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Fitch: China, US Rates Pressures Build for Apac Banks in 2016

Banking sectors within the Asia-Pacific (APAC) region are likely to face a more challenging year ahead as financial systems adjust to slowing growth in China and the prospect of higher US interest rates, says Fitch Ratings in the agency's 2016 Outlook Report for the region. Earnings and capital buffers built up in recent years mean that most banking systems start from a position of strength going into this weaker economic backdrop. The exceptions are the large markets of China and India, and the frontier markets of Mongolia and Vietnam, although the outlook for banks in India and Vietnam is balanced by a more favourable economic environment. We have a higher proportion of banking systems on negative sector outlooks for 2016 than was the case in 2015. This is driven by the prospect of deteriorating asset quality, a more cautious risk appetite from most banks contributing to weaker credit growth, and margin pressures - all of which is likely to lead to slower profit growth. Fitch views lower credit growth as a positive development from the perspective of financial sector stability. With respect to the outlook on ratings, we have a stable outlook on the overwhelming majority except Mongolia and the Philippines (negative and positive, respectively). The predominantly stable outlook reflects two factors: first, that there is some tolerance in the ratings to slowing growth, given the buffers; and second, the rating outlooks reflect sovereign support in the cases where the Viability Ratings are lower than Issuer Default Ratings. Support from the authorities still matters in APAC. Key downside risks are Chinese growth and US interest rates, as rapid credit growth and the accumulation of high private-sector debt since 2008 has made some countries across the region sensitive to a major change in economic conditions. Fitch expects Chinese GDP growth to slow to 6.3% in 2016 and 6% in 2017, and for US interest rates to rise gradually in 2016. However, a more severe China slowdown and/or a sharper-than-expected increase in US rates could lead to greater economic headwinds, weaker APAC currencies, and possibly higher domestic interest rates - raising the cost of debt servicing. For the Chinese banks, this would compound asset-quality and earnings pressures which are already mounting. For the rest of APAC, the more open economies such as Japan, Singapore, Hong Kong, Korea and Taiwan would be affected, especially those financial systems with the largest direct exposure to China (Singapore, Hong Kong, and Taiwan), while further weakness in commodity prices would also be likely - exposing Indonesia, Malaysia and Australia. Unhedged lending in hard currency that has been built up in some markets may also be tested, which would in turn have a knock-on impact for sectors in the supply chain - affecting asset quality more broadly in the local domestic banking system. That said, currency risks appear to be less than for other emerging market regions. On a positive note, Fitch sees capital levels improving as global regulatory pressures begin to influence capital trends across the region, with the Australian banks continuing to lead the market. With the Total Loss Absorbing Capacity (TLAC) rules having been finalised, we could see this beginning to influence regulatory capital and TLAC-qualifying instruments issuance trends - as local regulators clarify their thinking in response to the measures announced by the Financial Stability Board in November 2015.

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EU officials agree on new digital privacy law

European Union officials sealed a deal on a pan-European digital privacy law, forming a new legal framework which will have ripple effects around the world on how firms can utilize people's personal details. EU officials said negotiators agreed on a final text of the union-wide bill following almost four years of haggling and lobbying, replacing a patchwork of 28 different sets of national privacy laws and bolstering their privacy penalties to perhaps billions of euros. Under the agreement, fines would be increased to a maximum of 4% of a company's overall global revenue. The new text needs to be approved by the European Parliament and EU governments before enacting it in two years' time.

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Argentina to ease currency control

Argentina announced it would alleviate its foreign exchange control, with President Mauricio Macri hoping the move will bolster exports and fuel economic growth. Farmers in the country have been waiting for the Argentinian peso to decline before selling stockpiles of soybeans. The official exchange rate of 10 pesos per US dollar is not matched by a firmer black market rate. Analysts noted the official rate to decline between 13.5 and 15.00 to the dollar. Also, Finance Minister Alfonso Prat-Gay expected the rate to weaken near 14.2 per greenback.

