02/09/2025

BIZ & FINANCE TUESDAY | SEP 2, 2025

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JAKARTA: Indonesia posted a trade surplus of US$4.18 billion in July, beating expectations on strong shipments of palm oil products and machinery, while imports fell, official data showed yesterday. The July surplus was slightly higher than the US$4.1 billion recorded for the previous month, and stronger than a US$3.2 billion forecast from analysts polled by Reuters. Exports, worth US$24.75 billion, continued a strong growth of 9.86%, the statistics bureau said, above the 5.2% increase predicted in the poll. The June export growth was 11.3%. Ahead of the release, Indonesia’s Chief Economic Minister Airlangga Hartarto said the host of data would show the fundamentals of Southeast Asia’s largest economy were strong, trying to shore up market confidence after widespread political protests sparked selling of stocks and the currency. Exporters had sped up US-bound shipments ahead of the full imposition of American tariffs, helping boost export figures in the past few months even as prices of some of Indonesia’s top commodities like coal and nickel remained low. The US set a tariff rate of 19% on shipments from Indonesia, which took effect on Aug 7, in line with regional peers and well below the 32% rate first flagged in April. There was also a more than 80% annual rise in shipments in July of vegetable and animal fats – a grouping of products that includes palm oil, the bureau said. Meanwhile, imports shrank by an annual 5.86% to $20.57 billion in July, more than the poll’s 5% drop, marking the biggest contraction since May 2024. Indonesia logged a 2.31% annual inflation in August, below the 2.48% expectation in the Reuters poll and inching down from 2.37% in July, as the government’s subsidies for transportation fares counterbalanced a rise in prices of shallots and rice. Core inflation, which strips off volatile food prices and government-controlled prices, was at 2.17%, slower than the 2.30% survey forecast. Both rates were comfortably within the central bank’s 1.5% to 3.5% target range for 2025. Bank Indonesia has cut interest rates five times over the past year and Governor Perry Warjiyo has said it could reduce borrowing costs further to support the economy. Indonesia’s July trade surplus above expectation

Employees moving copper rod on a pallet on the production line for copper flat wire at the Wellascent factory in the China city of Ganzhou. – REUTERSPIC Asia factory activity shrinks as US tariffs bite

going forward, with countries reliant on US-bound shipments like Thailand and South Korea particularly vulnerable,” he said. The RatingDog China General Manufacturing PMI, compiled by S&P Global, rose to 50.5 in August from 49.5 in July, beating market forecasts and exceeding the 50-mark that separates growth from contraction. The reading confounds an official survey on Sunday that showed China’s manufacturing activity shrank for a fifth straight month in August on weak domestic demand and uncertainty over the outcome of Beijing’s trade deal with the US. Taken together, the surveys suggest China’s economy is still under significant strain. “Notably, the manufacturing sector is helping the recovery, but this rebound is patchy,” said Yao Yu, founder of RatingDog.

billion in Indian equities so far, including US$4 billion in outflows in August, when US President Donald Trump hit India with tariffs of as much as 50%. Indian consumer staples struggled in the April-June quarter, with Hindustan Unilever reporting subdued revenue growth of 4% and Colgate Palmolive India posting a 4% decline. “In our view, markets remain on the expensive side, and we expect the impact of tariffs to lead to further earnings downgrades over the next 1-2 months,” said Peeyush Mittal, portfolio manager at Matthews Asia. “Accordingly, our near-term is cautious.” – Reuters weak demand from key markets like China, Europe and the US, the Japan PMI survey showed. South Korea’s factory activity also shrank with the S&P Global PMI standing at 48.3 in August, up from 48.0 in July but contracting for the seventh straight month. Both countries struck a trade deal with the US that eased, but not removed, the pressure on their export-reliant economies. Tokyo and Washington agreed in July to lower US tariffs on Japanese goods, including to 15% from 27.5% for automobiles, though uncertainties remain around the implementation of the deal’s terms. South Korea also signed an agreement in July that lowered tariffs to 15% from a steeper 25% duty, effective from August. Manufacturing activity in Taiwan weakened in August, while that of the Philippines and Indonesia expanded, the surveys showed. India’s manufacturing activity expanded at its fastest pace in more than 17 years in August as strong demand boosted production. But the Trump administration’s steep 50% tariff on US imports of Indian goods like garments, gems and jewellery threatens to dampen growth in the coming quarters. “Looking ahead, we think tariffs will lead to weaker global growth,” said Shivaan Tandon, markets economist at Capital Economics. – Reuters

TOKYO: US tariffs took a toll on factory activity across Asia, overshadowing a surprisingly upbeat performance in China, private surveys showed yesterday, keeping pressure on policymakers to underpin the region’s fragile economic recovery. The outcome reinforces concerns that manufacturers in Asia, which have been frontloading shipments to beat higher US levies, will struggle to grow profits as exports weaken in the months ahead, analysts say. Export powerhouse Japan, South Korea and Taiwan all saw manufacturing activity shrink in August, the surveys showed, underscoring the challenge Asia faces in weathering the hit from President Donald Trump’s tariffs. o Japan, South Korea and Taiwan PMIs decline but China bucks trend

“With inflation under control, it provides room for cautious adjustments to the benchmark interest rate to support economic growth, as long as exchange rate stability and inflation expectations remain manageable,” said Bank Permata economist Josua Pardede. – Reuters India’s strong economic growth fails to impress equity investors “It’s a double-whammy for Asian economies, as they face higher US tariffs and competition from cheap Chinese exports,” said Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute. “We’ll likely see the hit from US tariffs intensify “With weak domestic demand, potentially overstretched external orders, and slow profit recovery, the durability of the improvement depends on whether exports truly stabilise and whether domestic demand can pick up pace.” The S&P Global Japan Manufacturing Purchasing Managers’ Index (PMI) stood at 49.7 in August, improving from 48.9 in July but staying below the 50 threshold for two straight months. New orders from overseas fell at the fastest pace since March 2024 as companies battled

MUMBAI: India’s world-beating economic growth is failing to translate into gains for equity markets as weakening pricing power and US tariffs weigh on corporate earnings, turning foreign investors away. Gross domestic product in India grew at a faster-than-expected 7.8% in the April-June quarter in real terms. However, nominal growth, which represents output at current market prices, fell to 8.8% from 10.8% in the previous three months, indicating a drop in inflation. This trend was also seen in corporate earnings, with revenue growth of the top 3,000 listed Indian companies slipping to a seven quarter low of 3.4% on-year, down from 5.1% in

with nominal growth. Slower nominal GDP growth translates into weaker corporate revenue and profits, which can make stocks look overvalued. Nominal GDP growth for the current financial year is expected to be 8.5%-9%, the lowest in two decades outside the Covid-19 pandemic, which could keep earnings and equity markets under pressure, analysts at Jefferies said in a report on Friday. India’s benchmark Nifty index has risen about 4% so far this year, making it the third worst-performing across MSCI Asia countries this year, after Thailand and Indonesia. Foreign investors have sold a net US$15

the previous three months and 6.8% a year ago, according to Mumbai-headquartered ICICI Bank Global Market Research. “The core corporate earnings outlook is weak and for the next few quarters at least we remain underweight,” said Sat Dhura, portfolio manager at Janus Henderson Investors, adding that higher US tariffs are an impediment to growth that India cannot afford right now. “Weaker credit growth, weaker nominal GDP growth and warnings of weakening asset quality at the banks will continue to keep foreign investors on the sidelines.” Equity analysts in India see corporate earnings growth as more closely correlated