The US Federal Reserve might delay much-anticipated interest rate increases to late this year or early next year, a move that could impact China’s next round of reserve requirement ratio cuts, Citicorp Securities Investment Consulting Inc (花旗投顧) said yesterday.
Most analysts have forecast that the Fed would raise its interest rates sometime this quarter or next quarter, but some have recently changed their tone in view of the US’ slower-than-expected economic recovery.
“The Fed may launch its rate hikes by the end of this year or early next year... as [US private] consumption momentum did not rebound as expected,” Citicorp Securities vice president Spencer Wang (王進彰) told a media briefing.
Although US employment continued to grow last month, the figure did not fully reflect the real unemployment situation, which Wang said could cloud US economic sentiment ahead.
Data from the US Bureau of Labor Statistics showed that while employment grew last month, only 126,000 jobs were added — a disappointing figure to many.
In addition, the US’ current account deficit has not shown a significant improvement, which affected private consumption momentum and could further delay the timing of the Fed’s rate hikes.
Another factor that could affect the US central bank’s decision on when to raise its policy rates is the US’ capability to cope with its national debt for the rest of the year, Wang added.
The potential delay in US rate hikes could add more uncertainty to the People’s Bank of China’s decision to cut reserve ratios, Wang said.
Despite these uncertainties, the continuous improvement in US listed companies’ profitability, which has reached its highest level since the global financial crisis in 2008, still makes US equity markets a favorable target for investors, Wang said.
The Japanese stock market is also a good investment target, as many listed firms offer safe and sound financial results, he said.
The Chinese yuan might not significantly appreciate against the US dollar this year in light of the reserve ratio cuts, but yuan-based investments are still worth a look compared with assets denominated in other emerging markets’ currencies, he added.
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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],”
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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