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Asia Business Report - July 2021

Author: socialmedia@taplowgroup.com/Saturday, July 24, 2021/Categories: News

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The economic recovery in Australia is stronger than earlier expected and is forecasted to continue. The outlook for investment has improved and household and business balance sheets are generally in good shape. National income is also being supported by the high prices for commodity exports. Domestic financial conditions are very supportive, and the exchange rate has depreciated a little recently. The labour market has continued to recover faster than expected.

The unemployment rate declined further to 5.1 per cent in May and more Australians have jobs than before the pandemic. There has also been a welcome decline in underemployment and labour force participation is around record highs. Job vacancies are high, and more firms are reporting shortages of labour, particularly in areas affected by the closure of Australia's international borders.

Despite the strong recovery in jobs and reports of labour shortages, inflation and wage outcomes remain subdued. The bond purchase program is playing an important role in supporting the Australian economy. Housing markets have continued to strengthen, with prices rising in all major markets.
*Source Reserve Bank of Australia

Contact: Ian Stacy, Managing Partner, Australia, E: istacy@taplowgroup.com.au


People Bank of China reduced the reserve rate of what commercial banks must hold. This policy is good news to reduce the financing costs of the small and middle size enterprises suffered from Covid-19 impact. The stock market is also welcome this change.

Beijing imposed strict data security measures for the overseas listing companies from China. Didi, the recently listing company in US has been punished for the invasion personal information. The APP is prohibited to be downloaded during the investigation. Beijing is

becoming very serious about the personal information protection and county’s data security and impose the strict measures.

China’s manufacturing PMI and new export orders slightly declined in June and could rebound in July. China’s official manufacturing PMI declined to 50.9 in June from 51.0 in May, slightly above market expectations. The new export orders continued to edge down to 48.1 in June, partly caused by congestion at some South China ports. Due to the resurgence of Covid-19 in Guangdong and related tightening in social distancing rules, the official non-manufacturing PMI fell to a weaker-than-expected 53.5 in June.

Thanks to the release of pent-up demand following the containment of the latest wave of Covid-19, the recovery of some South China ports is expected. It is projected that PMI were solid in Q2 and could rebound slightly in July.

China current account has surged and would not last forever. Thanks to its successful containment of Covid-19, massive policy stimulus in the developed economies China’s current account (CA) surplus has surged in the past year, foreign exchange deposits have risen significantly and RMB has appreciated as well. However, good times do not tend to last forever.

Contact: Derek Zhang, Managing Partner, China. E: derek.zhang@chinadox.com


Moody's downgraded India's growth projection to 9.6% for 2021, from its earlier estimate of 13.9%, and said faster vaccination will be paramount in restricting economic losses. Earlier, Moody's had projected India to clock a 9.3 per cent growth in the current fiscal ending March 2022, but a severe second COVID wave has increased risks to India's credit profile and rated entities. Mobility and economic activity will likely accelerate in the second half of the year as the pace of vaccinations pick up. The government has announced a strategy to centralise vaccine procurement in order to boost vaccinations, which if successful, will support the economic recovery.

Ratings agency ICRA maintained its growth forecast for two-wheeler sales at 12-14% for the ongoing fiscal, despite the second wave of the coronavirus pandemic hitting non-metro and hinterlands that dampened rural consumer sentiments. A low base, healthy rural cash flows, and continued preference for personal mobility would support two-wheeler demand in the festive season, ICRA said in a statement. Expectations of a healthy agricultural production, timely arrival of the monsoons, a hike in minimum support prices for crops and other income support schemes by the government are likely to help revive rural demand sentiments and support the two-wheeler offtake in the festive season.

German consumer electronics brand Blaupunkt is re-entering the Indian market through an exclusive licensing agreement with home-grown contract manufacturer Super Plastronics. As per the licensing contract, Blaupunkt’ s manufacturing, branding, designing, packaging, and retailing supply chain will be handled by Super Plastronics. The products will be available to consumers on the e-commerce platform. Super Plastronics will invest more than $30 Million in Blaupunkt in the next three years in technology & innovation.

With Global Steel Player ArcelorMittal Nippon Steel, India’s play in the steel market is set to get bigger. The company is busy making plans that would increase its capacity by five million tonnes in the next three years while laying building blocks for the phase after.

