SINGAPORE: Singapore's central bank left its monetary policy unchanged on Wednesday and said its accommodative stance will remain appropriate for some time as the city-state's economy emerges from its coronavirus slump.

The Monetary Authority of Singapore (MAS) manages policy through exchange rate settings, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed band.

"As core inflation is expected to stay low, MAS assesses that an accommodative policy stance will remain appropriate for some time," MAS said in its semi-annual policy statement.

Singapore, whose small and open economy has been hit hard by the COVID-19 pandemic, kept its expectations for full-year gross domestic product (GDP) to shrink 5%-7%.

GDP fell 7% in July-September on a year-on-year basis, compared with a revised 13.3% contraction in the second quarter, preliminary data showed on Wednesday. Economists polled by Reuters had expected a decline of 6.8%.

"Given such volatility previously, the GDP number is not too bad compared to expectations," said Jeff Ng, senior treasury strategist at HL Bank. "Inflation is expected to gradually recover by 2021 and that is going to anchor expectations that MAS will keep policy setting unchanged in 2021."

The MAS said core inflation will average 0-1% in 2021, while headline inflation is forecast to be between −0.5 and 0.5%.

Singapore's main price gauge contracted for the seventh consecutive month in August, with prices falling 0.3% from a year earlier.

The country has spent about S$100 billion, or 20% of its GDP, in virus-related relief to support households and businesses as it battles its worst-ever slowdown.

On a quarter-on-quarter seasonally adjusted basis, GDP grew 7.9%. Singapore's trade ministry said it would report non-annualised seasonally-adjusted growth rates from the third quarter to better represent economic performance.

The central bank said sequential growth in the Singapore economy is expected to slow in the final quarter of this year and remain modest in 2021, amid cautious external demand and restrictions on crossborder travel.

"We are still quite a distance away from the pre-COVID levels in terms of activity," said Brian Tan, regional economist at Barclays.

The country has been gradually lifting some of its lockdown measures to reopen its economy in recent months and signalled it wants to slowly resume tourism and travel. - REUTERS

HONG KONG: Hong Kong's central bank has sold more of its local currency so far this year than it did in any full year since the global financial crisis, in a bid to stop the unit strengthening and breaking its peg with the greenback.

Capital has flown into the Asian financial hub in 2020, initially due to comparatively high interest rates, and subsequently attracted by a series of large initial public offerings, analysts said.

Ant Group's looming $35 billion joint listing in Hong Kong and Shanghai, for example, is expected to keep demand high.

The Hong Kong Monetary Authority (HKMA) sold HK$10.9 billion ($1.41 billion) on Tuesday in interventions in Hong Kong and U.S. trading hours.

That brings its total so far this year to HK$230.6 billion, beating the HK$227 billion for the full year of 2015, which was previously the highest since 2009, according to official data and Reuters calculations.

This is a sharp turnaround from 2019, when some feared political uncertainty would drive money out of Hong Kong.

The Hong Kong dollar is pegged in a narrow range of 7.75-7.85 to the U.S. dollar. When it weakens to HK$7.85 a dollar, the HKMA buys Hong Kong dollars from the market. When it strengthens to $7.75, the HKMA sells Hong Kong dollars.

Carie Li, economist at OCBC Wing Hang Bank in Hong Kong, said the factors driving the inflows had varied throughout the 2020.

"Back in April it was about the 'carry trade' as the Fed cut rates to nearly zero, but Hong Kong interest rates did not follow the trend immediately," she said.

This meant traders sold U.S. dollars for Hong Kong dollars to benefit from the better rates.

"At the end of June, there were strong equity inflows ... and then a very strong IPO pipeline which resulted in very strong HK dollar demand," Li said.

This seems set to continue.

"The Hong Kong dollar remains 'biddish' at its strong-side convertibility undertaking of 7.75 on the buoyant IPO flow," Ken Cheung, chief Asian FX strategist at Mizuho Bank wrote in a research note.

"Currently there are six IPO subscriptions underway, with the Chinese giant internet payment IPO (Ant Group) in the pipeline later this month." - REUTERS

TOKYO: Japan's household spending fell for an 11th straight month in August and real wages marked half a year of declines, as consumers struggled to return to their pre-pandemic purchasing habits.

Analysts see the economy picking up from the slump caused by the coronavirus but weak spending and wage figures highlight the challenges new Prime Minister Yoshihide Suga faces as he works to revive the economy.

Household spending declined 6.9% in August from a year earlier, government data showed on Friday, matching a median forecast in a Reuters poll.

A year-on-year decline in the household spending in August would mark the 11th straight of falls, the longest period of contraction since a 15-month stretch to May 2017.

However, the pace of decline has slowed after hitting a record 16.2% in May, when people stayed at home to prevent the virus infection under the nationwide shutdown.

The government lifted the emergency measures in late May and business activity has gradually resumed.

Compared with the previous month, household spending rose 1.7% in August after a 6.5% decline in July.

