Asia faces the threat of higher inflation, slower growth and tougher times for exporters after oil prices hit new highs and the dollar plunged last week.
Farmers, miners and oil companies could profit from high commodity prices. But most of Asia depends on imported energy and raw materials and even oil exporters such as Malaysia have other industries that could suffer.
"We are seeing inflation pressure rising across the region and that's becoming a key challenge for the economies that also potentially face downside risks from a US slowdown," Citigroup economist Yiping Huang (
Japan, China and other export-driven economies that sell to the US market have watched earnings erode as the dollar falls. It dipped below ¥100 last week for the first time in 12 years and hit 7.1 yuan, its lowest level against China's currency since 2005, when the current exchange rate system began.
Toyota Motor Corp said its profit for this fiscal year would decline by about ¥35 billion (US$350 million) for each ¥1 that the dollar falls.
"With a high yen, exports are likely to come down, bringing down company profits and also bringing down stock prices," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities Co in Tokyo.
Such worries have sent Japanese stocks tumbling to two-and-a-half-year lows, fueling alarm among investors across Asia who are afraid the US -- a huge export market -- is sliding into a recession.
In China, exporters have been hit by higher costs and a 16.5 percent rise in the yuan against the dollar since the middle of 2005. Factories that depend on sales of low-cost furniture, toys, shoes and other goods to US consumers have laid off thousands of workers.
Commerce Minister Chen Deming (陳德銘) warned last week that export growth might slow if the yuan rises further against the dollar.
China has frozen retail prices of gasoline and diesel, shielding consumers from global crude prices that hit a record US$111 a barrel last week.
But factories and steel mills are being pinched as market-set prices of coal, iron ore and other materials surge. That rise in costs is hampering China's efforts to rein in consumer inflation that accelerated to 8.7 percent last month, its highest level in nearly 12 years. That was driven by a 23.3 percent jump in food prices that has hit China's poor majority hard.
Beijing has imposed price controls on food and is trying to increase production. But wholesale prices are edging up, suggesting consumers could face more across-the-board increases in living costs.
Vietnam, Indonesia, Malaysia and Sri Lanka also face a risk of higher inflation due to higher energy costs, HSBC economist Peter Morgan said in Hong Kong.
"They have pretty high inflation rates to start with," he said.
Asian buyers could be paying higher prices for oil, gold and other commodities for some time as global prosperity drives a boom in demand, said Tim Condon, chief Asian economist for ING in Singapore.
"We were in a bear market for commodities for the past 80 years, up to the beginning of the 21st century," Condon said. "We've been in a bull market for five years. I think there's more room to run."
On the bright side, poor farmers in Indonesia, Malaysia and Thailand are being paid more for rice, palm oil and other crops, said Marshall Gittler, chief Asian strategist at Deutsche Bank Private Wealth Management in Singapore.
"It's going to redistribute wealth in these countries and it may actually be a good thing for them," Gittler said.
Even oil producers such as Malaysia that stand to profit from higher prices face a downside.
Malaysia subsidizes retail gasoline, so rising crude prices will increase costs to its treasury, said Jeff Brown, managing director of FACTS Global Energy in Singapore. And he noted that Malaysia exports personal computers, chips and other technology goods to the US and Europe, where sales could slow as energy prices rise.
"So I would be reluctant to even say that Malaysia's a beneficiary" of the oil boom, he said.
In Japan, airlines have responded to soaring oil prices by raising fuel surcharges on tickets by up to US$42 per passenger, effective next month.
In Thailand, state-owned oil company PTT PCL has asked the government to cut the amount of fuel it is required to hold in reserve from 30 days' supply to 18 days. The company said that would avert possible diesel shortages by letting it sell cheaper stocks bought earlier without having to replace them at current high prices.
Also see: EU must accept dollar weakness
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day