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Through the MAS Lens : India and China

Monetary Authority of Singapore has released its report today which includes an international outlook. Some excerpts to compare India and China.

	Q1 2015	Q2 2015	2014	2015F	2016F
China	7.0	7.0	7.3	6.8	6.5
India**	7.5	7.0	6.9	7.3	7.5

** Refers to fiscal year ending March.

 India

• Private consumption, the main driver of the expansion in Q2, contributed 4.3% points to headline growth
• The effects of earlier monetary easing and lower oil prices.
•  GFCF also ratcheted up in tandem with the government’s infrastructure push, recording a 4.9% y-o-y increase.  
• Government expenditure added to growth in Q2 with a 1.2% expansion.
• The  fuller pass-through to lending rates would be impeded by banks’ weak balance sheets, which remain saddled with non-performing loans.
• Meanwhile, foreign investors have increased their investment in India, signalling rising confidence in the economy. Foreign direct investment inflows amounted to US$19.4 billion year-to-date in June—a 29.5% improvement over the same period last year.
• In particular, the computer software, automobile and construction sectors saw a discernible uptick in investment flows. All in, India’s GDP growth is expected to increase to 7.5% in FY2016, from 7.3% in FY2015, making it the fastest growing economy in the region.

China

• In Q2 2015, China’s economy grew by 7.0% y-o-y, on par with the previous quarter’s performance.
•  Headline growth in the second quarter held up on account of a 17.5% y-o-y year-to-date surge in financial services value added, attributable to increased brokerage activity, as the stock market boomed in Q2. Meanwhile
•  Exports and imports contracted.
• Growth slackened in secondary industries, with weaker expansions recorded by the manufacturing and construction sectors.
• Against a backdrop of substantial industrial slack and subdued real estate construction activity, fixed asset investment (FAI) rose by a slower 11.4% y-o-y year-to-date in Q2, down from 13.5% the quarter before.  

Fear is the key...

Emerging markets may not hold. 
As China triggers concern, competitive devaluation and benign depreciation may be the policy of central bankers.
There are no macho currencies. 
Just the herd instinct of currency sheep crossing over to a difficult week.
Countries that are relatively China tagged such as Australia and Singapore should see greater volatility. Countries like Vietnam will have to cope with a cheaper China competition. 
India's Make In India might see a lag. 
Asia which is the new power house is stalling and that is not a positive sign for the world economy.

Sell?
Or Sell and buy?
For the non- technical investor, it may be good time to stay out and watch,


Views expressed are without any risk or responsibility. This blog recommends no investment decision. 

Why China should worry the World more than Greece

The market knew that Greece since last 3 years at least.
The market has factored Grexit already.
EC cannot solve all of Greece's problems and the market has factored that aspect in.
Greece is too small a nation to affect any one except itself  or at most some parts of Europe.

China is the second biggest economy in the world.
It is already slowing down.
Its growth rate has been slowing. When financial markets outstrip real markets, a bubble ensues. The bubble has now gone bust in China with over 25 % fall in the equity  market in nearly a month.
The second largest economy is a buyer of commodities and any regression in China will further decelerate commodity economies. Economies like Australia and Singapore are China influenced in a big way.  Buying slowdown will hurt several global locales. Oil, gold, copper. coal would all slow down.

The decline of Chinese stockmarkets which affects the common man investor has geo-political implications.

Without any risk or responsibility

Chinese regulatory acts are market killers...

China's market regulator Securities Regulatory Commission has reportedly prohibited  major defined as those with stakes of more than five percent -- company directors, board supervisors and senior executives.shareholders and executives of listed companies from selling their shares for the next six months.

This diktat applies to big" shareholders .  The psychological impact on the market is  tremendous. It has shut off selling and thus smothered any market activity. Investors are holding scrips which may be falling in value and they cannot sell at the best available price. Liquidity of shares, essential characteristic of an equity market is being virtually given a go by! 

The regulatory panic is understandable  given that there were  trading halts in  more than 1,300 companies - nearly half of mainland listings -  but the remedies may artificially and temporarily stem the tide but cannot induce confidence. 

Australian economy will be among the first to be dented to be closely followed by Singapore by a Chinese crash. These economies' exposure to Greece is negligible but Chinese interests are huge into these economies. Any climb-back by respective currencies/ stock markets has to be transient.

Without risk or responsibility

Singapore Monetary Policy Statement

Extract from the Monetary Authority Statement

"Singapore’s GDP growth came in at 1.1% in Q1 2015 on a quarter-on-quarter seasonally adjusted annualised basis, following the 4.9% recorded in Q4 2014.  