"We expect the overall economy including consumer spending will pick up as the economic activity restarts," said Yusuke Shimoda, senior economist at Japan Research Institute.

"But people remained cautious about risks to get the virus infection and wages are expected to worsen further, so the pace of recovery in consumer spending will likely be limited."

Separate data on Friday showed the nation's inflation-adjusted real wages fell 1.4% in August from a year earlier, down for the sixth straight month, reflecting a big drop in overtime.

The economy tumbled deeper into recession in the June quarter as the coronavirus jolted global demand and analysts say it will take time for pre-pandemic levels of activity to return. - Reuters

PETALING JAYA: AmInvestment Bank, which attended Norway-based independent energy research and business intelligence company Rystad Energy’s Deep Dive Oil Markets webinar, cited Rystad as saying that the coronavirus pandemic will have a net negative impact on global oil demand until 2025, with an estimated 900,000 barrels a day below pre-Covid-19 levels, after falling 23 million barrels in April this year and an estimated 7 million barrels in December 2020.

Rystad warned that a second wave scenario could cut 3 million barrels a day in production towards the end of the year and 3.5 million barrels a day in December 2021, eroded by demand reduction for jet fuel, petrol, diesel and other fuels.

Rystad envisioned oil prices recovering to a base-case scenario of US$75 a barrel in late 2022 from the curtailment of global oil production as demand gradually improves, which could set the next down cycle in 2023–2024. However, a more volatile upcycle could mean over-US$90 a barrel prices by mid-2022, followed by a more drastic collapse to US$30 a barrel in 2024 from potential overinvestments.

Rystad reiterated that the Covid-19 pandemic will continue exerting the single largest and long-term impact on global oil market as the transportation and petrochemical sectors account for 60% of global demand.

Despite the volatility, AmInvestment Bank Research said it believes that the down cycle has reached a bottom with the worst experienced in April this year when Brent spot prices fell to a low of US$14 a barrel while futures inverted to an abnormal negative price due to lack of storage capacity.

The research house maintained its ‘overweight’ call on the oil and gas sector with six ‘buy’ calls versus only two ‘sells’ and one ‘hold’ recommendation.

“We like Yinson Holdings Bhd as its earnings growth momentum from the maiden contributions of floating, production, storage and offloading vessels Helang, off Sarawak, Abigail-Joseph in Nigeria and Anna Nery in Brazil could be further propelled by another substantive Petrobras project, the Parque das Beleias.

“We also continue to have buy calls for Dialog Group Bhd and Serba Dinamik Holdings Bhd due to their resilient non-cyclical tank terminal and maintenance-based operations. We recommend Petronas Gas Bhd, as the group’s optimal capital structure strategy and resilient earnings base translates to highly compelling dividend yields,“ it said in a report yesterday.

Year to date, it said, Brent crude oil prices have averaged US$42 a barrel with the current spot price at US$41/barrel. This is supported by US crude oil inventories declining by 9% to 496 million barrels currently from the all-time high of 541 million barrels in June.

“Hence, we maintain our crude oil price forecast at US$40–US$45 a barrel for 2020, in line with Petronas’ near-term view, and US$45–US$50 a barrel for 2021.”

Oxyalkylates venture positive for Petronas Chemicals’ long-term prospects: AmInvestment

PETALING JAYA: Petronas Chemicals Group Bhd’s (PetChem) plan to buy 50% of PCC Oxyalkylates Malaysia Sdn Bhd for an undisclosed sum from PCC SE indicates management’s confidence in the growth in demand for specialty chemicals in the region.

PCC Oxyalkylates is building an oxyalkylate facility within the Kertih Integrated Petrochemical Complex, Terengganu to produce ethoxylates and polyether polyols. Ethoxylates are used to produce detergent, home care and personal care products while polyether polyols are used in foam mattresses and upholstery applications.

In a note, AmInvestment Research said it is positive on the group’s longer term prospects, estimating a 10% return on investment will translate to a substantive 6% of FY20F earnings.

“While the announcement did not reveal the specific capex for this plant, we understand that it could already be included in the total capex allocation of US$200-250 million (RM834 million-RM1 billion), as guided by management during the 2QFY20 analyst briefing,” it said.

“This capex is expected to be spent over three years for three new specialty chemical projects – a silicone blending plant in Gebeng, a butadiene derivative facility in Pengerang Integrated Complex, and the Kertih operations. We have not incorporated any contributions from these investments yet as the commencement dates lie beyond our current projections.”

In the near term, however, the research house said the group’s FY20F plant utilisation rate (PU) is expected to be in the mid-90% level as the deferral of turnaround activities for Gebeng plant in Q1’20 to Q4’20 could slightly moderate PetChem’s operations.

For FY21F, the group still expects PU levels of over 90% with four minor turnaround activities scheduled for methanol plants in Labuan and Gebeng as well as Asean Bintulu Fertilizer and Petronas Fertilizer Kedah.