19/09/2024

BIZ & FINANCE THURSDAY | SEP 19, 2024

/thesuntelegram FOLLOW / Malaysian Paper

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Indonesia’s central bank delivers surprise rate cut JAKARTA: Indonesia’s central bank delivered its first rate cut in more than three years yesterday, opting to move hours ahead of the widely expected start of the US Federal Reserve’s easing cycle in a bid to bolster growth in Southeast Asia’s largest economy. Bank Indonesia (BI) unexpectedly trimmed the benchmark rate by 25 basis points to 6.00%, its first rate cut since February 2021. Only three out of 33 economists polled by Reuters had predicted the move, while all the others expected rates to be held steady. BI also cut the overnight deposit facility and lending facility rates by the same amount to 5.25% and 6.75%, respectively. The decision is consistent with BI’s expectation that inflation will remain low in 2024 and 2025, an expectation of a stable rupiah and the need to bolster economic growth, BI governor Perry Warjiyo said. The rupiah had been under pressure earlier this year in response to changing risk appetite in global financial markets, but has since reversed those losses against the US dollar to be trading slightly firmer than last year’s close. – Reuters India tops China for first time in key MSCI equities index BENGALURU: India has overtaken China for the first time ever in a key MSCI equities index, bolstered by steady economic growth and strong flows. India’s weight in the MSCI investible large-, mid- and small-cap index has risen to 2.35%, greater than China’s weight of 2.24%, Morgan Stanley said in a note on Tuesday. “India will continue to gain share due to market outperformance, new issuances and liquidity improvements,” analysts led by Jonathan Garner said. India’s nominal gross domestic product growth rate is running in the low teens, more than thrice the economic growth in China, generating a “profound divergence in earnings growth environment”, they said. Earlier this month, Morgan Stanley forecast that India will overtake China in the MSCI Emerging Markets index as India’s stock market rally was “only past the halfway mark”. India’s rising weightage in the MSCI indexes will bring additional inflows, analysts said. India is among the best-performing markets this year globally, with its benchmark indexes NSE Nifty 50 and S&P BSE Sensex up 17% and 15%, respectively. – Reuters

Businesses facing months of recovery in Vietnam

HANOI: Factory roofs blown off, products worth millions of dollars destroyed, supply chains disrupted: Typhoon Yagi has had a disastrous impact on local and global companies in northern Vietnam that could take months to recover, business leaders warn. The strongest typhoon to hit the country in decades slammed into the important industrial port city of Haiphong before unleashing a torrent of rain across the north, a major production hub for global tech firms such as Samsung and Foxconn. With climate change making destructive storms like Yagi more likely, the disaster raises questions about Vietnam’s push to become an alternative to China in the global supply chain owing to its high susceptibility and lack of mitigating measures. Dozens of factories and warehouses in Haiphong were damaged by Yagi , while some in neighbouring Quang Ninh province expect to have no power until the end of the week, business leaders said. “I can guarantee that (the

The next rate review is on Oct 16. Prime Minister Paetongtarn Shinawatra has called central bank independence an ‘obstacle’ to growth. Her government plans to nominate party loyalist and former finance minister Kittiratt Na Ranong, a staunch critic of the BOT, as the next BOT board chairman, sources said. The BOT chair cannot direct rates, but plays a role in choosing rate review panel and the next governor after incumbent Sethaput Suthiwartnarueput’s term ends in September 2025. – Reuters However, some hope the disaster may incentivise investors to consider renewable energies such as solar that could help shore up supply when storms or floods occur. Solar and wind power grew tenfold to 13% of electricity generation from 2015 to 2023, on par with the global average and exceeding some Southeast Asian peers, according to Ember. – AFP has long been seen as a likely key beneficiary of the decoupling between the United States and the world’s second-largest economy. Investors have expanded into the country as part of a “China plus one” strategy and US President Joe Biden made a high-profile state visit to Hanoi a year ago. Biden symbolically upgraded diplomatic ties and pushed Vietnam as a solid partner for “friendshoring” – diversifying manufacturing supply chains away from China towards friendly countries. Executives from tech behemoth Google, chip makers Intel and GlobalFoundries, and aviation giant Boeing joined Biden for investment talks in Hanoi. But Vietnam is one of the world’s most vulnerable countries to human-caused climate change, and without adaptation and mitigation measures, the World Bank estimates it will cost about 12% to 14.5% of GDP a year by 2050. A study earlier this year said Southeast Asia – and Haiphong specifically – was facing “unprecedented threats” from longer and more intense typhoons because of climate change. Vietnam’s government has set a target to become a high-income country by 2045, but the World Bank says damage caused by climate change poses a “critical obstacle” to this goal. Vietnam’s government has already said Yagi caused an estimated US$1.6 billion (RM6.8 billion) in economic losses, and would slow GDP growth in the second half of the year. But if Vietnam’s susceptibility is a worry for investors, most see a lack of climate-safe alternatives. “Vulnerability due to climate change is subject to any region ... (so) it will not affect Japanese investment,” said Yoshida.

