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Moody's: Philippines Rating Resilient to Slowing Growth in Asia, Outlook Stable
Moody's Investors Service says that the Philippines' Baa2 government bond rating reflects the resilience of its economy to the current headwinds buffeting neighboring countries and emerging markets as a whole. Further, the stable outlook reflects Moody's expectation that positive economic and fiscal trends will be sustained over the next 1-2 years. However, these will be balanced against the persistent weaknesses in the sovereign's credit profile. Moody's conclusions were contained in its credit analysis on the Philippines, and which examines the sovereign in four categories: economic strength, which is assessed as "high"; institutional strength "moderate (+)"; fiscal strength "moderate"; and susceptibility to event risk "low". The report constitutes an annual update to investors and is not a rating action. Moody's report notes that domestic demand has cushioned the effects of weaker exports amid slowing growth in much of the Asia Pacific region. At the same time, the external risks to the government's external liquidity and funding conditions arising from the prospective tightening by the US Federal Reserve are manageable. Internally, although political noise has increased ahead of general elections next year, Moody's does not expect the improvements in institutional strength to reverse. Reform momentum has been largely sustained, leading to improved assessments of competitiveness and governance. However, bottlenecks in fiscal expenditure continue to weigh on growth and could threaten the government's capacity to meet its goal of increasing infrastructure spending to at least 5% of GDP by 2016. Nevertheless, the government's Public Private Partnership Program has gained some traction, following a slow start at the outset of the Aquino administration. Moody's expects government debt as a share of GDP to fall for a fifth consecutive year in 2015 as fiscal deficits remain narrower than budgeted. Both the public and private sector have also relied less on cross-border sources of financing in recent years, leading to improved external debt ratios and lowering the country's susceptibility to volatile capital flows. Nevertheless, the government's revenue--as measured against GDP--is low and debt affordability remains weak when compared to investment-grade peers, although both ratios have improved in recent years, says the rating agency. The relatively high proportion of government debt denominated in foreign currency renders the Philippines susceptible to currency risks, although this has also improved recently. In addition, the country's GDP per capita is among the lowest for investment-grade countries.
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JPMorgan’s Chang Says Fed Rate Hike Would Help Emerging Market
Joyce Chang, global head of research at JPMorgan Chase & Co., said a U.S. Fed rate hike would help emerging markets by lowering uncertainty that has kept investors from taking on risk there. Last month, official kept the rate near zero to see if slower growth in China undermines their forecast that U.S. inflation will move back to the Fed's 2% target. David Fernandez, head of fixed-income, currencies and commodities research for the Asia Pacific region at Barclays Plc, said during the panel discussion that emerging markets would benefit if the U.S. Federal Reserve increased rates.
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BoJ Minutes: Economic Recovery Remains On Track
Members of the Bank of Japan's monetary policy board said that the country's economic recovery is expected to continue, minutes from the bank's September 14 and 15 meeting revealed on Tuesday. At the meeting, decided to maintain its target of raising the monetary base at an annual pace of about JPY 80 trillion. It also kept its benchmark lending rate unchanged at 0 to 0.10 percent. "Japan's economy has continued to recover moderately, although exports and production are affected by the slowdown in emerging economies. Overseas economies -- mainly advanced economies -- have continued to grow at a moderate pace, despite the slowdown in emerging economies," the minutes said. Exports and industrial production have been more or less flat. This was a downgrade from its earlier view that exports and industrial production have been picking up. Inflation expectations appear to be rising, the minutes said, due to the effects of the decline in energy prices. "The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is about 0 percent. Inflation expectations appear to be rising on the whole from a somewhat longer-term perspective. The year-on-year rate of increase in the CPI is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices," the minutes said. Downside risks include the health of commodity exporters and emerging markets, economic momentum in Europe and the pace of the economic recovery in the United States. The central bank will continue to take steps as needed to achieve its goals, the minutes said. "Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects, and the Bank will continue with QQE, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate," the minutes said. Also on Tuesday, the BoJ said that overall bank lending in Japan was up 2.6 percent on year in September, coming in at 491.312 trillion yen. That was shy of forecasts for 2.7 percent, which would have been unchanged from the previous month. Excluding trusts, bank lending also was up 2.6 percent to 427.163 trillion yen. That was beneath forecasts for 2.8 percent, which would have been unchanged from the August reading. Lending from trusts gained 2.2 percent to 64.149 trillion yen, while lending from foreign banks added 0.2 percent to 1.926 trillion yen.
