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Asia: Weekly Observatory

Wed, Nov 18 2009, 09:46 GMT
by BBVA Bancomer Team

BBVA Bancomer

Economic and Financial Market Highlights

Exports in Asia continue to contract as external demand remains weak and slow to recover. Industrial production however, seems to be recovering as output figures in India and China revealed although this trend is not widespread in emerging Asia. Meanwhile, Hong Kong’s economy expanded once more in the third quarter although the GDP figures were below the market’s expectation while Indonesia’s economy grew robustly for the second consecutive quarter. Consumer confidence tumbled in both Japan and Thailand which could signal weaker consumption going forward. On the policy front, Korea’s central bank left interest rates unchanged as was expected. Strong gains in all Asia-Pacific’s stock markets with the notable exception of the Japanese index which slipped slightly. As for FOREX markets, all the region’s currencies appreciated against the US dollar over the week.

Greater China

China’s industrial production climbed 16.1% year-on-year (yoy), accelerating from September’s 13.9% yoy. Heavy industry continued to lead the overall industrial growth, with 18.1% yoy rise (September 14.8% yoy) driven by demand from investment spending. Light industry continued to exhibit a modest recovery, posting 11.3% yoy in October, slightly lower than the 11.8% in September

As for fixed asset investment (FAI), both nominal and real FAI registered a slower growth than September, with nominal growth at 31.6% yoy in October versus 35% yoy in September and real at 39.7% yoy in October versus 45.1% yoy in the previous month. For the January to October period, nominal fixed investment growth came in at 33.1% yoy, compared to 33.3% yoy in Jan-Sep 2009.

Meanwhile, nominal retail sales year-on-year growth picked up from 15.5% in September to 16.2% in October, largely pushed by strong sales of durable goods like auto sales, home decoration and electric appliances which are benefiting from the rise in housing sales.

Chinese exports growth contraction continued to narrow, posting - 13.8% yoy in October from -15.2% in September, reflecting that overseas demand seems to be recovering. Meanwhile, import’s yearon- year growth weakened to -6.4% in October from -3.5% in September. This sent China's surplus to US$24 billion from US$13 billion last month, its highest level since January. For the first ten months in 2009, trade surplus totaled to US$160.6 billion.

As for inflation, China’s October consumer price index (CPI) fell 0.5% yoy, compared to a 0.8% decline in September. Inflation in food prices remains at the same pace of 0.5% yoy as in September and contributed 0.5 percentage point to overall CPI. As for non-food prices, the contraction slowed from -1.3% yoy in September to -1.0% yoy in October, and contributed minus 1 percentage point to overall CPI.

Chinese banks extended CNY253 billion of new loans in October, well below the CNY516.7 billion in September and also the lowest level in this year. The M2 growth rate was steady at 29.4% yoy from the 29.3% yoy rise at the end of September. Outstanding yuan loans at the end of October were up 34.19% from a year earlier, almost unchanged from the 34.16% rise at the end of September.

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Published on  Wed, Nov 18 2009, 09:46 GMT

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