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Japan Nov Trade Deficit Narrows More Than Forecast

Japan's merchandise trade deficit narrowed more-than-expected in November from a year ago, as imports fell faster than exports, the Ministry of Finance said on Thursday. The trade deficit decreased notably to JPY 379.7 billion in November from JPY 898.8 billion in the corresponding month last year. Economists had expected the deficit to narrow to JPY 449.7 billion. Exports dropped 3.3 percent year-over-year in November, exceeding economists' expectations for a 1.6 percent decline. Similarly, imports plunged 10.2 percent in November from a year ago. The expected rate of fall was 7.3 percent.

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Canadian Dollar Falls Against Majors

Japan's merchandise trade deficit narrowed more-than-expected in November from a year ago, as imports fell faster than exports, the Ministry of Finance said on Thursday. The trade deficit decreased notably to JPY 379.7 billion in November from JPY 898.8 billion in the corresponding month last year. Economists had expected the deficit to narrow to JPY 449.7 billion. Exports dropped 3.3 percent year-over-year in November, exceeding economists' expectations for a 1.6 percent decline. Similarly, imports plunged 10.2 percent in November from a year ago. The expected rate of fall was 7.3 percent.

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Carney open to serve 8-year term as BOE Governor

Mark Carney has hinted at serving a full eight-year term as Bank of England Governor, three years longer than he initially pledged, saying he needs to do more at the central bank. He refused to rule out staying longer than the five years he committed himself to when he was appointed in 2012, following George Osborne wooed the previous Bank of Canada Governor for nearly a year. Carney was formally appointed for eight years, but the Treasury previously said he had indicated he wanted to serve for only five years. To extend his term, Carney needs to express his intention to continue.


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Japan All Industry Activity Rises More Than Expected October

Japan's all industry activity increased at a faster-than-expected pace in October, after falling in the previous month, figures from the Ministry of Economy, Trade and Industry showed Monday. The all industry activity index rose 1.0 percent month-over-month in October, reversing a 0.2 percent drop in September. Economists had expected a 0.9 percent climb for the month. In August, the measure showed no variations. The index measuring industrial production gained 1.4 percent monthly in October. Similarly, the index measuring both construction and tertiary activity index grew by 0.9 percent during the month. On a yearly basis, the all industry activity index climbed 0.9 percent in October, faster than the 0.6 percent spike in the preceding month. It was the fifth consecutive monthly rise.

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NZ Dollar Rises Against Majors

The New Zealand dollar strengthened against the other major currencies in the Asian session on Tuesday. The NZ dollar rose to a 5-day high of 0.6787 against the U.S. dollar and a 4-day high of 82.26 against the yen, from yesterday's closing quotes of 0.6759 and 81.88, respectively. Against the euro and the Australian dollar, the kiwi edged up to 1.6075 and 1.0607 from yesterday's closing quotes of 1.6127 and 1.0625, respectively. If the kiwi extends its uptrend, it is likely to find resistance around 0.68 against the greenback, 83.50 against the yen, 1.57 against the euro and 1.04 against the aussie.

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Fitch: India, Se Asia Airlines to See improved Earnings Outlook

The earnings outlook for Indian and south-east Asian airline sectors should improve in 2016, driven by higher demand, lower fuel costs and ongoing industry restructuring, Fitch Ratings says. But the operating environment will be challenging due to strong competition and capacity expansion. Macroeconomic growth should help bolster demand and top-line growth for the region's airlines, and data so far in 2015 is already showing strong demand growth. Passenger load factors (PLF) in India and south-east Asia have risen steadily, with the average PLF across seven major airlines based in the region hitting multi-year highs above 80% in 3Q15. The continued decline in global oil prices will also provide a much-needed boost to airline earnings, with Brent crude falling further so far in 4Q15. Industry consolidation and restructuring should also result in improved profitability. Nonetheless, aggressive competition and capacity expansion remain key risks for the sector over the longer term. Capacity growth in south-east Asia and India has slowed in 2015 as airlines focused on profitability, but a huge order book for new aircraft remains, which could make it difficult to improve profitability for the sector.

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Estonia Retail Sales Growth Slows For Second Month

Estonia's retail sales growth eased for the second straight month in November, figures from Statistics Estonia showed Monday. The volume of retail sales excluding vehicles rose 6.0 percent year-over-year in November, slower than the 8.0 percent climb in the previous month. The latest rate of increase was the weakest since April this year, when it grew the same 6.0 percent. The annual sales growth in stores selling manufactured goods eased to 11.0 percent in November from 12.0 percent in October. Similarly, the retail sales growth in grocery stores moderated significantly to 1.0 percent in November from 4.0 percent in the preceding month. The retail sales of automotive fuel alone surged 8.0 percent in November from a year ago. On a monthly basis, retail sales fell 6.0 percent in November, reversing a 5.0 percent gain in the prior month. On a seasonally and working-day-adjusted basis, retail sales dropped 1.0 percent.

