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Action Insight: Special Reports

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RBA Left Rate Unchanged, More Confident Over Domestic Developments Print E-mail
Special Reports | Written by | Oct 06 15 06:35 GMT
As expected, the RBA kept the cash rate unchanged at 2.00% in October. The accompanying statement contained few changes, suggesting that policymakers' view on the economic outlook stayed largely the same as the previous month. The updates, however, indicated that the central bank has turned more confident over the growth outlook. It also hinted that more regulatory measures have been implemented to contain the housing price surge in Sydney, as well as Melbourne. We retain the view that the RBA would leave the monetary decision unchanged for the rest of the year.
China's Manufacturing Activities Improved Modestly, But Stayed In Contraction, In September Print E-mail
Special Reports | Written by | Oct 01 15 07:49 GMT
China's official estimate of manufacturing PMI beat expectations, adding +0.1 point to 49.8, in September. The services sector PMI stayed unchanged at 53.4. The improvement was led by production and new domestic orders, probably due to pickup in production following the celebration on September 3 and impacts of government's stimulus measures. Meanwhile, Caixin's manufacturing PMI was revised higher to 47.2, from a flash reading of 47. However, this still means a drop from 47.3 in August. The services PMI slipped -1 point to 50.5, the lowest level in 14 months. Both sets of PMIs suggested that China's manufacturing activities stayed in contraction. The data signals that IP growth in September should moderate further while GDP growth in 3Q15 should shy below +7%.
Tankan Survey Shows Weaker Confidence for the Future Print E-mail
Special Reports | Written by | Oct 01 15 07:19 GMT
Bank of Japan's Tankan survey for 3Q15 shows that large manufacturers were less optimistic over the business conditions, while non-manufacturers were more positive. For the coming 3 months, all sizes of enterprises turned less optimistic. Capex plans remained firm despite recent disappointing economic data with big enterprises expecting to increase spending by +10.9% for the year ending March 2016. Planned investment, including land investment and excluding software, for all sizes all industries was revised higher to +6.4% y/y from +3.4% In 2Q15. While the disappointing IP had raised speculations of another quarter of negative GDP growth in Japan in the third quarter, this survey does not add further evidence to this rhetoric. Yet, we expect the economy hardly grew during the quarter while the chance of contraction has increased in the fourth quarter.
Underlying Inflation Trend Should Keep BOJ Away From Further Easing In October Print E-mail
Special Reports | Written by | Sep 25 15 08:38 GMT
Deflation pressure remained as an issue in Japanese economy. While nationwide inflation steadied at +0.25 y/y in August, core CPI (in Japan, core CPI excludes perishables but includes energy prices) dropped -0.1% y/y from July’s flat reading. The latter had been staying in the positive territory since April 2013, when the BOJ implemented the asset purchase program. On a positive now, however, the core-core CPI (ex food and energy) rose +0.8% y/y, while the new CPI ex-perishables and energy stayed in an uptrend, firming at +0.9% to +1% y/y last month. The trend of these 2 parameters should make the BOJ less likely to add further easing in October, although it is more likely that the central bank would delay the timing for inflation to return to the +2% target.
China's September Activity Remains Weak, Despite Easing Measures Print E-mail
Special Reports | Written by | Sep 23 15 09:55 GMT
Preliminary economic indicator signaled that China's economic growth continued to surprise to the downside in September. This is in spite of the government's accelerated pro-growth measures, including interest rate and RRR cuts, and faster approval of investment projects.
Australia's Housing Price Rallied Further in 2Q15, More Frequent Data Suggest It's Peaking Print E-mail
Special Reports | Written by | Sep 22 15 13:47 GMT
Australia's property prices jumped more than expected in the second quarter of year. ABS' residential property price index (RPPI) jumped +4.7% q/q in 2Q15, compared with consensus of +2.5% and first quarter's +1.6%. From a year ago, property prices rallied +9.8%. Looking into the details, ABS' RPPI soared +8.9% q/q in Sydney and +4.2% in Melbourne. Growth in Brisbane, Adelaide and Canberra was below +1% while price decline was seen in Perth and Darwin. From a year ago, RPPI jumped +18.9% in Sydney, followed by +7.8% in Melbourne. Brisbane, Canberra, Adelaide and Hobart all showed moderate gains whilst price decline was seen in Darwin and Perth. The report shows that prices surged most sharply in Sydney and, to a much lesser extent, Melbourne, while the rest of the country relatively subdued.
