The European Central Bank agreed to launch a new and potentially
unlimited bond-buying program despite the fact that they are operating with
very limited reserves, what does this mean? It means the ECB will begin the
biggest Money printing exercise in History.
“No ex-ante quantitative limits
are set on the size of outright monetary transactions,” said Draghi as he
readies the printing press.
The more conservative Bundesbank
chief Jens Weidmann rightfully had expressed concern that intervening in the
bond market would break the ECB taboo of financing euro zone member states.
Other ECB policymakers see a greater urgency to stop a collapse in Spain and
Italy and prevent the euro zone crisis from deepening.
And is the Money printing was not
enough, Draghi tied the whole deal to the IMF Austerity plan that has helped to
exacerbate the EuroCrisis, Draghi said the ECB would only help countries that
signed up to and implemented strict policy conditions, with the euro zone’s
rescue fund also buying their bonds, and preferably with the IMF involved in
designing and monitoring the conditions.
But not even Draghi is a believer,
he added a clause that preempts further defaults by European States.
Not bad enough yet, don’t worry
it gets worse, Draghi said all bond purchases would be “sterilized” by taking
in an equivalent amount in deposits from banks to avoid any risk of inflation,
from that statement we can conclude Europe’s Banks have unlimited funds to
match the unlimited Bond buying.
Asked about ECB bond buying and a
conflict of interest between Spain and Germany, Rajoy told Germany’s
Frankfurter Allgemeine Zeitung: “It is good to have principles in life. But
sometimes it is also good to be flexible.”
And his statement sums it up,
this is a trick to disguise the rampant and unlimited printing of Euro, it does
not address growth in the region and it back-ends it to the cash strapped banks
of Europe, in short it is a new Crisis in the making.
Singapore
Singapore’s manufacturing economy
contracted for the second consecutive month in August.
According to data released on
Tuesday by the Singapore Institute of Purchasing & Materials Management
(SIPMM), the purchasing managers index (PMI) was 49.1 in August, compared with
49.8 in July
A PMI reading of below 50
indicates that the manufacturing economy is generally declining.
The 0.7 point drop from the
previous month is in line with weakness in regional PMIs, with China, South
Korea, Taiwan and India also seeing declines in factory orders.
But Singapore’s electronics
sector PMI rebounded from a contraction to expand at 50.7 in August, up 1.5
points from 49.2 in July.
Experts say the sector could just
provide the needed lift for manufacturing output in the next month or so.
At Racer Technology’s Singapore
facility, which makes components for security and medical devices, production
goes round the clock seven days a week.
With its order book boosted by
its European and US customers, the firm aims to record a turnover of S$50
million this year, about S$10 million higher than what it made in 2011.
Willy Koh, CEO, Racer Technology,
said: “Until end of this year, the order is there. It’s a very consistent order
until end of this year for medical products.”
But bright spots like Racer
enjoying strong US and Europe orders are few and far between as manufacturers
in Singapore continue to see another month of faltering demand.
Singapore’s overall PMI in August
was pulled down by falling new orders and contraction in stockholdings of
finished goods and imports.
Thailand
As the economy regained its
footing, Thailand’s outward foreign direct investment (OFDI) slowly took off
again after 2000, and it has grown markedly since. By early this year, the
stock of Thailand’s OFDI reached US$33 billion, almost 15 times the amount in
2000.
The rise of Thai OFDI is part and
parcel of the growing new role of developing economies as “home country”
sources, rather than the traditional “host country” recipients, of
multinational corporations. With their rapid global expansion, emerging-market
multinational enterprises (EMNEs) from large developing economies have made
international headlines as muscular newcomers vis-a-vis established
multinationals from the West.
Thai firms are still some way
behind their larger emerging-market peers in quantity and global reach. In the
2011 Boston Consulting Group Global Challengers Report, which lists the top 100
sizeable and most expansive firms from developing economies, only four hailed
from Thailand, namely the CP group, Indorama Ventures, PTT and Thai Union
Frozen Products. That foursome was dwarfed by China’s 33 and India’s 20.