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Chinese shares open lower as regulator seeks to reassure traders

Chinese stocks opened lower as the regulator sought to soothe investors following Monday's plunge ignited a trading halt in the country's equities, futures, and options. The CSI 300 dropped around 2.7% before alleviating declines. Meanwhile, the MSCI Asia-Pacific Index erased 0.3 to 128.46. Japan's Topix fell 0.4%. Futures on Hong Kong's Hang Seng Index wiped out 0.4%, while South Korea's Kospi rose 0.1%.

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CEOs And Over 1,500 Startup Founders To Join Modi For 'Startup India Movement

CEOs and founders of over 1,500 startups from across the country are expected to attend the 'Start Up India' launch on January 16 where Prime Minister Narendra Modi will unveil the government's action plan for encouraging budding entrepreneurs and developing a conducive start-up ecosystem in the country. The event shall be a non-stop day long global workshop on start-up entrepreneurship and shall include panel discussions on topics such as "Unleashing Entrepreneurship and Innovation: What do Indian Startups Need to Grow and Prosper", "Celebrating Women: Stories of Innovative Women Entrepreneurs", "How digitization will change India's future", "Making Indian Healthcare Leapfrog" and "Financial inclusion is within reach". The panel discussion on "Show Me the Money: How do we Capitalize Entrepreneurship?" shall be chaired by Minister of State for Finance Jayant Sinha. A unique Question and Answer (Q&A) session titled "Face-to-face with Policy makers" is also being organized wherein secretaries of key government ministries and departments will answer questions on how government will be creating an enabling ecosystem for start-ups. The objective is to reinforce commitment of the government towards creating an ecosystem that is conducive for growth of start-ups. The event shall also feature interactive talks with global leaders and venture capitalists such as Masayoshi Son (founder and CEO, Softbank), Travis Kalanick (founder, Uber) and Adam Nuemann (founder, WeWork). A delegation of over 40 top CEOs and founders of start-ups, venture capitalists and angel investors from Silicon Valley will be attending as special guests for the event and will be taking part in interactive Q&A sessions. Google shall be conducting an innovative session titled "Launchpad GoogleAccelerator" which will involve live pitches being made by early stage start-ups to potential investors. Nikesh Arora, President & Chief Operating Officer, Softbank shall be interacting with participants on aspects relating to start-up funding. A virtual exhibition is also being organized as part of the event to showcase some of the unique and innovative work done by start-ups in the country.

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Malaysia Exports Rise In November

Malaysia's exports increased in November from a year ago, figures from the Department of Statistics showed Thursday. Exports grew 6.3 percent year-over-year in November to MYR 67.6 billion. Shipments of electrical and electronics products, which contributed 34.2 percent to total exports, rose 0.6 percent in November. Exports of refined petroleum products surged 13.2 percent. Imports climbed 9.1 percent annually in November. The increase in imports was mainly attributed to consumption goods, intermediate goods and capital goods. On a monthly basis, exports plunged 10.8 percent in November and imports declined by 9.8 percent The visible trade surplus of the country came in at MYR 10.2 billion in November, which was lower by 6.9 percent and 15.9 percent respectively for the both yearly basis as well as monthly basis.

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Fitch: Chinese Offshore Debt Issuances Face Limitations Despite New Rules

