20120227 1039 Local & Global Economic Related News.

Malaysian exports are likely to see a lift in growth in 2H12, said Malaysia External Trade Development Corp (Matrade). Improvements can be expected from May onwards as the 1Q12 is seasonally a quieter period, it said. Matrade CEO Dr Wong Sai Lum expects Asia to provide the bulk of the trade volume, although she is encouraged by the economic recovery in the US. With developments in the global scenario, Matrade has projected merchandise exports to grow by 5-6% and services to expand by 4.9% this year. (BT)

South Korean inflation may accelerate above the government’s target of 3.2% on higher oil prices, just as the nation’s economic growth is about to start improving, Finance Minister Bahk Jae Wan said. A 10% increase in the cost of crude pushes inflation up by 0.12% pt. (Bloomberg)

Singapore’s industrial production increased 3.3% mom in Jan (8.9% in Dec), and fell 8.8% yoy in Jan (+25.2% in Feb). Economists had forecasts growth rates of 3.2% mom and -1.6% yoy. (Bloomberg)

Japan's credit rating would be reviewed if plans to double its sales tax rate are delayed further, Moody's Investors Service said, warning weak policy formation threatened efforts to curb the country's massive debt burden. Moody's did not plan to change Japan's Aa3 rating with a stable outlook for now, in part because the country's current account surplus helped offset its public debt. (Reuters)

The IMF predicts Thailand’s 2012 economic growth will register at 5.5% before growing further to 7.5% in 2013, according to IMF mission chief for Thailand Thomas Rumbaugh who also praised the fiscal stimulus policy that the government has been pursuing. (The Financial Post)

The Bank of Thailand expects to launch a master plan that will encourage more capital outflows to help balance fund flows, according to assistant governor Pongpen Ruengvirayudh who said, "The main focus is to promote Thai investment overseas, both portfolio and direct investment.” (Reuters)

The European Central Bank is preparing to flood Eurozone banks with cheap money again this week in the second of two such operations, aimed at preventing a credit crunch in the euro area. (Business Times)

G-20 finance ministers and central bankers deferred key decisions on international aid for Europe as they awaited more euro-zone action to contain the debt crisis. The group planned to issue a joint statement explicitly requiring expansion of the European rescue fund as a condition for increasing IMF resources to support Europe. (WSJ)

Japan: Yen down most in 2 years shows BOJ stimulus beating intervention
Bank of Japan Governor Masaaki Shirakawa’s inflation goal is succeeding where record intervention failed, as the yen heads for its steepest monthly drop in two years. The currency plunged to a seven-month low after the BOJ, which has struggled for more than a decade against deflation, said on 14 Feb it aimed for 1% annual gains in consumer prices and would add JPY10trn (USD123bn) to the economy. Traders are paying record premiums for options to buy the dollar against the yen for 3, 6 and 12 months. Bullish bets on Japan’s currency have fallen 70% from 31 Jan. Shirakawa needs a weaker JPY to help Japan export its way out of a recession made deeper by last year’s earthquake and the worst nuclear crisis in a generation. Oil and gas imports to replace lost capacity have reversed trade surpluses that made the currency a refuge in a slowing global economy. (Bloomberg)

China: May double rare earth exports as demand rebounds on price
China, the biggest supplier of rare earths, may almost double exports this year and meet quotas set by the government as lower prices stimulate demand. Chinese exports were 49% of the government-alloted quota in the first 11 months of last year because the slowing global economy sapped demand, the Ministry of Commerce said. “Export quotas may be met this year as overseas demand recovers,” Wang Caifeng, a former official overseeing the rare- earth industry with the Ministry of Industry and Information Technology, said. “High prices last year had deterred purchases and led to inventories depletion. Smuggling also hampered exports through illegal channels.” Prices of rare earths have tumbled since the 3Q as consumers including makers of electric cars and wind turbines sought to reduce use. The average price of lanthanum oxide, a rare earth used in rechargeable batteries and refining catalysts, was RMB129,167 (USD20,508) a metric ton in the 4Q, 15% less q-o-q, according to data from Shanghai Steelhome Information. (Bloomberg)

India: Singh crowding out companies pushes rates higher
Indian companies are paying the highest borrowing costs in 11 months as the government’s record debt sales drain cash from the banking system. Three-month commercial paper yields surged 92 basis points this year to 10.75%, while similar rates in China slid 77 basis points and were unchanged in the US, according to data compiled by Bloomberg. Lenders in Asia’s third-biggest economy borrowed INR1.3trn (USD27bn) on average every day from the Reserve Bank of India this quarter to meet fund shortages, more than twice the maximum of INR600bn favoured by the central bank. A two-month rally in the nation’s benchmark bonds has slowed after Prime Minister Manmohan Singh’s administration boosted its borrowing program for the fiscal year to a level that is 23% higher than planned. (Bloomberg)

EU: G-20 Snubs Germany on IMF help as Europe funds deferred to April
Group of 20 nations rebuffed German-led calls to come to Europe’s rescue as it battles the sovereign debt crisis, saying any decision on outside help hinges on the euro area delivering more financial firepower within two months. G-20 officials meeting in Mexico City heeded US calls to defer a German bid to raise fresh money for the IMF that could be used to defuse the crisis. A euro-area review of its financial firewall against the crisis is “essential” before any consideration to “mobilize resources” for the IMF, according to a G-20 statement issued at the end of the summit. Progress will be assessed in April, when officials gather in Washington for the IMF’s Spring meetings, according to the statement. This is the second time in almost four months that the world’s biggest economies have declined to rally to Europe’s side, even as the IMF warns the crisis risks triggering another global recession. The spotlight now shifts to Germany, which is weighing whether to agree to beef up the region’s financial backstop to a potential EUR750bn (USD1trn) at a 1–2 March European summit. (Bloomberg)

US: Consumer sentiment in US reaches one-year high
Confidence among US consumers rose more than forecast in February, reaching a one-year high as Americans grew more upbeat about the outlook for the economy. The Thomson Reuters/University of Michigan final index of consumer sentiment increased to 75.3 this month from 75 in January. New-home sales last month were stronger than projected, another report showed. Three straight months of faster job growth along with a stock market rally since late 2011 are helping keep Americans optimistic in the face of rising gasoline prices. Further gains in confidence may sustain the household spending that accounts for about 70% of the economy. (Bloomberg)

US: Purchases of new US homes exceeded forecasts in January
Purchases of new homes in the US exceeded forecasts in January after climbing a month earlier to a one-year high, more evidence the housing market is stabilizing. Sales, tabulated when contracts are signed, fell 0.9% to a 321,000 annual pace from a 324,000 rate in December that was stronger than previously reported, figures from the Commerce Department showed. The median estimate of 77 economists surveyed by Bloomberg News called for a rise to 315,000. The number of homes for sale dropped to a record low. (Bloomberg)