17-10-2018

ECONOMY & BUSINESS
BANGLADESHTODAY 10
THE
WEdnESdAy, OCTOBER 17, 2018
‘Calm before storm’ as
Asian stocks drift higher
The Presidents of Gulsan Club Showkat Aziz Russell and Sylhet Club Haseen Ahmed exchanging agreement of Affiliation between
the two Eminent Clubs.
Photo: Courtesy
Japan unveils sales tax hike
Japan on Monday announced a
much anticipated sales tax hike in
2019 to address the nation's huge
public debt, despite warnings it
could hobble growth in the world's
third-biggest economy.
The point-of-sale tax will rise
from eight percent to 10 percent
from October next year as ageing
and heavily indebted Japan battles
to finance snowballing social
security bills - especially medical
fees.
The tax rise was originally
planned for October 2015 but was
pushed back twice due to fears it
could derail the fragile economy.
The last such move - in April
2014 - was blamed for tipping
Japan into a brief recession.
This time, Prime Minister
Shinzo Abe believes he can avoid a
sharp decline in consumer
spending by introducing measures
to cushion the blow.
The government "will do its best
to avoid a negative impact on the
economy by taking every possible
measure," Chief Cabinet Secretary
Yoshihide Suga told reporters.
However, Suga added that the
planned hike could still be
IMF to
reopen office
in Argentina
The International
Monetary Fund said
Monday it has decided to
reopen an office in
Argentina, six years after
leaving.
The decision came days
after Buenos Aires reached a
deal with the IMF on the
money supply, interest rates
and an exchange rate
framework.
In exchange for these
measures, the Fund agreed
to speed up payment of a
$50 billion loan granted in
June to Latin America's
third-largest economy, now
in another economic crisis.
Economist Trevor Alleyne,
an IMF staffer since 1992,
will be the Fund's
representative in Buenos
Aires.
He has overseen IMF
missions in countries such
as Nigeria, Zambia, Jamaica,
Peru, Venezuela and
Ecuador.
Hong Kong
stocks gain
in early
trade
Hong Kong stocks gained
ground in early trade on
Tuesday, recovering some
losses from recent choppy
sessions caused by
concerns about the global
economic growth outlook.
The Hang Seng Index rose
0.49 percent, or 123.78
points, to 25,568.84 in the
opening minutes.
The benchmark
Shanghai Composite Index
was flat, easing 0.34 points
to 2,567.76.
The Shenzhen
Composite Index, which
tracks stocks on China's
second exchange, was also
barely changed, giving up
0.26 points to 1,280.82.
scrapped if there were a
potentially historic recession like a
global slump triggered by the
2008 collapse of Lehman
Brothers. The measures will
include plans to leave the sales tax
on food unchanged at eight
percent, Suga said.
The government also plans
subsidies to offset the impact of
the sales tax hike on some durable
goods such as houses and
environmentally friendly cars.
And the proceeds from the tax
hike will go in part to fund free
nursery places to ease the impact
on families and encourage
Japanese to have more babies, as
the population continues to shrink
at a fast pace.
"I don't think the sales tax this
time will create a setback in the
economy," Hideo Kumano, chief
economist at Dai-ichi Life
Research Institute, told AFP,
adding that a hoped-for rise in
wages would be critical.
The measures to mitigate the
impact on consumption and an
expected rise in salaries next year
should be enough to absorb a
shock from falling disposable
Sensex slips 71 points on
negative economic data,
weak rupee
The BSE benchmark
Sensex after reclaiming the
35,000-mark fell 71 points to
quote at 34,662.73 Monday,
as the IIP slipped to a threemonth
low in August and
retail inflation rose
marginally in September.
Besides, weak Asian cues
on worries over China-US
trade dispute influenced
sentiment.
The 30-share barometer
pushed lower by 70.85
points, or 0.20 per cent, to
34,662.73. It opened higher
and touched a high of
35,008.65. The gauge had
climbed 732.43 points in the
previous session on Friday.
Sectoral indices were
negative across the board,
with oil&gas, auto, consumer
durables, PSU, bankex,
capital goods, metal,
infrastructure and realty
falling by up to 1.25 per cent.