New rules introduced by Chinese regulators in 2015 may help to reduce structural subordination risk for Chinese corporates' offshore creditors, but these rules have limitations and may only benefit a small pool of corporates in the short-term, Fitch Ratings says in a special report. Fitch expects that the National Development and Reform Commission (NDRC) may provide "window guidance" in implementation of the new registration-based scheme, introduced in September 2015, for offshore debt issuance by Chinese corporates. Fitch believes the registration-based scheme will favour leading corporates, especially state-owned enterprises (SOEs), in government-supported sectors. The State Administration of Foreign Exchange (SAFE) eased the regulatory restrictions on cross-border guarantees in May 2015, but still prohibits the proceeds from offshore debt issuance under onshore guarantees to be repatriated back to China. Given the limitations of these new rules, keepwell deeds supplemented by equity interest purchase undertaking deeds and/or liquidity support covenant deeds may remain popular and efficient structures for issuers who wish to repatriate funds to China, although the new NDRC registration rules apply to offshore debt issued under keepwell deeds from onshore corporates as well. The full report, titled "Common Structures of Chinese Offshore Debt Issues:

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China to face adversity in hitting 6.5% growth over 2016-2020

China will face great hardship in achieving economic growth above 6.5% between 2016 and 2020 due to sluggish global demand, escalating labor costs, and aggravating environmental concerns in the country. According to State Council's Development Research Centre President Li Wei, gross domestic product has recorded annual growth of approximately 10%. The 6.5% projection is not high, but it will be difficult to attain such pace of growth. China is scheduled to release fourth quarter and full-year GDP figures on January 19.

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Fxwirepro: Aud/jpy Extends Recovery from Multi-Year Lows, Good to Buy Dips

Poor Chinese inflation data released over the weekend raised concerns over China's ability to boost the economic growth, denting risk appetite and boosting yen. AUD/JPY hit a multi-year low of 80.88, levels not seen since Oct 2012, but was rejected at lows. The pair later rebounded higher towards 82 handle, on the back of strong pullback seen in the USD/JPY pair. Broader market sentiment will continue to dominate markets amidst a data-light economic calendar today. Strong resistance is seen at 81.95 levels, breaks above could take the pair to next hurdle at 82.95 (5-DMA) and then to 83.90 (Jan 8th highs). To the downside immediate support might be located 80.88 (Session lows Jan 11) below that at 79.50 (Oct 2012 Level). Recommendation: Good to buy dips around 81.50, SL: 80.90, TP: 82.95/83.90

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Singapore bond market sees default despite unrecognized notes

Singapore's bond market may default for the second time following lenders said Pacific Andes Resources Development Ltd. has not recognized some obligations on S$200 million ($139 million) of notes. In a January 10 filing, the Hong Kong-based company said it received a letter from HSBC Holdings Plc, alleging it breached on the 2017 securities. Investors, under the bond's terms, can request full immediate repayment in the event the firm's shares are suspended. Since November 25, Pacific Andes has halted trading in the country.

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Fxwirepro: Usd/jpy Bounces Off Trendline Support, But Unable to Hold Gains Above the 118 Handle

USD/JPY bounce overnight from trendline support failed near 118 handle and the major dropped to new session lows towards the mid-point of 117 handle. Yen back in demand amid falling Japanese stocks, Asian stocks have been volatile triggering risk-off trades. Strong support for the pair lies at 116.65 (trendline) and further below at 116 levels, while on the upside resistance is seen at 118.02 (Jan 11 & session highs) ahead of 118.75 (Jan 7 highs). Price action is well below the cloud and moving averages biased lower. RSI and Stochs on dailies are deeply in oversold territories. The data calendar is rather empty today, nothing of note for the JPY in terms of macro news except for the BOJ Governor Kuroda's speech.

Recommendation: We will wait for further technical confirmation to initiate any trade

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Disney to reveal Shanghai theme park on June 16

Walt Disney Co. announced the new Shanghai Disney Resort will be unveiled on June 16, the firm's biggest investment outside America. The $5.5 billion resort will showcase Disney's two hotels, tallest castle, and a pirates-themed land. The size of their first Chinese resort is 963 acres (389 hectares), three times bigger than the Hong Kong Disneyland. Chairman and Chief Executive Bob Iger has remained upbeat on the project, which has been planned for years, amid China's economic degeneration and stock market slump.

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China Exports Fall Less Than Forecast

China's exports declined less than expected in December, data published by the General Administration of Customs revealed Wednesday. Exports fell 1.4 percent on a yearly basis in December, slower than the 8 percent decline forecast by economists. At the same time, imports slid 7.6 percent annually, also slower than the expected decrease of 11 percent. Consequently, the trade surplus rose to around $60 billion, which was well above a $51.3 billion surplus forecast by economists.