Fed On Hold, Outlook More Dovish Print E-mail
Special Reports | Written by | Sep 18 15 05:43 GMT
As expected, the Fed left unchanged the policy rate at 0.125%. Yet, the accompanying statement and the economic projections came in more dovish than expected. The Fed showed concerns over the negative impacts of the recent global financial market volatility, as well as rapid slowdown in China and other emerging markets, on growth and inflation outlook. In the latest Summary of Economic Projections, the Fed staff revised lower the growth and inflation outlook. In the new dot plot, there were fewer members expecting rate hike this year and there was one member favoring a cut to negative rate.
SNB Left Policy Rate Unchanged, Revised Lower Inflation Forecasts Print E-mail
Special Reports | Written by | Sep 17 15 10:56 GMT
The SNB left the target range for the 3-month Libor unchanged at between −1.25% and –0.25%, and that sight deposits rate at –0.75%. It believed negative interest rates are needed so as to make Swiss franc 'less attractive' and reiterated that the central bank stands ready to intervene the foreign exchange market whenever necessary. The central bank reiterated that the Swiss franc remained 'significantly overvalued' despite depreciation.
FOMC To Signal Rate Hike In 4Q15 Print E-mail
Special Reports | Written by | Sep 16 15 09:24 GMT
We expect the Fed to keep its powder dry, leaving the Fed funds rate unchanged at 0.25%, this month. Although macroeconomic developments have improved with solid economic growth and declining unemployment rate, volatility in global financial markets was high in mid-August and concerns over slowdown in China and other emerging markets would defer Fed’s rate hike schedule. We expect the Fed to maintain the policy rate unchanged in September, but Chair Janet Yellen should indicate at the press conference that a hike might come in October or December this year.
RBA Minutes Suggested Global Developments Intensified Downside Risks To Growth Outlook Print E-mail
Special Reports | Written by | Sep 15 15 05:50 GMT
Aussie dropped after release of RBA's minutes for the September meeting. While keeping the cash rate unchanged at a record low of 2%, the RBA warned that recent international developments have increased downside risks to Australia's growth outlook. It also suggested the huge size of capital outflow from China should have large impacts on the asset market. Domestically, the RBA acknowledged improvements in the employment condition, suggesting higher demand for labors especially in the service sector. However, policymakers were concerned that cost cutting in the mining sector might render the sector to stabilize at a lower level than previously expected.
China Watch: August Data Suggests Risks To GDP Growth Skewed To Downside Print E-mail
Special Reports | Written by | Sep 14 15 10:43 GMT
The latest set of macroeconomic data suggested downside risks to China's growth outlook. Industrial production stabilized at a low level while fixed asset investments decelerated further in August. These were consistent with the disappointing trade data released earlier this month. Although retail sales growth accelerated slightly during the month, this failed to change overall outlook which indicates more headwind is facing China's growth outlook. On a separate note, China's new renminbi loans moderated sharply in August, whilst lending to the real economy new corporate bond financing improved.
BOE Left Bank Rate Unchanged, Believed Recent Turmoil Won't Affect Growth Prospect Print E-mail
Special Reports | Written by | Sep 11 15 04:03 GMT
BOE voted 8-1 to keep the Bank rate unchanged at 0.5% and decided unanimously to leave the asset purchase program at 375B pound. Policymakers acknowledged that inflation remained below target and noted that there were still 'underutilized resources' in the economy. The BOE also discussed about the recent financial uncertainty and slowdown in China. It cited analysis in the August Inflation Report that 'the risks to the growth outlook were skewed moderately to the downside' due to developments in Eurozone and China. It then noted that the increased risks in China and other emerging economies since then have 'led to markedly higher volatility in commodity prices and global financial markets'. The central bank believed the impact on UK's growth outlook would be limited for now. As indicated in the minutes, 'global developments did not as yet appear sufficient to alter materially the central outlook described in the August Report, but the greater downside risks to the global environment merited close monitoring for any impact on domestic economic activity'.
BOC Left Policy Rate Unchanged. Talked About Uncertainty In China But Not Too Worried Print E-mail
Special Reports | Written by | Sep 10 15 06:08 GMT
BOC left the targeted overnight rate unchanged at 0.5% in September, after lowering it by -25 bps in July. Policymakers discussed about China's slowdown and noted that China and emerging markets have raised uncertainty over global economic growth. Yet, they assured that Canada's GDP growth and inflation had evolved as expected in July's MPR. The central bank's outlook did not appear to be significantly more dovish than previously as it remained confident that the previous 2 rate cuts had continued to take effect in Canada's economy.
RBNZ Cut OCT To 2.75%, Warning Of Uncertainty In China Print E-mail
Special Reports | Written by | Sep 10 15 04:16 GMT
In its September meeting, RBNZ announced to cut the OCR by -25 bps to 2.75% and signaled more easing to come. The rate cut was in response to the 'softening in the economy' and the need to keep future inflation near 2%. The accompanying statement came in more dovish than the one in July, as the central bank warned of downside risks from China and drought. The RBNZ sharply revised lower its GDP growth estimates but maintained inflation expectations largely unchanged. On exchange rate, the central bank acknowledged lower kiwi during the inter-meeting period but indicated that 'further depreciation is appropriate'.
