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| 20-Oct-2010 12:12 |
User Research/Opinions
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%%%% WORLD ECONOMIC SUMMIT %%%%
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Japan govt says economy at standstill
TOKYO
In a monthly report, the government downgraded its assessment of the economy for the first time since Feb 2009. A senior Japanese official said further pressure on the economy, which is mired in stubborn deflation, could tip it into recession.
“If the economy turns out as expected in our main scenario, we may end up describing the current situation as a soft patch,” said the official at the Cabinet Office, which compiled the report. “But if it comes under further downward pressure, it could end up slipping into recession,” he said.
The government also cut its view on exports and industrial output, saying they were weakening,
which prompted the downgrade of its overall economic assessment.
A rise in the yen to a 15-year high against the dollar added to these woes.
Faltering recoveries from the global financial crisis in developed economies have pushed global investors into emerging markets in search of higher returns, driving up their currencies.
The move has been exacerbated by widespread expectations that the United States Federal Reserve will print billions of dollars to try to lift the US economy, sparking concerns that the extra liquidity will find its way into emerging markets.
Japan’s policymakers had earlier prompted the government to draw up a supplementary budget and the central bank to offer cheap loans and to promise to buy assets.
The government said it wanted the Bank of Japan to support the economy through “appropriate and flexible” monetary policy while the two branches work closely together — phrasing it used when it announced ¥5.05 trillion ($$80 billion) in stimulus spending on Oct 8.
The currency tensions will dominate a Group of 20 finance ministers’ meeting in South Korea starting on Friday and a G20 summit in November, as officials look to tackle the economic imbalances and the threat of competitive currency devaluation.
“Currencies will be the topic that many people will be talking about ... at the G20. I hope that good ideas will be put forward there and we will explain the present situation in Japan,” Finance Minister Yoshihiko Noda said.
Japanese Prime Minister Naoto Kan said yesterday he wants to implement stimulus measures as quickly as possible to support the expansion of the economy. |
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| 20-Oct-2010 12:11 |
Fixed Deposits
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$$$$ F D Interest Abnormalisation MLM BUBBLE $$$
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Japan govt says economy at standstill TOKYO In a monthly report, the government downgraded its assessment of the economy for the first time since Feb 2009. A senior Japanese official said further pressure on the economy, which is mired in stubborn deflation, could tip it into recession. “If the economy turns out as expected in our main scenario, we may end up describing the current situation as a soft patch,” said the official at the Cabinet Office, which compiled the report. “But if it comes under further downward pressure, it could end up slipping into recession,” he said. The government also cut its view on exports and industrial output, saying they were weakening, which prompted the downgrade of its overall economic assessment. A rise in the yen to a 15-year high against the dollar added to these woes. Faltering recoveries from the global financial crisis in developed economies have pushed global investors into emerging markets in search of higher returns, driving up their currencies. The move has been exacerbated by widespread expectations that the United States Federal Reserve will print billions of dollars to try to lift the US economy, sparking concerns that the extra liquidity will find its way into emerging markets. Japan’s policymakers had earlier prompted the government to draw up a supplementary budget and the central bank to offer cheap loans and to promise to buy assets. The government said it wanted the Bank of Japan to support the economy through “appropriate and flexible” monetary policy while the two branches work closely together — phrasing it used when it announced ¥5.05 trillion ($$80 billion) in stimulus spending on Oct 8. The currency tensions will dominate a Group of 20 finance ministers’ meeting in South Korea starting on Friday and a G20 summit in November, as officials look to tackle the economic imbalances and the threat of competitive currency devaluation. “Currencies will be the topic that many people will be talking about ... at the G20. I hope that good ideas will be put forward there and we will explain the present situation in Japan,” Finance Minister Yoshihiko Noda said. Japanese Prime Minister Naoto Kan said yesterday he wants to implement stimulus measures as quickly as possible to support the expansion of the economy. — Japan’s government said yesterday the economy was now at a standstill, highlighting the growing gulf between developed and emerging countries at the heart of global currency tensions.AGENCIES |
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| 20-Oct-2010 12:00 |
Fixed Deposits
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$$$$ F D Interest Abnormalisation MLM BUBBLE $$$
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Dr Prasarn Trairatvorakul struggled for balance as the ferry taking him across a Bangkok river pitched in choppy waters.