The NSE index Nifty was
trading lower by 21.85
points, or 0.21 per cent, at
10,450.65 after shuttling
between 10,524.60 and
10,432.
Selling activity emerged
after data released by Central
Statistics Office (CSO) on
Friday showed that
industrial production
slipped to a three-month low
of 4.3 per cent in August,
while retail inflation up
marginally to 3.77 per cent in
September.
Meanwhile, the rupee
depreciated by 36 paise paise
to 73.93 against the dollar in
early trade after Brent crude
again went past the USD 81 a
barrel, which also dampened
sentiments. Hindustan
Unilever, emerged top loser
in the Sensex pack, falling
3.28 per cent, followed by
ICICI Bank at 2.46 per cent.
Other big losers that
dragged both the key indices
were Maruti Suzuki, Axis
Bank, L&T, Bharti Airtel,
Bajaj Auto, PowerGrid,
Kotak Bank, Coal India,
Adani Ports, Asian Paint,
HDFC Ltd, SBI, Vedanta Ltd
income, he said.
Kumano said further delaying
the tax hike could in fact be more
damaging.
This would "prompt worries
over the future financing of the
social security system that in turn
would have negative impact on
consumption," Kumano said.
Abe has frequently stressed that
reforming the country's social
security system is "the biggest
challenge" facing his government
and has pledged to tackle the
issue.
IMF chief Christine Lagarde
warned earlier this month that the
challenges facing the country will
"only grow as Japan's population
continues to age and shrink,"
noting that both the size of the
economy and the population are
on track to shrink by a quarter
over the next 40 years.
In addition, a loss of confidence
in Tokyo's ability to pay its debts
could send interest rates soaring
and increase the risk of a
bankruptcy.
Ratings agencies have previously
cut Japan's credit standing over its
debt levels.
and Tata Steel.
However, stocks of Sun
Pharma, ITC LGd, TCS,
Infosys, RIL and Wipro were
trading higher.
Foreign portfolio investors
(FPIs) gave up shares worth
a net of Rs 1,322 crore, while
Domestic institutional
investors (DIIs) remained
net buyers, picking up shares
worth a net of Rs 1,287 crore
on Friday, provisional data
showed.
Most other Asian markets
too were down on trade war
worries and surging crude
prices following rising
diplomatic tensions between
Riyadh and the West.
Japan's Nikkei fell 1.39 per
cent, Hong Kong's Hang
Seng shed 1.30 per cent,
Taiwan was down 1.10 per
cent in their early deals.
Shanghai Composite Index,
however, was flat.
The US Dow Jones
Industrial Average had
closed 1.15 per cent higher on
Friday.
Spain's Cepsa postpones IPO,
blames market conditions
Spanish oil company
Cepsa on Monday said it
had postponed a market
listing planned for
Thursday, blaming global
market conditions.
The firm said in a
statement that Abu Dhabibased
Owner Mubadala
had "decided to desist" on a
planned market listing,
citing "the current state of
international
markets."
capital
State inverstor
Mubadala, which has since
2011 held a 100 percent
stake in Cepsa, had
announced a month ago it
intended to sell off a 25
percent share to raise
around $2.3 billion.
The planned operation
wuold have valued the
group, which employs
some 10,000 people, at
8.08 billion euros ($9.35
billion) if investors had
snapped up shares for the
maximum 15.10 euros.
Madrid-based Cepsa
delivered first half profits
up 7 percent at 441 million
euros on sales of of 12.4
billion euros.
Its activities are
concentrated on refining
and distribution in Spain
but it is also present in oil
and gas exploration and
production both in Latin
America and North Africa.
13th death
anniversary of
M A Samad
yesterday
On 17th is the 13th death
anniversary of M A Samad,
an Insurance legend &
founder of Bangladesh
General Insurance
Company Ltd. (BGIC). After
his retirement as Managing
Director of Jiban Bima
Corporation, he established
BGIC, the first Insurance
Company in private sector
after country's liberation.
