despite unemploy-ment being at a half-century low.
“Even though we’re at 3.5% un-employment, there’s actually more slack out there,” Powell said. “And the risks of using an accommoda-tive monetary policy” to boost the labour market are “relatively low.’’
The bottom line for policy: The Fed will be in no rush to reverse its three recent interest rate cuts, even if the economy picks up steam and the odds of recession recede.
Indeed, policy makers projected no change in rates through 2020. That should be good news for Pres-ident Donald Trump who is bank-ing on a solid economy to help win re-election in November.
Powell opened the press confer-ence with a tribute to Volcker, who died on Sunday at the age of 92, say-ing the legendary Fed chair’s fi ght to tame double-digit infl ation laid “the foundation for the prosperity and price stability we enjoy today.’’
“There is defi nitely scope for un-employment to fall into 3.00-3.25% territory if the Fed truly decides to sit back and let conditions heat up. Our analysis shows that job growth will have to slow to 100,000-125,000 per month on a sustained basis for the unemployment rate to stop declining. We are hand-ily exceeding that pace at present”, says Carl Riccadonna, Bloomberg economist.
Powell though made clear that the Fed faces a very diff erent chal-lenge now: Infl ation that is not too high, but too low for the long-term health of the economy.
That’s the conundrum Japan has
been grappling with for decades as it’s struggled to escape the eco-nomic malaise caused by prolonged defl ation.
Acknowledging that infl ation expectations have slipped below the Fed’s 2% target, Powell said he “would want to see a signifi cant move up in infl ation that’s also per-sistent before raising rates.’’
Peter Hooper, global head of economic research for Deutsche Bank, said that the Fed under Pow-ell is entering a new regime where it no longer seeks to preemptively squash price pressures just because joblessness is low.
“The Fed is as dovish as I have ever seen them,’’ said Stephen Stanley, chief economist at Am-herst Pierpont. “They cut three times because they were worried about downside risks. Now even if those risks disappear, they will
tighten and take back the cuts only if infl ation rises.’’
In fact, Powell said the Fed was still focused on the global econom-ic slowdown and muted infl ation pressures that caused it to reduce interest rates this year to a range of 1.5% to 1.75%.
“We put now in place policies that we think are appropriate to address those things,” he said. But “they haven’t gone away.”
Hanging over the economy is Trump’s threat to slap another round of tariff s on Chinese imports on December 15 – a move that some economists think could push the US to the brink of a recession.
Powell refused to be drawn into saying how the Fed would react should ongoing trade negotiations between the US and China break down. He also said that that the Fed did not discuss whether moves by
Democrats in the House of Repre-sentatives to impeach Trump could undermine confi dence in the econ-omy. “We don’t consider things like that,” he said.
For now, Powell said that the economy and monetary policy “are in a good place.”
“We can sustain much lower levels of unemployment than had been thought,’’ Powell said. “That’s a good thing because that means we don’t have to worry so much about infl ation and you see the benefi ts of that in today’s labour market.’’
That’s welcome news for work-ers and those on the fringes of the labour force who’ve had diffi culty in getting jobs. Employment gains have been broad-based across ra-cial and ethnic groups as Ameri-cans who had been left behind fi nd jobs, Powell said.
African American unemploy-
ment is near record lows, though at 5.5% it is still well above the 3.5% level for the nation as a whole.
Wages have also been rising, par-ticularly for lower-paying jobs, Pow-ell said. But the salary increases of 3% to 3.5% are not so rapid as to suggest that the labour market is in danger of overheating and that infl ation is about to take off , Powell said.
“To call it hot, you’d want to see heat, you’d want to see’’ even high-er wages, he said.
Praising Volcker as someone who “always pursued the policies that he believed would ultimately ben-efi t all Americans,’’ Powell said that he and his colleagues are trying to do the same today.
That means using monetary pol-icy to extend the more than decade-long economic expansion, “so that the strong job market reaches more of those left behind.’’
Powell: Inflation that is not too high, but too low for the long-term health of the economy.