02/10/2024

BIZ & FINANCE WEDNESDAY | OCT 2, 2024

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Asia’s factories hit by global uncertainty

said Shivaan Tandon, markets economist at Capital Economics, on Asia’s PMI. “We think weak global demand is set to remain weak in the coming months and weigh on activity in Asia for the near term,” he said. The PMI for Taiwan stood at 50.8 in September, falling from 51.5 in August. Manufacturing activity shrank in Vietnam, Malaysia and Indonesia, the surveys showed. Growth in India’s manufacturing industry also cooled to an eight-month low in September as new orders - a key gauge of demand - grew at the weakest pace since December. The International Monetary Fund anticipates a soft landing for Asia’s economies as moderating inflation creates room for central banks to ease monetary policies to support growth. It predicts growth in the region to slow from 5% in 2023 to 4.5% this year and 4.3% in 2025. – Reuters JAKARTA: Indonesian prices rose at their slowest rate in almost three years in September as the pace of food-price inflation eased, giving the central bank ample room to loosen monetary policy to stimulate economic growth. Annual inflation reached 1.84%, Statistics Indonesia said yesterday. That was the lowest since November 2021, LSEG data showed. The figure compared with 2.12% in August and the 2.00% median of analyst estimates in a Reuters poll. It also stayed within Bank Indonesia’s inflation target range of 1.5% to 3.5%. Food prices are the biggest contributor to inflation figures but their rate of growth eased to 2.57% versus August’s 3.39%. Core inflation, which excludes volatile food prices as well as government controlled prices, was 2.09% versus 2.03% in the poll. – Reuters CHINA, US TO HOLD TALKS ON ECONOMIC, TRADE TIES: XINHUA BEIJING: Chinese Commerce Minister Wang Wentao and his US counterpart will hold a call in the near future on trade and economic ties, China’s state-run Xinhua news agency reported yesterday, citing people familiar with the matter. They will exchange views on bilateral economic and trade relations and key issues of mutual concern, including restrictions on electric vehicles, Xinhua reported. During a two-day working group meeting in Beijing last month with a US delegation, Chinese officials expressed “grave” concerns about additional US tariffs, investment restrictions, and Russia-related sanctions. A new round of US tariffs on US$18 billion (RM75 billion) of Chinese goods including EVs, EV batteries and solar panels took effect in late September, with lithium-ion batteries bearing the brunt of the levies by value. The US imports nearly zero Chinese EVs. – Reuters project conditions to worsen, the tankan showed. “Momentum among non-manufacturers could have already faded, including hotels and restaurants that had been boosted by inbound tourism,” said Masato Koike, senior economist at Sompo Institute Plus. “For the BOJ, today’s tankan was evidence that things were on track. Its rate-hike cycle will likely continue,” said Toru Suehiro, chief economist at Daiwa Securities. “The focus shifts to how the yen’s rise affects business sentiment and inflation. That would be the key point to scrutinise at the next tankan,” he said. The next tankan is due on Dec 13, roughly a week before the BOJ’s policy meeting on Dec 18 19. – Reuters INDONESIAN INFLATION AT 1.84% IN SEPTEMBER, LOWEST RATE SINCE 2021

September after increasing 11% in August. The monthly trade of South Korea, Asia’s fourth-largest economy, is considered a bellwether for world trade and is the first to be released among major exporting economies. In China, factories struggled to make headway, with the Caixin/S&P Global manufacturing PMI released on Monday showing a slump to 49.3 in September from 50.4 the previous month, marking the lowest reading since July last year. It was a similar picture in Japan, which is relying on exports to boost economic growth amid subdued consumption. The final au Jibun Bank Japan PMI dipped to 49.7 in September from 49.8 in August, remaining below the 50.0 threshold that separates growth from contraction for the third straight month. “Softer growth in new orders was the main factor weighing on manufacturing last month,”

rates and injection of liquidity into the banking system. Factory activity in Japan shrank in September and expanded at a slower pace in Taiwan, purchasing managers’ index (PMI) surveys showed yesterday, highlighting the toll soft global demand was taking on Asian exporters. In a sign of the widening fallout from slowing US growth, South Korea’s export growth decelerated in September with shipments to the world’s largest economy barely increasing, data showed yesterday. South Korean exports increased 7.5% in September from a year ago, decelerating from an 11.2% rise in the previous month, the customs service agency reported. The result, which beat the 6.5% consensus estimate from analysts, was driven by a slower 3.4% growth in shipments to the US in