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Senior Fed official urges delay in raising rates
Federal Reserve Governor Lael Brainard said the US central bank should not rush in increasing interest rates as global risks are clouding the overall US outlook, indicating risk management considerations call for an opportunity to wait if the perils diminish. Even though the outlook for domestic demand is good, global factors are “weighing on net exports and inflation,” and the foreign risks seemed inclined to the downside,” Brainard added. Fed officials voted to defer a rate hike to wait for more evidences on how slowing growth in China influences the US outlook. The official refused to disclose if she favored increasing rates this year or in 20
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South Korea Leading Index Gains 0.2% In August - Conference Board
The leading economic index in South Korea was up 0.2 percent in August, the Conference Board said on Wednesday, following the 0.3 percent decline in July. The positive contributor was the yield of government public bonds. Negative contributors included the value of machinery orders, stock prices, private construction orders, the index of inventories to shipments and real exports FOB. The coincident index was up 0.2 percent, down from 0.4 percent in the previous month. The positive contributors were total employment, the wholesale and retail sales component, monthly cash earnings and industrial production.
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Singapore central bank eases monetary policy to bolster growth
Singapore's central bank dwindled monetary policy for the second time this year, seeking to revive growth in the country. In a statement, the Monetary Authority of Singapore said it will downsize the slope of its currency band, lowering the rate at which its dollar will advance. The central bank retained the width of the band and the center. The trade ministry said the country thwarted a technical recession in the third quarter, gaining 0.1% from the last three months, when it dropped to 2.5%. We have noticed some uncertainties which “threw some debate on the next MAS move,” said Christy Tan, Head of Markets Strategy at National Australia Bank Ltd. In January, the MAS held an unscheduled meeting and disclosed it would cut the slope of the band, while maintaining modest, gradual appreciation of the Singaporean dolla
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China Inflation Slows; PPI On The Decline For 43 Months
China's inflation eased in September, reflecting a slowdown in food inflation, and producer prices extended its downward trend, adding to fears of deflationary pressure amid moderation in economic growth. Consumer price inflation slowed to 1.6 percent in September from a 12-month high of 2 percent seen in August. It was forecast to fall to 1.8 percent. Food inflation eased notably to 2.7 percent from 3.7 percent, while non-food inflation slowed only marginally to 1 percent from 1.1 percent. Month-on-month, consumer prices gained 0.1 percent, slower than the 0.5 percent increase seen in August. Another report from NBS showed that producer prices fell at the weakest rate since late 2009, posting the 43rd consecutive month of decline. Producer prices dropped 5.9 percent annually in September, the same rate of decline as seen in August and matched expectations. On a monthly basis, prices fell 0.4 percent. Julian Evans-Pritchard at Capital Economics expects the fall in consumer price inflation to be temporary. As the sharp falls in the price of oil and other commodities late last year begin to drop out of the base for comparison over the coming months, both consumer and producer prices are likely to pick up markedly, easing concerns over deflation, the economist said. The People's Bank of China cut its interest rates five times since last November and reduced reserve ratio to support lending. Inflation has remained between 0.8 percent and 2 percent this year. The government aims to achieve around 3 percent inflation this year.
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Yen Falls Against Majors
The Japanese yen weakened against the other major currencies in the Asian session on Thursday. The yen fell to a 1-1/2-month low of 125.49 against the Swiss franc, a 3-day low of 136.73 against the euro and a 2-day low of 184.35 against the pound, from yesterday's closing quotes of 125.04, 136.33 and 183.85, respectively. Against the U.S. dollar, the yen edged down to 119.16 from yesterday's closing value of 118.82. If the yen extends its downtrend, it is likely to find support around 129.00 against the franc, 138.00 against the euro, 188.00 against the pound and 121.00 against the greenback
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US stocks rebound on earnings report
US shares rallied following it recorded two days of losses Thursday, bolstered by the third quarter earnings report of the financial sector. The S&P's financial sector ended up 2.3% for its best trading day in over a month. Citigroup rose 4.4% following it surpassed projections. A Reuters data showed 67% of the companies that reported earnings so far have outmatched analyst estimates. The Dow Jones Industrial Average settled at 17,141.75, up 1.28%, the Nasdaq Composite ended at 4,870.10, up 1.82%, and the S&P 500 closed at 2,023.86, up 1.49%. The surge of stocks was merely a bounce back, as none of the fundamentals have become “decisive enough to take you away from the technical battle tha's going on,” said Jim Paulsen, Chief Investment Officer at Wells Capital Management
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10-year Treasuries most expensive in two years
The 10-year Treasuries are the most expensive compared with other maturities in over two years, as the Federal Reserve lacks clarity over the timing of its first interest rate hike since 2006, pushing investors to the benchmark note. Ahead of the central bank's September 17 rate decision, the yield hovered about 2% this month from as high as 2.3%. Futures traders reduced rate increase bets by December to as low as 27% last week, as October 2 report showed the economy gained less than 150,000 jobs in September. The yield on the Treasury 10-year note was slightly changed at 2.03%. The 2% security expiring in August 2025 ended at 99 ¾.
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