The Chief Executive Officer for ArcelorMittal Nippon Steel India (AM/NS India) said the ground-breaking for the expansion to 14 million tonnes was expected this year. In the next phase, they will take it up to 18 million tonnes. The two phases of expansion are expected to cost more than $7000 Million

Contact: Sangeeta Sabharwal, Managing Partner, India E: sangeeta.sabharwal@taplowgroupindia.com

New Zealand

New Zealand is well on the way to economic recovery after the damage wrought by COVID-19. Going into the crisis, every economic forecaster was expecting a large and drawn-out recession, with the possibility of deflation, and a 10% unemployment rate, and an economy that would struggle to get back to pre-COVID levels of output. What has occurred is that GDP has recovered spectacularly, and recent labour market data showed that New Zealand’s labour market is far closer to full employment than anyone could have hoped for.

Unlike some of our trading partners, such as the US and Australia, New Zealand did not see a large drop in employment as a result of lockdown in second quarter 2020. Some people did unfortunately lose their jobs, but in aggregate, the damage was limited. That made it much easier to switch the economy back on after lockdown, and we have seen employment in New Zealand actually increase above pre-COVID levels in recent months.

For better or worse, the housing market has been the key driver of the economic rebound from lockdown. Demand for housing is still well ahead of supply and this has given the construction sector an almost overwhelmingly large pipeline of work. The crisis has had an impact on the supply side of the economy. The sectors that propelled New Zealand’s economic recovery, in particular construction, are running into serious capacity constraints. One reason is the disruption to global supply chains caused by COVID-19. Firms and tradespeople in New Zealand are finding it harder to import the goods they need, leading to cost overruns and delays.

The labour market is very tight, and firms are struggling to find workers they need. Many of the jobs lost due to COVID were face-to-face industries like tourism and hospitality. With the borders closed, the latter industry is struggling to find the workers they need to be able to provide the service necessary. Some have elected to reduce hours of opening or in one case close down their restaurants for a period of two weeks to be able to give their workforce a break from the demands of being over worked as a result of the shortage. A closed border will mean labour supply is fairly unresponsive, so it is likely that we will see stronger wage growth rather than strong employment growth, as firm poach off each other. It is expected that New Zealand’s labour supply will get a small bump once borders reopen and net migration starts to lift.

In New Zealand, it appears that foregone international holiday spending has been finding its way into house renovations, spas, cars and boats. Supply chain issues means that there can be a wait for these goods e.g., up to 3-4 months wait for a new car due to the need to import these into New Zealand.

New Zealand now has a travel bubble with both Australia and the Cook Islands, though the former has had a wobbly period since being introduced with a number of temporary border closures being imposed by the New Zealand government with Australia states as a result of community outbreaks, especially since the Delta variant has become more and more widespread. The deteriorating situation in New South Wales (in particular Sydney) an latterly Victoria could see the travel bubble with these states closed for some time.

While New Zealand led the world on its initial response to COVID-19, we are lagging behind on vaccinations. As of writing, only 10% of the population has been fully vaccinated. In New Zealand the Pfizer/BioNTech is being used. There are back-up vaccines available should these be needed. A major surge in vaccinations has been announced by the New Zealand government which should see this rate increase significantly over the coming months. Source– ANZ Bank Quarterly Economic Outlook.

Contact: Graeme Sandri, Managing Partner, New Zealand, E: graeme@swr.nz


Singapore's economy contracted in the second quarter after battling new outbreaks of COVID-19, but economists expect it to get back on track quickly as global growth picks up and vaccination rates rise. The city state's economy still showed the best growth in more than a decade on a year-on-year basis, as many economies have done because of last year's coronavirus-induced slump.

Analysts have upgraded Singapore's trade outlook for 2021, in the wake of the better-than-expected export performance in the first half. External demand is tipped to stay strong in the next six months, even though Covid-19 outbreaks in key markets cast a pall over the forecast.

The manufacturing sector grew by 18.5% year on year, helped by robust global demand for semiconductors and semiconductor equipment. The construction sector expanded 98.8% compared with a year earlier when most construction activities stopped due to the lockdown.

Across the service sectors - the wholesale and retail trade, and transportation and storage sectors grew by 9.3 per cent in the second quarter of this year, reversing the 1.7 per cent contraction in the previous quarter. The remaining group of service sectors - accommodation and food service, real estate, administrative and support service, and other service sectors - expanded by 13.4 per cent.

Contact: Lee Fang Xing, Managing Partner, Singapore, E: lfang@taplowgroup.com


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