The finance & insurance sector likely registered some pullback in activity, after an exceptionally strong performance in the preceding quarter. 

Meanwhile, the manufacturing sector remained lacklustre, reflecting the weakness in the electronics, precision engineering and transport engineering clusters. 

In comparison, the construction sector expanded strongly in Q1 2015, bolstered by the residential building segment.  

GDP is on track to grow at 2–4% in 2015, 

   In January 2015, MAS reduced the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, with no change to its width and the level at which it was centred.  This adjustment to the policy stance, which kept the S$NEER band on a modest and gradual appreciation path, was assessed to be appropriate in view of the more benign inflation outlook.

  "

Source: Monetary Authority of Singapore 

Without risk or responsibility 

Singapore price fall- January 2015 data

"CPI-All Items inflation eased to -0.4 % in January from -0.1% in December 2014, mainly on account of sharper price declines in direct oil-related items as well as lower food and services inflation

MAS Core Inflation, which excludes the costs of accommodation and private road transport, came in at 1.0% in January compared to 1.5% in December, due to the cut in electricity tariffs as well as the fall in food and services inflation.  "

 Source: MAS

Our comments: Singapore price fall a cause for worry  for Singapore Dollar?
Without risk or responsibility 

Why Singapore Dollar might be under pressure:

 Monetary Authority of Singapore (MAS) says :

"Over the last three months, the S$NEER has generally fluctuated around the middle of the policy band. The depreciation of the S$ against the broad-based strength of the US dollar was partly offset by the appreciation of the S$ against the Malaysian ringgit, euro, and Japanese yen. Thus, movements in the S$NEER have been relatively muted compared to bilateral S$ movements against the major currencies. The three-month S$ SIBOR increased slightly from 0.41% at end-September 2014 to 0.46% at end-December. It rose further to 0.65% in mid-January 2015, and has since stayed at around this level.  "

1.      Singapore economy grew  only  by 1.6% in Q4 2014 on a quarter-on-quarter, seasonally-adjusted annualised basis, or about half the pace of expansion in Q3.

2.      The Monetary Authority of Singapore's 2015 growth forecast for the Singapore economy at 2–4% looks a little difficult to achieve given the  state of the world economy.  

3.      The fall in global oil prices.

4.      MAS Core Inflation moderated to 1.6% y-o-y in Q4 2014 from 2.1% in Q3, while CPI-All Items inflation fell to -0.1% from 0.9%.  

5.      Rentals will fall against oversupply in the housing market.    

6.      CPI-All Items inflation is now projected by MAS at -0.5–0.5%, from the 0.5–1.5% expected in October.  MAS Core Inflation is expected to be 0.5–1.5% this year, down from the earlier forecast range of 2–3% .

7.      MAS has said it will continue with the policy of a modest and gradual appreciation of the S$NEER policy band.  However, the slope of the policy band will be reduced, with no change to its width and the level at which it is centred.  This measured adjustment to the policy stance is consistent with the more benign inflation outlook in 2015 and appropriate for ensuring medium-term price stability in the economy.  

Reading:  MAS Monetary Policy Stt. 28 January 2015. http://www.mas.gov.sg/news-and-publications/speeches-and-monetary-policy-statements/2015/monetary-policy-statement-28jan15.aspx

Views Expressed without Any Risk or Responsibility.

Singapore real estate woes...

With the Chinese slowness, and the alignment of the 'Singai' economy to the Chinese one, the fall in property prices may be on expected lines.  There is a possibility that Australian property prices may also be under pressure as Chinese real estate investment is active there too. The alignment with China is likely to affect the  Singporeans quite a bit.

Views without risk and responsibility

London losing steam as a financial centre?

For decades, London, with its time zone positioning had a natural advantage as the World's largest volume driven financial centre. New York and Tokyo followed tamely for years. Thatcher's big bang helped re-inforce the London Lead. So much so that London became a centre for Islamic Finance too!

With the rise of Asia and the innovativeness of the Americans and the tottering of Europe, things have changed. The Chinese have post Kissinger days, been more at home in USA  than than in imperial England. Chinese students go by hordes to USA. The  rich Arabs have diversified to continental Europe  from France to Germany to Spain. London's key banks have also been affected by recession woes and LIBOR  fixing scandals and even probable legal violations (in USA) . The Pound is no more an alternative currency, forget a safe haven. Cable (GBP/Dollar) is virtually history.

With the growth of Dubai, Arab funds might see a return nearer home;  with Singapore's proximity to China ; with ECB  in Frankfurt, with the colonies no more to fund regal splendour; with its universities badly behind in revenues and perhaps research, with Scottish threats, imperious London's real estate and real finances may  soon be under pressure.