BANGKOK: Thailand’s finance minister said yesterday an agreement on an inflation target should be reached with the Bank of Thailand (BOT) this month, as the government seeks an interest rate cut and the baht rises to a 31 month high. Pichai Chunhavajira’s comments come ahead of meeting, plans for which were first reported by Reuters, between the ministry and central bank this week to discuss the inflation target and strong currency, amid government pressure on the BOT to cut rates and align with fiscal policy aimed at stimulating a sluggish economy. The baht has risen 5.2% since the beginning of the year, making it the region’s second-best performing currency after Malaysia’s ringgit. The baht’s rapid appreciation has been hitting exports and tourism spending, two key drivers of Southeast Asia’s second-largest economy. The baht, inflation target and interest rates are all connected, Pichai said. “We have spoken and are always in discussion ... these issues require preparing a lot of information,” Pichai told reporters. “It’s not a one-time thing,“ he said, adding the BOT said that it had managed the baht. A review of the 1% to 3% inflation target range, which has been in place since 2020, could raise the chance of a rate cut. The central bank has so far resisted calls for easing and held the benchmark rate at 2.5% for a fifth straight meeting in August. Its chief has said a cut was not necessary, despite easing by the U.S. Federal Reserve. The next rate review is on Oct 16. Thailand’s inflation target is reviewed every year and must be agreed by the BOT and finance ministry, and approved by the Cabinet before the end of the year. The Thai economy grew at a faster pace of 2.3% in the April-June quarter on the year, but TOKYO: Asia’s factory activity weakened in September as soft Chinese demand and global economic uncertainty pointed to a challenging outlook, private-sector surveys showed, keeping policymakers under pressure to shore up fragile growth. The region’s manufacturers may get some relief in coming months from aggressive stimulus unveiled by Chinese authorities over the past week, including a lowering of interest o Region’s manufacturers may get some relief in coming months from China’s aggressive stimulus TOKYO: Japanese business sentiment was steady in the three months to September, a closely watched survey showed, a sign the economy remained on track for a moderate recovery that leaves scope for further interest rates increases by the central bank. But companies remained cautious about the outlook with service-sector firms projecting business conditions to sour over the next three months, the Bank of Japan’s (BOJ) “tankan” survey showed yesterday, as weak global growth and volatile financial markets cloud the outlook. The tankan will be among key factors the BOJ will scrutinise in setting monetary policy and releasing fresh growth and inflation forecasts at its next meeting on Oct 30-31. The headline index measuring big manu

Ministry-BOT deal on inflation target expected this month

BR I E F S

A visitor takes photograph of a vertical farming model at the Sustainability Expo 2024 in Bangkok on Monday. Thailand’s inflation target is reviewed every year and must be agreed by the central bank and the finance ministry, and approved by the Cabinet before the end of the year.– AFPPIC

hit agriculture and food shipments. “This is the biggest risk ... there are no supportive factors in the final stretch, we have to fight to drive exports.” In the first eight months of 2024, exports rose 4.2% from the same period a year earlier, helped by a weaker baht, Chaichan said. Exporters also urged the government to further delay plans to raise the minimum wage. “This would impact the cost structure and our competitiveness. It should be delayed further, don’t consider it now,” said Chaichan. – Reuters

analysts said fiscal policy uncertainty has clouded the outlook. The central bank has forecast economic growth of 2.6% this year, after last year’s 1.9% expansion. Separately, the Thai National Shippers’ Council said Thailand’s exports are expected to rise 2% this year, the upper end of a previous forecast of 1% to 2% growth, but the rapidly strengthening baht could be a challenge for the rest of the year. “The baht’s appreciation is too fast when compared with our partners and competitors,” said Chaichan Chareonsuk, chairman of the council, adding the currency’s strength would facturers’ business confidence was +13 in September, unchanged from June and matching median market forecasts, the survey showed. The sentiment index for big non manufacturers rose slightly to +34 from +33 in June, exceeding market forecasts of +32, as price hikes lifted retailers’ profits, the tankan showed. “Despite the yen’s rebound since mid-July, big manufacturers’ business sentiment remains unexpectedly solid,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Overall results are positive, considering various risk factors such as a stronger yen, pressure to raise wages and downside risks to the global economy.” Despite the yen’s 11% surge in the third quarter, big manufacturers set their dollar/yen estimate for the current fiscal year at 144.96, up

Japan’s business mood steady, keeps BOJ rate hike chance alive

from 142.68 in the June survey. The dollar stood at 143.725 yen yesterday. Big companies expect to increase capital spending by 10.6% in the fiscal year to March 2025, the tankan showed, smaller than a median forecast for an 11.9% gain and down from an 11.1% increase three months earlier. Companies expect inflation to stay above the BOJ’s 2% target one, three and five years ahead, the tankan showed, backing up the central bank’s view that Japan was making progress towards durably achieving its price goal - a prerequisite for hiking still-low interest rates. But the survey found Japanese companies remain cautious about the outlook. While big manufacturers expect conditions to improve three months ahead, non-manufacturers