The sparse presence of Thai
multinationals in the global arena reflects their latecomer status and limited
size and scope of activities. Although a few pioneers such as CP and Siam
Cement groups may have penetrated overseas markets since the 1990s, most firms
only started paying serious attention to international expansion in the last
decade.
Protection from foreign
competition at home, combined with a relatively large domestic market, has made
Thai firms more domestic-oriented and complacent than their counterparts in
smaller countries such as Singapore or Malaysia. Thai firms, therefore, tend to
seek growth via diversification into other industries at home rather than
pushing boundaries to expand abroad.
The intensifying competition amid
growing regionalisation and globalisation has altered the mindset. Some larger
Thai firms have grown in capabilities and confidence to believe that a global
presence is desirable and within their reach. From simply exporting, some have
undertaken bolder steps of directly investing overseas. Given the early stage
of their internationalisation, the size and scope of their international
activities are growing but are still limited.
Indonesia
The JCI closed at 4,102.86 after
3.36 billion shares valued at Rp 3,090 trillion ($322 billion) changed hands,
according to Bloomberg data.
Shares in Unilever Indonesia
gained Rp 600, growing 2.26 percent to Rp 27,100 at closing. Indonesia’s
biggest automotive company, Astra International grew 1.45 percent, closing at
Rp 7,000 a share.
Bank Rakyat was up Rp 150,
posting a 2.11 percent gain to close at Rp 7,250.
Shares in Bank Mandiri, Adaro
Energy, Borneo Lumbung Energy and Metal and Timah were flat.
Telekomunikasi Indonesia shed
0.52 percent, closing at Rp 9,550 a share.
The expected announcement of a
new bond-buying program by the ECB drove investor sentiment across Asian
markets, said Bertrand Reynaldi, a research analyst at Indonesia’s eTrading
Securities.
“The markets today were affected
by the ECB meeting tonight,” he said. “Not just Indonesia, but all of Asia and
Europe. The sentiment drove the markets higher.”
ECB President Mario Draghi is
expected to unveil a new bond-buying program intended to bring down the high
borrowing costs of Spain and Italy. Without some way to reduce the interest
rates on the bonds they sell, the two nations could be pushed into asking for a
bailout, following a path taken by Greece, Ireland, Portugal and Cyprus.
“It won’t save Europe but it will
keep Spanish yields and Italian yields down for now and give Europe’s leaders another
3-6 months to come up with bigger and better plans for a real solution,” said
analysts at DBS Bank Ltd. in Singapore.
But analysts also expressed
skepticism about whether the move was sufficient to resolve the debt crisis
affecting the 17 nations that use the euro when the world’s major economies are
suffering sluggish growth.
“I do think reality is setting
in, that there is only so much the ECB can do. At the end of the day, the macro
data doesn’t look great. So there’s probably an inclination for the markets to
drift until a lead comes in from the macro side,” said Lorraine Tan, director
at Standard & Poor’s equity research in Singapore.
She said she didn’t expect a big
improvement in key economic data until the fourth quarter of 2012.
“If China starts to show better
numbers that will make an impact. But we really don’t expect to see too much
change in the numbers until September data rolls around.”
Malaysia
KLCI index lost 23.02 points or
1.40% on Thursday. The Finance Index fell 1.41% to 14500.27 points, the
Properties Index dropped 1.56% to 1026.08 points and the Plantation Index down
1.44% to 8400.1 points. The market traded within a range of 22.79 points
between an intra-day high of 1635.95 and a low of 1613.16 during the session.
Actively traded stocks include
NEXTNAT, INGENS, GLOTEC, HUBLINE, SCOMI, JCY, MAYBANK, SKPETRO, TM and YTL.
Trading volume decreased to 1302.96 mil shares worth RM1989.62 mil as compared
to Wednesday’s 1354.10 mil shares worth RM1700.24 mil.
