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IMF sees shallower recession, tough path back to full recovery

EconOct 13. 2020

By Syndication Washington Post, Bloomberg · Eric Martin · BUSINESS, US-GLOBAL-MARKETS 
The International Monetary Fund warned that the world economy still faces an uneven recovery until the coronavirus is tamed even as it offered a less-dire view of this year’s recession following massive stimulus from central banks and governments.

The fund now forecasts world gross domestic product to shrink 4.4% this year, compared with the 5.2% drop seen in June, according to the latest World Economic Outlook released Tuesday. For 2021, the IMF sees growth of 5.2%, down from 5.4%. The report includes revisions to June’s forecasts and other historical data to reflect updated country weightings.

The contraction would still be the deepest since the Great Depression, with covid-19 having killed more than 1 million people and shut down large swaths of business. The report sets the tone for this week’s annual meetings of the IMF and World Bank — being held virtually, like April’s spring meetings, due to the pandemic — as global policy makers discuss how to avert a wave of debt defaults in poorer nations resulting from the virus’s impact.

“Recovery is not assured while the pandemic continues to spread,” chief economist Gita Gopinath wrote in the report. “Economies everywhere face difficult paths back to pre-pandemic activity levels.”

The impact of the downturn has been cushioned by policy initiatives, including a European pandemic-recovery package, and large-scale central bank asset purchases, the fund said. Such unprecedented support helped ease financial conditions since June in advanced economies and in most emerging and developing economies, the fund said.

Policymakers must avoid prematurely withdrawing support in order to avoid setbacks, Gopinath said. The forecasts assume monetary policy is maintained at current settings through 2025, helping to alleviate debt service burdens for many countries. Governments globally have implemented $6 trillion in direct tax and spending measures, according to the IMF.

The fund’s forecast is based on the expectation that social distancing will continue into next year but gradually fade over time as vaccine coverage expands. It also is premised upon local transmission of the virus being brought to low levels everywhere by the end of 2022.

The upward revision in the IMF’s 2020 growth forecast reflects in particular better-than-projected second-quarter growth in the U.S. and the euro area, a stronger-than-anticipated return to growth in China and signs of a more rapid recovery in the third quarter.

The U.S. economy is projected to contract 4.3% this year, compared with a previous 8% estimate, the most-improved forecast among major economies. That doesn’t factor in potential additional fiscal stimulus, though, as President Donald Trump and Democrats continue to wrangle over measures. Growth is pegged at 3.1% in 2021, down from a prior forecast of 4.5%.

The euro area is estimated to shrink 8.3% this year, compared with the previous 10.2% projection, before expanding 5.2% in 2021, down from 6%. Advanced economies overall are seen declining 5.8% in 2020, compared with 8.1% previously.

By contrast, the outlook for emerging markets, some with rising infections, has worsened slightly, with a 3.3% contraction anticipated for this year, compared with 3.1% previously.

China remains the lone major economy estimated to expand, with 1.9% projected growth this year and an 8.2% boom in 2021. India saw the steepest forecast reduction, with a 10.3% contraction seen for this year, compared with just 4.5% previously, after a larger-than expected second-quarter contraction.

Overall, the fund sees global output by the end of 2021 being 0.6% higher than at the end of 2019, before the pandemic, but that’s driven almost entirely by China. Most other nations, including the U.S., will need to wait until at least 2022 to see full recovery to pre-virus levels.

The subdued outlook for medium-term growth will be accompanied by a significant increase in sovereign debt — by about 20 percentage points in advanced economies to 125% of GDP by the end of 2021, and by more than 10 percentage points in emerging and developing economies to 65% of GDP, according to IMF estimates.

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Gold price drops amid worries of delay in US economic stimulus until the election

EconOct 13. 2020

By The Nation

The price of gold dropped by Bt50 per baht weight in morning trade on Tuesday, the Gold Traders Association reported.

As of 9.19am, the buying price of a gold bar was Bt28,200 per baht weight and selling price Bt28,300 while gold ornaments were priced at Bt27,697.32 and Bt28,800, respectively.

At close on Monday, the buying price of a gold bar was Bt28,250 per baht weight and selling price Bt28,350 while gold ornaments were Bt27,742.80 and Bt28,850, respectively.

The Comex (Commodity Exchange) gold price to be delivered in December rose by US$2.7, or 0.14 per cent, closing at $1,928.9 (Bt60,241.88) per ounce on Monday.