Moreover he was the
founder Director of
Bangladesh Insurance
Academy and former
Chairman of Bangladesh
Insurance Association. M A
Samad wrote two books in
Bengali: one on life
insurance and another on
general insurance. He also
wrote two textbooks in
English on life insurance.
Being a legend of life
insurance sector, he
contributed a lot for General
insurance through his
merits & intellects. He was
an enlisted International
Expert in the Technical
Assistance Program on
Trade and Development of
the United Nations. M A
Samad visited most of the
insurance training
institutions in UK and USA
under UNDP fellowship
program. M. A. Samad was
born at Kulaura of
Moulvibazar in a respectable
Muslim family on 1st
January, 1923.
Asian shares drifted
marginally higher on
Tuesday following another
volatile session on Wall
Street but a perfect storm of
risks hovering over the global
economy curbed investors'
enthusiasm.
Hong Kong's benchmark
Hang Seng market led the
gains, rising by half a
percentage point, while
equities in Japan scraped
into positive territory after
suffering stiff losses the
previous day.
Chinese stocks opened
essentially flat while markets
in Australia and South Korea
were fractionally in the
green.
Global markets have been
rocked in recent days as
traders fret about spiking oil
prices, rising US long-term
interest rates and an attack
by US President Donald
A spike in the price of fruit
and vegetables pushed up
China's inflation rate in
September, official figures
showed Tuesday.
For the fourth straight
month, the consumer price
index (CPI) - an important
barometer of retail inflation -
rose, hitting its highest level
since February, at 2.5
percent, the National Bureau
of Statistics said.
Extreme typhoon weather
lashed southern China last
month, bringing strong
winds and heavy rain, and
badly affecting agricultural
production, it added.
The world's biggest pork
producer is also scrambling
to contain an outbreak of
Trump on his own central
bank and its policies.
After a see-saw session on
Wall Street, the Dow Jones
closed down 0.4 percent and
the broader S&P 500 was
down just more - at 0.6
percent.
Investors have now
entered a "stalemate period
to rethink the plethora of
looming
market
uncertainties, ambiguities
and flat out worries," said
Stephen Innes from OANDA
trading.
"But this relative calm
belies the building storm
clouds on the horizon."
Gains in Tokyo were
sparked by a "technical
rebound… after a sharp fall
yesterday," said analysts at
Okasan Online Securities.
The oil price continued to
climb amid ongoing
geopolitical tensions
African swine fever that has
spread through pig farms,
with pork prices rising
significantly from August.
Adding to the strain on
consumers, the cost of diesel
and gas jumped more than
20 percent on last year.
Oil is priced in US dollars, a
currency that has risen
against the yuan in recent
months, making fuel imports
pricier. The producer price
index - which is used to
measure the performance of
the industrial sector -
decelerated to a 3.6 percent
on-year rise in September.
That was down from 4.1
percent in August but above
the 3.5 percent forecast in a
Bloomberg News survey.
surrounding Saudi Arabia,
with accusations that
journalist Jamal Khashoggi
was murdered in the
Kingdom's consulate in
Istanbul.
Trump said overnight he
would send Secretary of State
Mike Pompeo to find out
"first-hand what happened,
what they know, what's going
on."
Turning to foreign
exchange markets, the
pound suffered further falls
in early Asian trade as the
possibility of a "no deal"
Brexit looms.
EU President Donald Tusk
said he remained "hopeful
and determined" that Britain
and the bloc could clinch an
amicable divorce deal.
However, he added: "We
must prepare the EU for a
no-deal scenario, which is
more likely than ever before."
China prices rise as
cost of food spikes
Tokyo shares closed higher on Tuesday,
with investors snapping up bargains after
recent losses.
The Nikkei 225 index rose 1.25 percent or
277.94 points to end at 22,549.24, while the
broader Topix index was higher by 0.74
percent or 12.47 points at 1,687.91.
While Wall Street issues slipped overnight,
the slowing speed of the fall and relative calm
on the forex market comforted investors,
Okasan Online Securities said in a note.
Market participants were also eager to buy
shares after sharp declines in recent days, it
added. "The market is in rebound mode. With
the forex market staying calm, selective
buying came in to pick up bargains," Okasan
said.
