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Asia Business Report - October 2021

Author: socialmedia@taplowgroup.com/Thursday, October 21, 2021/Categories: News

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Australian Gross Domestic Product rose by 0.7 percent (seasonally adjusted) in the quarter ending in June 2021. This is being driven by domestic demand including household spending, private investment and public sector expenditure. Lockdowns continued in many of the regions of Australia however this has had minimal impact on domestic demand.

Public demand contributed 0.7 percentage points to growth driven by continued investment in state and local infrastructure projects. Government spending rose by 1.3 percent driven by health-related expenditure. Gross Value Added (GVA) for the health industry rose 2.0 percent

Net trade detracted from growth driven by falls in exports of mining commodities reflecting disruptions to both coal production and transportation of iron ore to ports. Mining operating surplus rose 16.9 percent, its third consecutive rise, reflecting strong commodity prices. The terms of trade rose 7.0 percent in the quarter and 24.1 percent through the year.

The household saving to income ratio fell slightly but remained elevated at 9.7 percentas household spending rose, and household income fell. Compensation of employees rose 1.2 percent as employment and hours worked increased with underlying activity in the economy. A fall in benefit payments detracted from income growth, reflecting a decline in the number of recipients and the winding back of additional COVID-19 support payments during the quarter.

Fitch Ratings have affirmed Australia’s AAA credit rating and upgraded its outlook to stable from negative. Australia remains one of only nine countries to maintain a AAA credit rating from all three major credit rating agencies.

Despite the economic recovery being “temporarily disrupted by recent lockdowns Fitch Ratings “expect Australia’s economic recovery to continue” with the economy forecast to grow by 4.5 percent in 2022 compared to a median of 3.6 percent amongst other AAA rated countries.

This strong economic outlook willsee the labour market “snap back rapidly with the unemployment rate forecast to average 4.7 percent in 2022” which would be the lowest annual rate since 2008.

Source - media releases from Australian Bureau of Statistics and The Hon. Josh Frydenberg Treasurer of Australia.

In the “formal” (registered) employment pool of the private sector, reports indicate a growth of 2.9 million jobs for a 12-month period ended in June 2021. Major employment sectors were Commerce, Industry, Administrative Services and Civil Construction.

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


Golden week data contracted due to Beijing’s “zero-Covid” strategy Compared with golden week data last year, most indices contracted due to Beijing’s “zero-Covid” strategy and a quickening growth slowdown from various demand and supply shocks. The only exception is movie box office. During the National Day Golden Week, national domestic visits and tourism revenues were 29.9% and 40.1%, respectively, below pre-pandemic levels, which represents a further worsening from previous holidays,

New home sales growth cools down and the real estate market is facing a challenge. Beijing is now restricting the debt ratio of real estate developer and loan granted. The full payment should be made when they acquire the land from the government and not allowed to using bank loan. One of largest developer Hengda is in debt crisis which caused the fear and chaos of capital market. Government is now in the dilemma to cool down the price rising and keep the property market stable.

High and rapidly increasing cost of applying of Zero covid strategy China is stick to zero-covid strategy which could be increasingly costly for the economy. The bright side is that Covid is under the control. However, as an increasing number of nations choose to live with covid, the huge amount of tests costs financed by the government could be one burden and causing negative impact on the economic recovery. Beijing is expected to grant its monetary and fiscal support, but these will likely be insufficient to reverse the ongoing growth downtrend.

National power crunch Some large cities are restricted to use the electricity power due to national power crunch and rising prices. Although coal output quota was raised, the ceiling on coal-fired power prices has been lifted by 10 percentage points, and stranded Australian coal was finally allowed to be unloaded. According to Nomura forecast, the new electricity pricing scheme could raise power prices for non-agricultural businesses by around 10% which, in turn, may add 0.4pp to China’s GDP deflator when rising power prices pass through to the rest of the economy. It is anticipated that the eventual impact on the CPI to be close to 0.4pp. which could gradually affect year-on-year CPI inflation

China to aggressively cut energy consumption and carbon emissions At the National Energy Committee conference on 9 October, Premier Li Keqiang said that as a developing economy China’s energy demand will inevitably increase. He also highlighted that local governments and ministries should avoid “false starts” and need to be better coordinated in their efforts to cut carbon emissions. The balance shall be made while aggressively cutting energy consumption and carbon emissions

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


The International Monetary Fund (IMF) has retained its projection for India’s economic growth: in the current financial year at 9.5 percent, even as it has moderately scaled down its forecast for the world economy during 2021 by 10 basis points to 5.9 percent in view of worsening Covid dynamics and supply disruptions. In its World Economic Outlook (WEO), the IMF has maintained India's gross domestic product (GDP) estimates for next financial year at 8.5 percent, unchanged from its July projections. The WEO, titled ‘Recovery During a Pandemic Health Concerns, Supply Disruptions, and Price Pressures’, has forecast world economic growth at 4.9 percent for 2022, the same as earlier.

The Ministry of New and Renewable Energy (MNRE) announced that it has set a target to achieve 450 GW renewable energy installed capacity by 2030. India surpassed the 100 GW milestone (excluding large hydro) in 2021 and is working towards achieving 175 GW installed capacity by 2022. India is developing the National Green Hydrogen Energy Mission to scale up green hydrogen production and utilisation across multiple sectors.