Investors were buying gold as safe-haven assets due to uncertainty over the US political situation before the presidential election on November 3.

Meanwhile, investors were worried that US lawmakers would not be able to launch economic stimulus measures to mitigate the Covid-19 impact before the election.

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Stocks jump as Nasdaq notches best day since April

EconOct 13. 2020

By Syndication Waashington Post, Bloomberg · Rita Nazareth, Kamaron Leach, Vildana Hajric · BUSINESS, US-GLOBAL-MARKETS

U.S. stocks climbed to an almost six-week high amid a rally in some of the world’s largest technology companies Monday.

The S&P 500 extended gains into a fourth day and the Nasdaq 100 posted its biggest advance since April after surging as much as 4.1%. Amazon soared ahead of its Prime Day while Apple jumped as the tech giant – whose price target was raised by RBC Capital Markets – is set to embrace 5G as one of its most significant additions to this year’s iPhones. Twitter rallied on an upgrade at Deutsche Bank, which also boosted its price estimates for other companies that derive their revenue from digital advertising such as Facebook and Alphabet.

After plunging into a correction last month, the tech-heavy gauge extended its surge from this year’s lows to more than 70%. Investors have once again turned back to the companies flush with cash that can thrive if the economic recovery slows down. Prospects for a quick end to the stalemate over a new stimulus faded Monday with members of the House being told not to expect any action this week and many Senate Republicans rejecting the White House proposal for a deal.

“People are going back to the trade that’s worked, and that’s the growth trade,” said Keith Gangl, a portfolio manager of Gradient Investments. “People are worried about missing out, so they are going right to the tech leaders.”

The hearings for the Supreme Court nomination of Judge Amy Coney Barrett began Monday in the Senate Judiciary Committee as Republicans try to solidify a conservative majority on the court before the Nov. 3 election.

Elsewhere, oil slumped with workers in the U.S. Gulf heading back following Hurricane Delta’s landfall and Libya taking a major step toward reopening its biggest field. The offshore yuan sank after China’s central bank took steps to restrain the currency’s rally. The Treasury market was closed for a U.S. holiday.

– – –

Here are some key events coming up:

– JPMorgan, Citigroup and BlackRock report earnings Tuesday; results from Wells Fargo, Bank of America and Goldman Sachs are due Wednesday; Morgan Stanley’s earnings are scheduled for Thursday.

– U.K. Prime Minister Boris Johnson set a deadline of Thursday to outline a European Union trade deal.

– European Central Bank President Christine Lagarde leads the virtual annual meetings of the International Monetary Fund and the World Bank Group through Oct. 18.

– – –

These are some of the main moves in markets:

Stocks

– The S&P 500 climbed 1.6% as of 4 p.m. Eastern time.

– The Stoxx Europe 600 index gained 0.7%.

– The MSCI Asia Pacific index advanced 0.9%.

Currencies

– The Bloomberg Dollar Spot index gained 0.1%.

– The euro fell 0.1% to $1.1812.

– The British pound climbed 0.2% to $1.3065.

Bonds

– Germany’s 10-year yield fell two basis points to -0.55%.

– Britain’s 10-year yield declined one basis point to 0.271%.

Commodities

– The Bloomberg commodity index fell 0.6%.

– West Texas Intermediate crude declined 2.8%, to $39.47 a barrel.

– Gold weakened 0.4%, to $1,923.01 an ounce.

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Cabinet gives initial nod to Bt180m training program for auto businesses in EEC

EconOct 13. 2020

By The Nation

The Cabinet on Monday approved in principle to spending more than Bt180 million to provide training for personnel in the auto business based in the Eastern Economic Corridor (EEC), government spokesperson Anucha Burapachaisri said.

The project, proposed by the EEC Office, will cover 9,500 members of staff from participating auto firms.

Training will include courses on technology management for 2,300 supervisors and staff at the managerial level. Also included will be courses on 4.0 industry, which will be provided to 3,600 staff at the operations level and 3,600 workers at the labour level.

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Stock gurus sweet on Thai sugar shares amid global short supply

EconOct 13. 2020

By The Nation

The price of sugar shares continued to rise on Monday after the global sugar price hit 14 cents per pound over drought fears, up 50 per cent from its low point in April.

On Monday, shares in Khon Kaen Sugar Industry (KSL) rose 10.92 per cent to Bt2.64; Khonburi Sugar (KBS) rose 7.09 per cent to Bt3.32; Buriram Sugar (BRR) rose 9.15 per cent to Bt3.10; and Kaset Thai International Sugar Corporation (KTIS) was up 5.18 per cent to Bt2.84.