Leading Movers were BAT (+110 sen
to RM64.10) and YTLPOWR (+1 sen to RM1.68). Lagging Movers were AXIATA (-20 sen
to RM6.02), CIMB (-20 sen to RM7.54), MAYBANK (-14 sen to RM9.00), GENTING (-24
sen to RM8.70) and PETGAS (-54 sen to RM18.64). Market breadth was negative
with 157 gainers as compared to 739 losers.
Philippines
Ramon S. Ang, chief operating
officer of San Miguel Corp., has expressed confidence the country will hit its
target of landing on the top third of countries ranked for global
competitiveness by 2016.
The World Economic Forum (WEF)
released Wednesday its global competitiveness report, which showed that the
Philippines leaped by 10 notches to the 65th spot among 144 countries surveyed.
The latest ranking put the
Philippines at the upper half of surveyed countries for the first time.
Ang, who spearheaded SMC’s entry
into Philippine Airlines, said that given current trends in the economy and
governance, it was possible that the country would hit its medium-term global
competitiveness target.
“I am very sure the Philippines
will still do better,” Ang told reporters in an interview Wednesday night on
the sidelines of the 50th anniversary celebration of Metrobank.
The results of the latest WEF
survey on global competitiveness, which taps businesses as respondents, showed
that the Philippines improved the most in the area of government institutions.
Guillermo Luz, co-chairman of the
Philippines’ National Competitiveness Council (NCC), said Wednesday in a press
briefing that the significant improvement in the area of government
institutions could be credited to the ability of the Aquino administration to
convince the business community that reforms, especially in the area of
transparency and efforts to curb corruption, are being implemented in
government agencies.
Yesterday in Asia
Tokyo edged up 0.01
percent, or 0.75 points, to 8,680.57 while Seoul advanced 0.38 percent, or 7.21
points, to close at 1,881.24.
Sydney rose 0.80 percent,
or 34.1 points, to finish at 4,312.9 after Qantas Airways jumped 6.67 percent at
Aus$1.20 on an announcement it has tied up with Emirates Airlines as part of a
global alliance to turn around its international arm.
Hong Kong was 0.34
percent, or 64.23 points, higher at 19,209.30 and Shanghai climbed 0.70
percent, or 14.24 points, to 2,051.92.
Wellington rose 23.89
points, or 0.65 percent, at 3,693.54.
Telecom Corp. was up 0.41 percent
to NZ$2.465 and Air New Zealand increased 3.24 percent to NZ$1.12.
Manila closed flat, edging
down 0.10 points to 5,150.11.
Alliance Global Group rose 1.33
percent to 12.22 pesos, while Metropolitan Bank and Trust fell 15 centavos to
91.95 pesos.
Taipei fell 40.72 points,
or 0.55 percent at 7,326.72.
Taiwan Semiconductor
Manufacturing Co. shed 1.1 percent at Tw$81.1 while Hon Hai Precision was 0.45
percent lower at Tw$88.4.
Singapore closed down
0.22 percent, or 6.64 points, to 2,989.26.
DBS Group gained 0.56 percent to
Sg$14.26 while Keppel Land fell 1.49 percent to Sg$3.30.
Jakarta ended 0.67 percent
higher, or 27.51 points up, at 4,102.86.
Mining company Aneka Tambang rose
1.61 percent to 1,260 rupiah, automotive company Astra International gained
1.45 percent at 7,000 rupiah and Bank Negara Indonesia rose 0.66 percent to
3,800 rupiah.
Kuala Lumpur dipped 23.02
points, or 1.40 percent, to 1,617.99.
Axiata Group lost 3.2 percent at
6.02 ringgit, while AirAsia fell 3.2 percent to 3.38. British American Tobacco
gained 1.8 percent to 64.10 ringgit.
Bangkok rose 0.82 percent,
or 10.08 points, to 1,243.92.
Electricity firm EGCO dropped
1.67 percent to 118 baht, while medical services company BGH gained 2.78
percent to 111 baht.
Mumbai rose 0.19 percent,
or 32.93 points, to 17,346.27.
India’s third-largest software
firm Wipro rose 4.43 percent to 377.5 rupees while Bharat Heavy Engineering
slid 3.20 percent to 201.35 rupees.
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