o Products destroyed, supply chains disrupted by strongest typhoon to hit country in decades

Samsung – Vietnam’s largest foreign investor – said its operations were running as normal, but a warehouse belonging to Korean giant LG Electronics was flooded last week, Hong said, damaging fridges and other home appliances. LG told AFP it had resumed production of some products shortly after the storm and was making “every effort to swifty recover”. Among businesses from Japan, another major investor, around half reported some kind of damage – while around 70 said their business had been interrupted or suspended, according to Susumu Yoshida at the Japan Chamber of Commerce and Industry. Floods and landslides triggered by Yagi have killed more than 500 people across Southeast Asia – 292 in Vietnam, according to government figures. The nation of 100 million people

damage) is more than tens of millions of dollars,” said Bruno Jaspaert, CEO of DEEP C Industrial Zones, home to 178 companies across five industrial areas in Haiphong and Quang Ninh. “At least 85% of our customers have sustained damage.” Many companies lost roofs, while another business saw 3,000 square metres of wall panels blown off in gale-force winds, Jaspaert said. At the Haiphong DEEP C industrial zones, energy consumption was at two thirds of its usual rate, Jaspaert said, and was not expected to return to normal for another two or three months. Hong Sun, chairman of the Korean Chamber of Business in Vietnam, told AFP the typhoon had been a “disaster” for his members, with some struggling with staff shortages as flooding stopped workers reaching factories.

The flooded Red River in Hanoi in the aftermath of Typhoon Yagi hitting northern Vietnam. – AFPPIC

Thai finance minister to discuss inflation target with BOT BANGKOK: Thai Finance Minister Pichai Chunhavajira said yesterday he has set a date to meet with the central bank to discuss the inflation target, as the government pushes its case for a cut in interest rates. Thailand’s annual headline inflation slowed in August with the consumer price index (CPI) rising 0.35% year-on-year after July’s annual increase of 0.83%, and was below the target range of 1% to 3%. he said without elaborating. The government and central bank agree on an inflation target each year. The BOT has said the current range, which has been in place since 2020, was suitable. abroad, issuing dollar-denominated bonds next year, he added. Southeast Asia’s second-largest economy is expected to grow 2.7% this year from an expansion of 1.9% last year, behind regional peers.

In August, the BOT held rates at 2.50% for a fifth straight meeting, resisting government pressure for a cut and saying that rates alone could not spur growth, which was being held back by structural problems. “Our interest rates should align with global rates,” Pichai said.

Public-debt-to GDP by the end of September next year, which is the end of 2025 fiscal year, is expected to come in at 66%, assuming 3% economic growth, Pichai said, under the 70% ceiling. The level was 63.7% at the end of July. Thailand plans to borrow from

“We will have discussion soon, quietly,” Pichai told reporters, but did not give a date. The minister said he would like to see an inflation target that will push up consumer prices to help economic growth. “It can be a range or a mid-point,“

The plan to push for the review was first reported by Reuters and follows months of government pressure on the Bank of Thailand (BOT) to cut the rate from a decade-high 2.50% to help boost growth of an economy that has been struggling since the pandemic.