TOO MUCH OF A GOOD THING It’s not as fun as it sounds for Asian policymakers.
They are caught by the biggest economies flooding markets with money and warring over currencies.
“I am concerned,” says Dr Prasarn.
“Thailand is not a large economy but we are very open. The saying goes that when elephants fight, the grass is trampled.”
That’s quite a challenge for Dr Prasarn, who took over as central bank head on Oct 1. Asia has too much of a good thing on its hands as money gravitates this way.
The trick is to make sure it is used productively and to avoid dangerous bubbles.
The trick for Mr Bernanke, meanwhile, is making sure that the US economy captures more of the Fed’s stimulus.
How that can be accomplished is easier said than done.
Capital controls?
A tax on investment outflows?
Over lunch in Bangkok, I posed these questions to well-known economists Barry Eichengreen of the University of California, Berkeley, Takatoshi Ito of the University of Tokyo and Eswar Prasad of Cornell University — all of whom were in town for a Bank of Thailand symposium. They agreed it’s unclear how the US can adequately address its monetary-leakage problem.
The answer for Asia may be as simple as tightening fiscal policy. That, Prof Eichengreen says, could take some of the heat out of economies being overwhelmed by hot money.
Even so, there’s no getting around the fact that loose international monetary conditions are swamping domestic policy steps.
Sure, officials in Bangkok or Seoul could raise rates but it would make little difference with the world’s main monetary authorities leaving the floodgates open.
Also, higher borrowing costs could backfire, attracting even more capital as yield hungry investors reach for better returns.
Asia’s initial public offering activity is worth eyeing in the months ahead. Recent surveys show the highest levels of investor sentiment in months.
Will too much liquidity chasing too few good IPOs create demand for weaker ones?
There’s lots of anecdotal evidence, London-based Coggshall says, that “investors’ positioning has swung sharply towards ‘risk on’, and while we too find it difficult to argue against the notion that unlimited liquidity trumps all else, the level of activity is just frothy enough to make us uncomfortable”.
The good news is that Asian policymakers are fully aware that they are on the front lines of a monetary tsunami the likes of which the world have never seen.
The bad news is that with the US, Japan and the euro zone holding rates at, or close to, zero and China maintaining an undervalued currency, it’s all too easy for smaller economies to get overwhelmed.
My chat with Dr Prasarn on a Bangkok ferry was an ideal metaphor for where Thailand finds itself — navigating the rough waters of today’s global markets. While they are doing a fine job staying afloat, Thai officials never know when and where the next giant wave of capital will crash.
Frightening, indeed. William Pesek is a Bloomberg News columnist.
“It’s a bit like the world economy these days,” the Bank of Thailand governor deadpanned as he plopped down next to me on a ferry deck chair. “Very hard to control.” Dr Prasarn would certainly know. Thailand may offer the best example of a curious phenomenon: How the Federal Reserve’s ultra-low interest rates are benefiting Asia more than America. Excess central bank liquidity explains the disconnect. Asia is getting loads of it, US assets are getting little. This hot money is making waves in Asia. It is pumping up growth, real estate and stocks and, according to many economists, breathing new life into the “Asia decoupling” narrative. Asia hasn’t decoupled from the West so much as it has mutated into a giant net catching money emanating from Washington, Frankfurt and Tokyo. The result may be huge bubbles, the next wave of which could be dodgy stock offerings. Going forward, “the average quality of new offerings is beginning to fray slightly around the edges,” says Mr Jeff Coggshall, a hedge fund manager at Tiburon Partners LLP. Why does it matter? “A number of deals have mysteriously been pulled forward,” he adds. “It will doubtless not be long before some genuinely frightening IPOs begin hitting our desks.” If Fed chairman Ben S Bernanke wants to know who is benefiting most from his policies, Bangkok is as good a place as any to look. Thai stocks are up a spectacular 52 per cent this year, while the Standard and Poor’s 500 Index is up 5 per cent. Thailand, which is growing 9.1 per cent, isn’t alone. Singapore’s 10.3 per cent growth is another case in point. So are growth rates in Malaysia (8.9 per cent), the Philippines (7.9 per cent), South Korea (7.2 per cent) and Hong Kong (6.5 per cent). Stock markets are booming even as America’s funk is deepening. The reason: Investors know that any move by the Fed to further ease monetary policy means more liquidity is about to zoom Asia’s way. It’s ironic, really. The US is desperate to aid its beleaguered export industry and all it’s doing is exporting the stimulus needed at home. |
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| 20-Oct-2010 11:42 |