Honda Motorcycle & Scooter India (HMSI) is set to enter electric two-wheeler segment in the next financial year. HMSI, the country’s second largest two-wheeler maker, declined to specify details of the product planned for the Indian market. The company is in the process of testing electric scooter BENLYe, developed by Japanese parent Honda Motor, at the Automotive Research Association of India. Honda Motor had unveiled the BENLY-e at the Tokyo Motor Show in 2019. But it is unclear if it would introduce this two-wheeler, which was primarily designed for commercial use, or a new EV in India. Honda Motor globally has announced plans to launch three new EVs for personal use by 2024.

US-based consumer electronics brand Westinghouse Electric Corporation has forayed into the Indian market and has launched a range of its TV sets here. The brand has come here in collaboration with its Indian licensing partner Super Plastronics Pvt Ltd (SPPL) with whom it has entered into an exclusive licensing agreement. The brand will operate into the affordable segment of the LED TV and aims to gain a market share of 3-5% by the end of next year, SPPL said in a statement. As per the licensing contract, Westinghouse's manufacturing, branding, designing, packaging, and retailing supply chain will be handled by SPPL.

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

New Zealand

Labour Market:
The recent NZIER Quarterly Survey of Business Opinion showed that 42% of respondents intended to take on more labour. This is not only a record high but consistent with annual employment growth soaring to above 5.0%. A net 45% of respondents also expect that labour turnover will rise. This is 28 percentage points higher than the previous record, back in 1973. If this is the expectation of business, it is highly likely heightened demand for wage growth will be met. Tightness in the labour market is further confirmed by the net 72% of businesses who state that skilled labour is getting harder to find. This is a record high level in a survey that dates back to 1975.

Shortages of unskilled labour are not so extreme but at a net 52% remain problematically high. The degree of shortage is consistent with the unemployment rate dropping aggressively lower. To round things off, labour remains the biggest factor constraint that firms are facing and the 28% of companies reporting labour is their biggest problem is the highest reading since September 1974. Source – BNZ Economy Watch

Vaccination Rates still not at the Desired Level
Currently, just over 40% of the population is fully vaccinated (Westpac Bank use the total population estimates from Statistics New Zealand, rather than the eligible population figures from the Ministry of Health). That proportion will rise sharply in the coming weeks, as people come due for their second dose – around two-thirds have had at least their first jab. But both modelling and overseas experience suggest that more will be needed to be able to reopen the New Zealand border safely.

Future Outlook
Westpac bank concludes that managing Covid successfully will require a combination of high vaccination rates and other public health measures on an ongoing basis. As New Zealand moves beyond the need for Covid restrictions, the pressures that the economy had been facing in recent months will come to the fore again. The latest GDP figures confirmed that demand was running hot over the first half of the year, with a 2.8% jump in the June quarter on top of a 1.4% rise in the March quarter. The level of GDP is now 4.3% higher than it was at the end of 2019. That’s essentially the same extent of growth that Westpac bank were forecasting before the pandemic, despite the absence of overseas tourists and a smaller population than New Zealand would have otherwise had (as net migration has shrunk to near zero).

Pressures in the labour market have been especially apparent. In the first instance this might seem to be a supply-side constraint – the closure of the border has cut off access to migrant workers. But strong outright growth in employment in recent months shows that this is more of a demand-side story. Even with the current restrictions, job advertisements have been comparable to pre-pandemic levels.

Other Pressures Building
There is also a growing risk that recent inflation pressures prove to be more persistent. As seen globally, a range of supply-side pressures – including disruptions to supply chains, rising energy prices, and soaring shipping costs – have boosted inflation in the near term. In a strong demand environment, these forces could be the catalyst for broader, more persistent price pressures in the domestic economy.

The past few weeks have seen cost pressures in the economy continuing to build. Much of this is a result of ongoing supply-side factors, such as disruptions to global manufacturing and shipping. That’s resulted in shortages of some items and has seen the landed prices for many consumer goods and productive inputs rising rapidly in recent months.

Importantly, Westpac Bank think that those supply side disruptions are set to become more pronounced. Manufacturers globally are reporting ongoing difficulties sourcing chips and other components. And on top of that, shipping companies are expected to divert capacity towards markets in the Asia and Northern Hemisphere ahead of the Black Friday, Christmas and Lunar New Year shopping periods. Here in New Zealand, that combination signals ongoing difficulties sourcing some goods ahead of the holiday shopping season, along with continued upwards pressure on shipping costs and goods prices. Source – Westpac Economy Watch Updates September/October 2021

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


Singapore's economy expanded at a slower annual pace in the third quarter compared with the previous three-month period when growth was boosted by a low-base effect. The Monetary Authority of Singapore (MAS) unexpectedly tightened monetary policy at its half-yearly review in October. Market watchers like DBS senior rates strategist Eugene Loew pointed out that the MAS’ shift mirrors that of other central banks across the world.

The move bucked market consensus Most watchers had expected the central bank to only start policy normalisation in April next year, given global concerns about economic recovery amid the spread of the more contagious Delta variant.

The Gross domestic product rose by 6.5 percent on a year-on-year basis in the July-September period, moderating from 15.2 percent growth in the previous quarter, said the Ministry of Trade and Industry (MTI) on Thursday.

The pace of growth was weaker than the forecast of 7 percent by the economists in a Monetary Authority of Singapore survey last month, while a Bloomberg poll had predicted a 6.6 percent expansion. Selena Ling, head of treasury research and strategy at OCBC Bank, said on an annual basis the first-half 2021 growth stands at 7.7 percent, but will likely slow to around 5.8 percent in the second half as low base effects fade.

Singapore negative output gap could close by mid-2022 at the earliest as a broad recovery swept across all sectors in the third quarter, according to advance estimates.

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


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