Prasit Sujiravorakul, Bualuang Securities’ director of institutional client research, said the shares shares rose after the global sugar price hit a seven-month high of 14 cents, adding that the average export price also rose both quarter on quarter and year on year, to Bt11,811 per tonne.

“The global sugar price has risen gradually since its low point of 9.2 cents per pound in April, in response to uncertainty over La Nina which caused drought in Brazil and Argentina, as well as risks of forest fire,” he said.

“The sugar supply is expected to fall by about 7 per cent, with rainwater volume forecast to drop by 5-20 per cent. Meanwhile, the chance that La Nina will last until the first quarter of next year is 70-90 per cent.”

Given the above factors, he advised investors to speculate on Thai sugar shares, reasoning that the price will rise in line with the global price. KSL expects the sugar price to move between 11.5 and 13.5 cents per pound this year.

“We expect the price of sugar to hit 15 cents as the La Nina impact deepens [next year], but it won’t rise any further as supply will increase by 10-15 per cent when India, China and Brazil emerge from drought season,” he said.

He added that positive sentiment will boost sugar companies’ performance in the next two quarters because the sugar price is usually set in futures contracts.

“In Thailand, sugar companies make new contracts around March and April every year,” he said.

Naree Apisawaittakan, Phillip Securities (Thailand)’s assistant managing director of securities analysis, said the value of sugar shares had now risen above their base price.

“The rise in share prices reflects the rising global sugar price due to uncertainty over dry weather, which triggered mass buy-ups in shares by speculators,” she said, adding that the price of soybean had risen on the same uncertainty.

She advised investors to buy the stocks for short-term speculation, saying Phillip Securities would adjust its forecast for sugar stocks if the sugar price continues to increase.

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SET rises despite mass sell-offs ahead of Bangkok protest

EconOct 12. 2020

By The Nation

The Stock Exchange of Thailand (SET) Index closed at 1,273.43 on Monday, up 6.29 points or 0.50 per cent. Total transactions amounted to Bt46 billion with an index high of 1,277.64 and a low of 1,265.27.

In the morning session, an analyst at Krungsri Securities expected the day’s index to fluctuate between 1,260 and 1,275 despite progress in talks on US economic stimulus measures.

“Uncertainty over mass sell-offs in to mitigate risks from the [Bangkok] political rally on October 14 and weak third-quarter performances of banks will pressure the index,” he said.

The 10 stocks with the highest trade value on Monday were PTT, STA, CPF, STGT, NER, IVL, KBANK, CPALL, MINT and PTTEP.

As of 4.30pm, the price of oil dropped by US$0.58 or 1.43 per cent to $40.02 per barrel, while gold dropped by $1.10 or 0.06 per cent, to $1,925.10 per ounce.

Other Asian indices were up, with the exception of Japan:

Japan’s Nikkei Index closed at 23,558.69, down 61.00 points or 0.26 per cent.

China’s Shang Hai SE Composite Index closed at 3,358.46, up 86.39 points or 2.64 per cent, while the Shenzhen SE Component Index closed at 13,708.07, up 418.80 points or 3.15 per cent.

Hong Kong’s Hang Seng Index closed at 24,649.68, up 530.55 points or 2.20 per cent.

South Korea’s KOSPI Index closed at 2,403.73, up 11.77 points or 0.49 per cent.

Taiwan’s TAIEX Index closed at 12,955.91, up 68.72 points or 0.53 per cent.

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Thai Monthong faces Malaysia’s ‘King’ in battle for China’s Bt50bn durian market

EconOct 12. 2020

By The Nation

A fruit war has broken out in China, where Malaysia’s Musang King is battling with Thailand’s Monthong to conquer the increasingly lucrative durian market.

The Royal Thai Consulate-General in Nanning, China, said Kuala Lumpur had stepped up its game in early October, bombarding Guangxi region with over 1,000 tonnes of Musang King durian for the “Durian Malaysia 2020” event.

Malaysia is exploiting “new normal” marketing channels, both online and offline, to tempt Chinese consumers with free samples and durian priced as low as 1 yuan (Bt4.6). As a result, Malay durian are fast becoming popular in China, with October’s promotion netting sales of 340,000 durians worth over 70 million yuan (Bt324 million).