Fixed Deposits
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$$$$ F D Interest Abnormalisation MLM BUBBLE $$$
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Asia and the monetary tsunami Scary IPOs and overwhelmed economies could be the price of the US’ ultra-low rates William Pesek Asia’s IPO activity is worth eyeing in the months ahead. Recent surveys show the highest levels of investor sentiment in months. Will too much liquidity chasing too few good IPOs create demand for weaker ones? |
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| 20-Oct-2010 11:19 |
IPO
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Mapletree Industrial Trust-IPO by Temasek
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“Mapletree has a huge diversified industrial portfolio and is close to home, making it capable of generating a consistent and lucrative yield,” said Mr Ng Kian Teck, investment analyst at Sias Research. “Given their high subscription rate, it will be surprising if the counter trades below its IPO price,” he added. GCP executive chairman at Global, Gabriel Yap said he was not surprised by the investor interest and, in fact, expected the oversubscription to be even higher. “As a REIT structure, this is actually one of the highest in the market. Also, it provides a geographical advantage in the sense that practically all the properties are listed in Singapore, as opposed to GLP where 80 per cent of the properties are actually in Japan as well as China,” said Mr Yap. |
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| 20-Oct-2010 10:58 |
Genting Sing
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GenSp starts to move up again
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Wednesday: 20 OCTOBER 2010 prIce actIOns
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| 20-Oct-2010 10:49 |
Chemoil Ene USD
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CHEMOIL
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Chemoil Energy said that it is expanding its storage capacity in the Middle East, and has taken a US$90m loan from banks in Abu Dhabi, Dubai and Singapore to fund the project. |
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| 20-Oct-2010 10:43 |
Keppel Land
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Kepland
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:39 |
IPO
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Mapletree Industrial Trust-IPO by Temasek
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:36 |
Global Logistic
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GLP looks set to soar!
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:32 |
All-S Equities Fin
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SINGAPORE BANKS - UOB + OCBC + DBS
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:31 |
User Research/Opinions
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%%%% WORLD ECONOMIC SUMMIT %%%%
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:29 |
Yanlord Land
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Lord of China Prop
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:27 |
Fixed Deposits
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## AGE Of ZERO Interest ## INFLATION ## POVERTY ##
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:26 |
Fixed Deposits
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$$$$ F D Interest Abnormalisation MLM BUBBLE $$$
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:16 |
All-S Equities Fin
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SINGAPORE BANKS - UOB + OCBC + DBS
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:15 |
All-S Equities Prop
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[][][]PROPERTY[][][] City Dev+ CapitaLand+ KepLand
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KIM ENG COMMENTARY After the market close, PBOC announced a 25 bps hikes in both 1-year lending rate and 1-year deposit rate. Interest rates for other tenor were also adjusted. Note that saving rates are kept unchanged. This is the first interest rate movement made by PBOC since 23rd Dec 2008, amid the financial crisis. On that day PBOC cut both the 1-year lending and deposit rates by 27bps. The direction of interest rate movement is well expected by market, but the timing is unexpected, while the structure of the interest rate hike is also interesting. Our analyst comment: * Timing: The rate hike happened just after the 12th 5-year plan conference, which may trigger some speculation in change of monetary polices. We believe that it is too early to say this, and still believe that this round of rate hike DOES NOT mean China is entering into a rate hike cycle with frequent and rapid interest rate hikes. * Structure: We always argue that the structure of the interest rate hike is more important than the hike itself. Note that previously there were rumors on asymmetric rate hike, i.e. raising deposit rate but keeping lending rate unchanged (which is obviously bad news to banks). This