Modi hails new FDI rules
Prime Minister Narendra Modi yesterday hailed a sweeping liberalization of rules on foreign direct investment (FDI), saying they would make Asia’s third-largest economy the most open in the world. “Key reform decisions were taken at a high-level meeting chaired by the prime minister, which makes India the most open economy in the world for FDI,” Modi said in a tweet. In a second tweet, he said the changes would provide a “major impetus to employment and job creation in India.”
Surplus soars to new heights
The Southeast Asian nation — best known for its beaches, food, military coups and, more recently, the soccer heroes Leicester City — has run up the biggest current-account surplus among major emerging markets. The current-account surplus in the first quarter ballooned to an annualized 10.2 percent of GDP, an improvement that is described as phenomenal. Much of the buffer is down to a steep fall in oil prices — Thailand relies on crude imports for more than 80 percent of its energy needs — and a surge in tourism fueled by Chinese shoppers. Thailand has been using the windfall to replenish its foreign-exchange reserves by about US$20 billion this year, providing a key bulwark if it faces a sudden surge in capital outflows or foreign-exchange market volatility. The increase in reserves has been the fastest of any emerging market. The current-account data also reflects a reluctance by companies and households to spend the dividend from cheaper energy, indicating a deeper malaise in the economy. Savings rates soared to 33 percent of GDP in the first quarter, while investment has slid.
Brexit fears abate
Stocks in the territory yesterday jumped nearly 2 percent, their biggest one-day gain in almost a month, as Asian markets rebounded on hopes Britain would decide to remain in the EU. The Hang Seng Index rose 1.7 percent, to 20,510.20, while the China Enterprises Index gained 1.8 percent, to 8,639.51 points. Brexit fears abated as three British opinion polls ahead of the EU membership referendum on Thursday showed the “Remain” camp recovering some momentum, although the overall picture remained one of an evenly split electorate. Most Hong Kong sectors rose, with financials and energy shares leading the gains. Stella International Holdings shares tumbled for a second session, after last week’s warning of a significant drop in first-half profit.
Banks buy more forwards
The country’s banks last month bought more foreign-currency forwards than they sold for the first time in 17 months, signaling lenders’ clients have turned more optimistic on the yuan as capital outflows abated. Banks bought a net 8.6 billion yuan (US$1.3 billion) of forwards from customers last month, the State Administration of Foreign Exchange said in a statement posted on its Web site yesterday. That compares with record net selling of 428.4 billion yuan in August last year, when policymakers devalued the currency, and is the first time the figure turned positive since December 2014. The change comes after the pace of capital outflows from China slowed to an estimated US$43 billion in April, the least since last June, according to Bloomberg Intelligence.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
The output of the global smartphone industry this year is to contract by 7.8 percent on an annual basis as the COVID-19 pandemic ushers in a global recession, Taipei-based market researcher TrendForce Corp (集邦科技) said in a report on Monday. The global production of smartphones is expected to fall to 1.29 billion units, as the pandemic dampens demand for consumer electronics, leading to a decline in shipments across Europe and North America, TrendForce said. With consumers delaying smartphone purchases and thereby lengthening the device replacement cycle, overall prices would suffer a setback that is expected to negatively affect the profitability of smartphone
ELECTRONICS Lite-On delays sale of unit Lite-On Technology Corp (光寶科技) yesterday said it would postpone the sale of its solid-state drives (SSD) business to Kioxia Holdings Corp, formerly known as Toshiba Memory Holdings Corp, due to disruptions amid the COVID-19 pandemic. Last year, the Taiwan-based electronics components supplier struck the deal with the Japanese firm, agreeing to sell the unit for US$165 million. Citing unfinished integration work due to the pandemic, Lite-On has deferred today’s closing date until further notice, adding that the delay would not have a negative effect on the unit’s operations. AUTO PARTS Hiroca approves dividend Automotive interior parts supplier Hiroca
ALL ABOUT STRATEGY: The company is optimistic, saying that its gross margin should increase year-on-year, but it is scaling back on its plans to expand capacity Quang Viet Enterprise Co (QVE, 廣越), which makes down jackets and garments for sportswear and outdoor brands including Adidas AG, yesterday said that revenue might drop 5 to 10 percent annually this year as some customers trimmed orders in response to the COVID-19 pandemic. That would mark its first revenue decline since 2016. Quang Viet posted record-high revenue of NT$16.26 billion (US$537.45 million) last year, up 22 percent from 2018. Down jackets made up 40 percent of it revenue last year. North Face Inc and Patagonia Inc are this year likely to reduce orders by 20 to 30 percent from a