“Durian Malaysia 2020” also gives Malaysian entrepreneurs the chance to test Chinese tastes for processed products, including durian French fries, durian beverages, coffee, tofu drinks, liquor, mooncakes and ice cream.

Thailand has always been the largest exporter of fresh durian to China, where the biggest markets are Guangxi and Guangdong province. However, Monthong’s status as the durian king in China is now being threatened by Musang King, which Chinese consumers have dubbed “Maoshan Wang” and the “Hermes of durian”.

Over the past five years, the retail price of Musang King durian has risen 300 per cent after China began importing whole frozen durian from Malaysia. The price of Malay durian shot up from Bt60-75 per kilo last year to Bt225-300 this year, with premium varieties such as Musang King, Ochee and Sultan sold out.

The Malaysian government has urged farmers to expand durian cultivation, forecasting that by 2030 export volume will increase 50 per cent and Musang King production more than double. Malaysia plans to increase its market share of frozen durian exported to China from 50 per cent to 75 per cent in the near future.

Durian are sold in China via online marketplaces such as the T-Mall website.

Si Hao, T-Mall’s operations manager for Food, Vegetable, Fruit and Cool Business Group, said most durian traders on T-Mall sell Monthong – which makes up more than 80 per cent of the Chinese market – and Chanee durian. However, Malaysian durian entered the fast-expanding online market by using nitrogen-freezing technology that extends the fruit’s expiry date from five days to 18 months and overcomes seasonal restrictions.

Last year, durian was China’s top fruit import with a total value of US$1.6 billion/Bt49.9 billion (up 47 per cent), surpassing fresh cherries at $1.4 billion for the first time. China currently allows durian shipments from Thailand and Malaysia, but Vietnam and the Philippines are now negotiating to gain access to China’s durian market.

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Tourism, people’s purchasing power to be ‘key areas of focus’ for new finance minister

EconOct 12. 2020New Finance Minister Arkhom Termpittayapaisith 

By The Nation

New Finance Minister Arkhom Termpittayapaisith said that his economic policy would focus on boosting people’s purchasing power, assisting the tourism sector and accelerating state budget disbursement.

On his first day in office, Arkhom added that his urgent task was to assist businesses suffering from the impact of the Covid-19 outbreak.

He said he had also discussed with Deputy Prime Minister Supattanapong Punmeechaow on plans to boosting liquidity of tourism operators.

When asked if the existing Bt1-trillion borrowing was sufficient to rev up the economy, he said that would depend on the speed of the economic recovery.

The government has continued to launch stimulus packages to revive the economy from the fallout of the pandemic.

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SET rises, but worries linger of mass sell-offs before Oct 14 protest

EconOct 12. 2020

By The Nation

The Stock Exchange of Thailand (SET) Index rose by 3.38 points, or 0.27 per cent, to 1,270.52 in the morning session on Monday.

An analyst at Krungsri Securities expected the index to fluctuate between 1,260 and 1,275 despite the ongoing progress in talks on US economic stimulus measures.

“Uncertainty over mass sell-offs in shares to mitigate risks from the political rally on October 14 and the weak third-quarter performance of commercial banks would pressure the index,” he said.

As an investment strategy, he recommended that investors buy:

▪︎ CRC, HMPRO, JMART, COM7, and KTC that benefit from the government’s “Shop Dee Mee Kuen” (Shop and Payback) scheme.

▪︎ TU, PLANB, STGT, COM7, ASIAN and CBG whose third-quarter performance is expected to grow.

The SET Index closed at 1,267.14 on Friday, down 7.69 points or 0.60 per cent. Total transactions amounted to Bt51 billion with an index high of 1,280.81 and a low of 1,264.24.

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Government offers personal income tax relief in last quarter to boost spending

EconOct 12. 2020Prime Minister Prayut Chan-o-cha, second right, seen during the announcement of Monday’s Cabinet decisions. 

By The Nation

The Cabinet on Monday gave the green light to a new stimulus package granting personal income tax deduction of up to Bt30,000 per person to help boost people’s spending on goods and services, Prime Minister Prayut Chan-o-cha said.

The measure will run from October 23 until December 31 and apply for the 2020 tax year. Around 4 million people are expected to be eligible for this scheme.

The govenment has continued to launch stimulus packages to revive the economy suffering from the Covid-19 outbreak.

Deputy Prime Minister Supattanapong Punmeechaow said that the measures launched in the fourth quarter were estimated to spark a cash flow of Bt200 billion into the economic system.