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Archive for July, 2011

The biggest challenge that Emerging Asia Pacific Economy are facing is the problem of inflation. Almost no Asian country is immune to inflation considering the rocketing rise in crude oil price. To counter the problem the every country has hiked the bank reserve ratio to slowdown the lending and credit growth. The other major problem faced by these economy is rise in food and labor cost which is making things bit more difficult for the emerging economy to sustain the economic growth rate.

Exports in these countries have so far fared well, even though there was uncertainty considering the slow recovery of US economy and debt-laden European countries

China reported export jump in the month of June which helped it in posting its largest trade surplus after many months. While India reported 50% increase in its exports. Other Asian export power house like South Korea and many other exporting Asian countries have seen decent exporting figures, thanks to rising global demand in shipping, steel & auto sector.

Here is a quick summary of some strong Emerging Asia Pacific Economies.

China: The major problem faced by Chinese economy is inflation, slowing consumer spending and slowing real estate and property sector. Chinese’s policy makers are focusing on the challenges faced by the economy in order to curb inflation and to revive and upgrade consumer spending to boost domestic consumption which will help the negatively growing property market to regain its foot.

China has been fighting inflation form last one and a half year after it exceeded the 3% inflation ceiling mark set by China’s National Development and Reform Commission. Rise in input cost have always troubled the Chinese economy to maintain the inflation rate below the ceiling limits. By late 2010 the inflation touched 4% and by May 2011 the inflation rate touched 5.2% mark.

Though China has taken various measures to moderate the rising inflation, since then it has hiked the lending rates four times since October 2010, and the bank reserve ratio have been revised 6^th time to 21.5%.

India: India too faces similar problem like China, with tremendous rise in inflation the economy is seeing pressure in its growth momentum.

To counter inflation the Reserve Bank of India tightened up monetary policy, it increased the cash reserve ratio with banks which made borrowing rates to go up. The raise in borrowing cost has ignited negative sentiments from the private sector. Hence many consumer durable companies have put their expansion plans on hold as they forecast slowdown in sales. Were as many capital intensive industries are giving up some projects due to lack of freely available capital. India’s industrial production also fell in the month of May to 6.3%.

South Korea: South Korea too is no different from the county mentioned above as pressure of inflation is also bothering this economy. South Korean  economy has been battling inflation from past 18 months which was contributed by rising exports, falling unemployment, and rising availability of consumer credit.

South Korean export-based industries have seen tremendous expansion due huge global demand for its consumer durable, auto and industrial input. Exports grew by 22.4% in the month of May.

The growth in export industries has also helped the labor market as unemployment rate was reduced to 3.3% in May. But in the month of May the inflation figures reached 4.1% exceeding the ceiling figure of 4% set by the central bank. The rise in consumer price inflation is also believed to be spreading to core inflation. In May, core inflation figures climbed to a two-year high of 3.5%.

It was surprising to see South Korea’s central bank and the Bank of Korea not raising the interest rates looking at the current trend of inflation in the country.

Taiwan: It was a good time for the Taiwan’s exports industry as exports grew at a pace of double digit for the past several months, until May when the figures dropped down to 9.5%. Taiwan’s economy is highly depended on exports as two third of the country’s total income comes from it.

The inflation figures too recorded an upside in the month of May which reached 1.66% from 1.32% in the month of April, even when export dropped in the country. The reason for inflation growth can be attributed to strong domestic consumption, robust investment and wage rise.

Considering the growth in inflation Taiwan’s Central Bank again decided to hike interest rate by 125 basis points. Since the beginning of 2011 the country is witnessing hike in interest rates for the fifth time.

Well the global market is following its global leads down. Dollar has slipped surprisingly from the record spot earnings. It may spark rally NZX shares drop after Aussie dispute Local shares up in morning trade Wrightson leads gains while NZX falls Wall Street rockets up on strong data Dollar on a high again after upbeat US data Strong data lifts Europe stocks.

Also the Guinness Peat Group which is having shareholder approval to wind down its business and return capital to investors that led the NZX 50 Index lower after a weaker-than-expected jobs report in the US dented optimism about the global economy.

The NZX 50 fell 19.22, or 0.6 per cent, to 3436.910 as at midday, heading for its fifth straight daily decline and the lowest level since the end of June. Stocks on Wall Street fell on Friday, with the Standard & Poor’s 500 Index down 0.7 per cent after US non-farm payrolls rose by just 18,000 in June.

That set the stage for weaker equity markets across Asia and Guinness Peat sank 6.3 per cent to 74 cents. The diversified investor has cancelled 227.9 million of its shares in exchange for payment of 35.07 pence apiece. Shareholders voted in favour of a capital return at their June 8 annual meeting and GPG is now looking to sell down its assets.

Cavalier slipped 0.3 per cent to $3.77 after Wool Equities emerged as a rival bidder for NZ Wool Services International, saying it has funding in place to make an offer for the wool scouring company.

Cavalier Wool Holdings, made up of Cavalier, ACC’s investment arm and private equity investor Direct Capital Investments was ordered to make a temporary halt to its offer for WSI on Friday pending an appeal by carpet maker Godfrey Hirst, which opposes that deal.

The Commerce Commission approved Cavalier’s $40 million takeover even though it would create a monopoly in New Zealand wool scouring because it agreed the competitive threat was from Chinese rivals.

Pyne Gould Corp was unchanged at 37 cents after the finance company confirmed it has taken a $14 million stake in a National Australia Bank loan to a related fund, Equity Partners Infrastructure Company (EPIC).

The deal will help EPIC avoid default and will help the orderly sale of its assets, the investment company said in a statement.

The NAB facility was due for repayment on April 30, but the lender waived that condition on the proviso EPIC significantly reduced its debt by the end of June, according to the NZX Market Supervision decision allowing the related party deal.

New Zealand property values crept up last month as a resurgent Auckland market bumped up the nationwide figures which were otherwise flat or negative.

National property values were 0.9 per cent below June 2010, compared to a deficit of 1.6 per cent in the rolling valuation for May, according to government valuer Quotable Value.

That’s just 5.2 per cent below the market peak in last 2007.

The improvement was largely off the back of a 1.4 per cent gain in Auckland property values compared to the same month a year ago, offsetting Wellington’s decline and Dunedin’s flat result. Christchurch values were still excluded given the uncertainty since the region’s earthquakes.

New Zealanders increased spending on credit and debit cards by 0.8 per cent last month, government figures show.

The seasonally adjusted value of total electronic card transactions climbed to $5.32 billion in June from $5.28 billion a month earlier, and was up 7.7 per cent compared to the same month a year earlier, according to Statistics New Zealand.

Spending on core retail industries, which strips out spending on vehicle-related industries, climbed 2.1 per cent to $3.35 billion.

The biggest gain came from spending on durables, which climbed 2.4 per cent to $996 million, while expenditure on consumables climbed 1.4 per cent to $1.46 billion.

The New Zealand dollar may continue to track upwards and test fresh post-float highs against the greenback this week, with local growth data expected to paint a more upbeat picture of the local economy versus its international peers.

Three of the five economists and market strategists surveyed by BusinessDesk saw the Kiwi gaining, while two saw the currency falling from its current level but remaining well supported.

Also the Kiwi group which was recently at US83.54 cents might trade between a mean range of 81.83 cents and 84.10 cents, according to the survey.