turned out to be false. Market’s concern on asymmetric rate hike should fade. * Also note that saving rates were kept unchanged. This is important to the banks: On the funding side, the cost of saving deposit (typically 40-60% of total deposits), only the cost of time deposit will rise. While on the asset side, the yield of all of their loans will rise. * Effect: In short, the latest PBOC move should be moderately positive to the bank’s margins. * On the volume side, note that the mainland banks’ volume growth is almost inelastic to interest rate movement. Volume growth was mainly controlled by government instead. * Who is going to benefit: The banks with high loan/deposit ratios, and the banks with high portion of saving deposits are likely to benefit most. Bocom, CITIC Bank, CMB and BOC are likely to benefit most. * The rate hike should be positive to insurer as well. We believe that PICC is going to benefit most. * Other implications: While the rate hike itself is moderately positive to the banks, we expect the market to react negatively. The weakness in overseas market, and the recent strong rally in China and HK market would trigger some profit taking. * Inflow of hot money, and strength in Rmb may continue after the rate hikes. * The upcoming CPI and GDP figures (both due on 21st Oct, Thu) may surprise the market on upside. |
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| 20-Oct-2010 10:06 |
All-S Equities Prop
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[][][]PROPERTY[][][] City Dev+ CapitaLand+ KepLand
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China raises key rate for the first time since 2007
Bloomberg BEIJING
The one-year lending rate will increase to 5.56 [+0.25] per cent from 5.31 per cent effective today, the People’s Bank of China said on its website. The deposit rate will increase to 2.5 [+0.25] per cent from 2.25 per cent.
“This is a bucket of cold water for the market,” said Capital Securities analyst Zhang Yuheng in Shanghai.
The tightening would hit both equities and commodities, he said.
The impact was also felt by global markets across the board after the announcement last night. Oil prices fell, stock markets turned negative in Europe and the US dollar rose as investors were caught off guard by the tightening step.
Inflation hit 3.5 per cent in August over a year earlier, above the official annual target of 3 per cent.
Data to be released in Beijing tomorrow may show that September inflation climbed to 3.6 per cent or more even as economic growth moderated, analysts said. |
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| 20-Oct-2010 10:03 |
All-S Equities Fin
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SINGAPORE BANKS - UOB + OCBC + DBS
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China raises key rate for the first time since 2007
Bloomberg BEIJING
The one-year lending rate will increase to 5.56 [+0.25] per cent from 5.31 per cent effective today, the People’s Bank of China said on its website. The deposit rate will increase to 2.5 [+0.25] per cent from 2.25 per cent.
“This is a bucket of cold water for the market,” said Capital Securities analyst Zhang Yuheng in Shanghai.
The tightening would hit both equities and commodities, he said.
The impact was also felt by global markets across the board after the announcement last night. Oil prices fell, stock markets turned negative in Europe and the US dollar rose as investors were caught off guard by the tightening step.
Inflation hit 3.5 per cent in August over a year earlier, above the official annual target of 3 per cent.
Data to be released in Beijing tomorrow may show that September inflation climbed to 3.6 per cent or more even as economic growth moderated, analysts said. |
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| 20-Oct-2010 10:01 |
Fixed Deposits
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$$$$ F D Interest Abnormalisation MLM BUBBLE $$$
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x 0
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China raises key rate for the first time since 2007
Bloomberg BEIJING
The one-year lending rate will increase to 5.56 [+0.25] per cent from 5.31 per cent effective today, the People’s Bank of China said on its website. The deposit rate will increase to 2.5 [+0.25] per cent from 2.25 per cent.
“This is a bucket of cold water for the market,” said Capital Securities analyst Zhang Yuheng in Shanghai.
The tightening would hit both equities and commodities, he said.
The impact was also felt by global markets across the board after the announcement last night. Oil prices fell, stock markets turned negative in Europe and the US dollar rose as investors were caught off guard by the tightening step.
Inflation hit 3.5 per cent in August over a year earlier, above the official annual target of 3 per cent.
Data to be released in Beijing tomorrow may show that September inflation climbed to 3.6 per cent or more even as economic growth moderated, analysts said. |
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