While prices rose, the costs
of raw materials went down,
the NBS said.
"Policymakers are likely to
look through the latest pickup
in consumer price
inflation and focus instead on
evidence of cooling economic
momentum, including slower
core inflation and weaker
factory gate price pressures,"
said Julian Evans-Pritchard,
senior China economist at
Capital Economics.
The rise in consumer
inflation is "unlikely to
prevent (the central bank)
from loosening monetary
policy further in the coming
months in a bid to shore up
economic growth," he said in
a note.
Bargain hunters to the fore as
Tokyo shares close higher
The dollar stood at 112.07 yen, up from
111.79 yen in New York on Monday afternoon.
Among major shares, SoftBank jumped
3.62 percent to 9,586 yen after losing more
than seven percent on Monday over its link to
Saudi Arabia, which has come under
international scrutiny after a journalist
disappeared from the kingdom's consulate in
Istanbul. Meanwhile, Toyota rose 1.11 percent
to 6,522 yen and Sony was also higher by 2.21
percent to 6,356 yen.
Japan's major oil refiners Idemitsu Kosan
and Showa Shell Sekiyu dropped 3.20 percent
to 5,740 yen and 2.58 percent to 2,378 yen
respectively, after revealing the financial
details of the merger between the two
companies.
Asian stocks extend slide
on plethora of risks
Asian stocks started the week on the
back foot Monday, with investors still
in a gloomy mood after several days of
market turbulence sparked by trade
rows and a spat over the US central
bank.
Meanwhile, European shares
struggled for direction in early
exchanges as traders wrestled with a
cornucopia of risks, including higher
oil from Saudi Arabia tensions and
ongoing turmoil surrounding Brexit
and Italy's budget.
In Asia, Japanese equities led the
way lower, with the benchmark Nikkei
225 shedding almost two percent, in
anticipation of an announcement from
Prime Minister Shinzo Abe of a two
percentage-point hike in the sales tax.
Abe also vowed a series of measures
to cushion the expected blow to
consumption but many analysts have
warned the rise in sales tax could
stymie growth in the world's third-top
economy.
"We have never seen a share price
rise in the past after an announcement
of a sales tax hike," noted Kyoko
Amemiya, senior market strategist at
SBI Securities.
Japanese stocks also came under
pressure after US Treasury Secretary
Steven Mnuchin said over the
weekend the US wants to include a
provision to prevent currency
manipulation in future trade deals
with Japan.
Chinese stocks, which were the
worst hit in last week's global rout, also
tracked lower, with the benchmark
Shanghai composite off one and a half
percent.
Markets in Hong Kong, Australia
and South Korea were also in the red,
with the Hang Seng giving up more
than one percent.
"We can't say the shock is over," said
Masayuki Kubota, chief strategist at
Rakuten Securities.
European markets however were
steady at the open, with London's
benchmark FTSE up 0.1 percent, the
Paris CAC 40 completely flat and the
Frankfurt open delayed for technical
reasons.
Last week saw a broad-based sell-off
in global equities, prompted by fears of
higher US interest rates, continued
worries over US-China trade and
attacks by President Donald Trump on
the Federal Reserve, which he called
"crazy".
On Friday, the bulls attempted a
fight-back but found it hard going in
another seesaw session. Early
European gains fizzled and the Dow
Jones closed up 1.2 percent following
late buying but it also dipped into the
red for part of the session.
This week, traders are expected to
focus on a raft of economic data and
dozens of company results.
Turning to commodities, oil prices
continued to soar as traders fretted
over US relations with its ally and the
world's top oil producer Saudi Arabia.
Trump has warned of "severe
punishment" if it is revealed that
journalist Jamal Khashoggi was
murdered inside the Kingdom's
consulate in Istanbul but Riyadh hit
back immediately, saying it would
retaliate.
Geopolitical tensions surrounding
Saudi Arabia battered shares in
Japanese conglomerate Softbank,
which has close financial ties to the
Kingdom.
Softbank stock plunged more than
seven percent in Tokyo, as Riyadh is
heavily involved in the firm's massive
technology investment fund.