China's FX Reserve Got Biggest Slump On Record As Renminbi Devalues Print E-mail
Special Reports | Written by | Sep 08 15 08:00 GMT
China's foreign exchange reserve plunged -US$93.9B, the sharpest decline record, to US$3.56 trillion in August. Although China's FX reserve remains high, when compared with other countries (China's holding takes up 30% of the world's FX reserve), and the current amount remains adequate to cover imports for 24 months, it has already fallen -11% from the peak of US$4 trillion in June 2014. Since PBOC announced to devalue renminbi on August 11, the currency has remained under pressure against USD. Accompanied with disappointing macroeconomic data that reinforced slowdown, capital outflow has been accelerating. The government is obliged to intervene, using foreign exchange reserve, to slow renminbi depreciation. Note that the greenback had depreciated against some currencies within China's renminbi basket, such as euro and yen, the capital outflow was actually higher than what the headline figure suggested.
More Dovish ECB Hints Further QE To Follow Print E-mail
Special Reports | Written by | Sep 04 15 04:31 GMT
Despite keeping the policy rate unchanged, ECB's September meeting turned out to be a dovish one. Emphasizing the 'willingness and ability to act', the Governing Council raised the issue share limit to 33% from 25%, subject to a case-by-case verification. While the ECB noted that change is to ensure 'smooth and full implementation of the program', we view this as a sign that the QE program might be extended and/or expanded. The chance additional easing is heightened as the staff projections of growth and inflation were revised lower. The ECB also mentioned a number of times the weakness in emerging market economies and the recent tightening of Eurozone financial conditions.
In USD We Trust Print E-mail
Special Reports | Written by | Sep 03 15 08:03 GMT
Recent financial market turmoil and increased concerns over the growth outlook in China, as well as the world market, have resulted in volatile USD trading. Although incoming US dataflow has remained largely positive, speculations of Fed funds rate hike in September have diminished in the midst of heightened uncertainty and downplaying of several Fed policymakers. We believe tamed rate hike speculations are a key reason for US dollar softness in recent weeks. The widely-watched USD index (DXY) plunged to a 7-month low of 92.6 on August 24. Despite the rebound thereafter, it has remained -4.4% below the peak of 100.4 in March 2015. Yet, other barometers for the greenback tell a different story. For instance, Fed's Broad Trade-Weighted USD Index (USD TWI) has continued climbed higher, extending to the highest level since 2003.
RBA Left Rate Unchanged, Stayed Neutral Despite Chinese Slowdown And Equity Volatility Print E-mail
Special Reports | Written by | Sep 01 15 08:01 GMT
As expected, the RBA left the cash rate unchanged at 2%. Despite recent stock market volatility and heightened concerns over China's slowdown, RBA's monetary stance stayed neutral and sent no indication of future rate adjustment. This suggests that the central bank, while cautioned over China's slowdown, is not overly concerned about its outlook. We expect the central bank to leave the policy rate unchanged for the rest of the year.
Limited Impacts Expected from PBOC's Belated Easing Print E-mail
Special Reports | Written by | Aug 26 15 12:52 GMT
PBOC cut its policy rates by -25 bps, taking the benchmark one-year lending rate 4.60% and the one-year deposit rate to 1.75%. Meanwhile, it has removed the deposit rate ceiling for time deposits longer than a year, whilst keeping the 1.5x ceiling for time deposits of other duration and demand deposits. The central bank also cut the required reserve ratio (RRR) by -50 bps for all depository financial institutions. Rural financial institutions would have an additional RRR cut of -50 bps, while financial leasing companies and automobile finance companies would have additional reduction of -300bps. This is the 5th consecutive interest rate cut in china's current easing cycle, which began in November, 2014. This is also the second combined interest rate and RRR cut taken during this round of easing.
Fed's Rate Hike Speculations Shrank. Less Likely to Hike Rates in September Print E-mail
Special Reports | Written by | Aug 26 15 12:41 GMT
The China-led global financial market crash has made the case of a September Fed rate hike increasingly unlikely. The market is now pricing in only 24% of a rate hike next month, compared with 40% last week. US financial conditions have weakened against the backdrop of equity slump and rapid depreciation of emerging market currencies. The Fed might think that tightening under such an environment would do more destabilization to the market. Meanwhile, the selloff in energy prices and strength in US dollar have softened inflation expectations, a determining factor of the Fed's monetary decision. These should make the Fed more cautious and would choose stand on the sideline in September.
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