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Australia Unemployment Rate Steady At 5.8% In December

The jobless rate in Australia was a seasonally adjusted 5.8 percent in December, the Australian Bureau of Statistics said on Thursday. That was unchanged from the November reading, and it beat forecasts for 5.9 percent. The Australian economy lost 1,000 jobs in December to 11,902,300 - which also topped forecasts for a decline of 10,000 jobs following the addition of 71,400 jobs in the previous month. Full-time employment saw an increase of 17,600 jobs in December to 8,228,700 following the spike of 41,600 a month earlier. Part-time employment was down 18,500 jobs to 3,673,600 following the 29,700 increase in November. Unemployment decreased 10,900 to 727,500. The number of unemployed persons looking for full-time work decreased 2,600 to 515,000 while the number of unemployed persons only looking for part-time work decreased 8,400 to 212,500. "The trend shows that around 312,000 more people were employed in December 2015 than in December 2014. Full-time employment growth was stronger than part-time over the year, increasing by 186,600 people," said Bruce Hockman, General Manager of ABS' Macroeconomic Statistics Division. The increase in employment has contributed to the trend employment to population ratio rising over the year from 60.6 percent to 61.4 percent, while the unemployment rate has decreased over the year from 6.2 percent to 5.8 percent. The participation rate was 65.1 percent - missing forecasts for 65.2 percent and down from 65.3 percent a month earlier. Monthly hours worked in all jobs increased 0.3 million hours to 1,645.2 million hours.

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[B]Fed: Strong dollar, low energy prices impact US economic growth

A firm US dollar and low energy prices have affected the American economy, as improvements in consumer spending and the labor market did nothing to counter its negative effects. Based on its Beige Book report of anecdotal details on business activity, collated from contacts in the country, the Federal Reserve said US economic activity expanded in nine of the 12 districts. The Boston Fed reported a positive economic activity, while Kansas City and New York districts considered theirs flat. Also, half the central bank's districts noted the perception for future economic growth was still mostly optimistic. Policymakers, in general, perceive additional four quarter-point increments in 2016 although they reiterated it would depend on figures and progress on Fed's 2% target on inflation.

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Saudi Arabia plans to create new sovereign fund - source

Saudi Arabia is planning to set up a new sovereign fund for diversifying its investments and overseeing a portion of its oil wealth. People privy to the matter, the kingdom also asked consultancies and investment banks to present proposals for the project. Sources said maintaining the foreign reserves at an acceptable level is needed to bolster the real and retain a sturdy financial position. Another source added the government did not disclose the size of the new sovereign fund. As of present, Saudi's state budget deficit is at record high while net foreign assets plunged over $100 billion in 15 months.

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European Economics Preview: Eurozone Foreign Trade Data Due

Foreign trade data from euro area is due on Friday, headlining a light day for the European economic news. At 3.00 am ET, Spain's statistical office INE publishes final consumer price data for December. Prices are forecast to remain flat on a yearly basis as initially estimated. In the meantime, Turkey's unemployment figures are due. The jobless rate is seen unchanged at 10.3 percent in October. At 4.00 am ET, Italy's statistical office Istat issues final consumer prices for December. According to preliminary estimate, consumer prices rose 0.1 percent from last year. Half an hour later, the Office for National Statistics issues U.K. construction output data. Output is forecast to fall 0.1 percent on a yearly basis in November after rising 1 percent in October. At 5.00 am ET, Eurostat is set to release Eurozone foreign trade figures for November. The trade surplus is expected to rise slightly to EUR 21 billion from EUR 19.9 billion in October.

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UK House Prices Rise For First Time In 3 Months: Rightmove

British house prices climbed at the start of the year, after declining in the previous two months, the latest house price balance from property tracking website Rightmove showed on Monday. The house price index rose slightly by 0.5 percent month-over-month in January, in contrast to a 1.1 percent decrease in December. "With their asking prices pretty much the same as a month ago, perhaps the knock-on effects of the more punitive landlord tax regime have arrived early and they now face a dilemma over whether to buy now or wait to see if prices drop in this sector over the next few months," Miles Shipside, co-founder of Rightmove, said. On an annual basis, house prices house prices grew at a slower pace of 6.5 percent in January, following a 7.4 percent surge in the prior month.

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