Malaysia and Hong Kong Special Administrative Region (SAR) of the People's Republic of China yesterday signed the Agreement on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (DTAA Malaysia-Hong Kong). The agreement will also allow Malaysia and Hong Kong tax authorities to exchange taxpayers' information to prevent income tax avoidance and evasion. The DTAA Malaysia-Hong Kong will come into force after both sides completed the ratification procedures. (Bernama)
Eleven banks have joined the Malaysian Electronic Clearing Corporation Sdn Bhd's (MyClear) Renminbi settlement services in the Real-time Electronic Transfer of Funds and Settlement System (RENTAS). They are Malayan Banking Bhd, CIMB Bank Bhd, Public Bank Bhd, Hong Leong Bank Bhd, RHB Bank Bhd, AmBank (M) Bhd, Alliance Bank Malaysia Bhd, Bank Islam Malaysia Bhd, Bank Muamalat Malaysia Bhd, Hong Leong Investment Bank Bhd and OSK Investment Bank Bhd. Financial institutions that joined before 18 May would enjoy the RMB RENTAS service fee waiver until 31 Dec. (Bernama)
S&P has warned that Malaysia’s record spending binge, aimed at shoring up support before elections as early as next month, may risk the country’s first credit-rating downgrade since the Asian financial crisis. Moody’s and Fitch also said Malaysia must take steps to bring down its debt-to-GDP ratio, which the IMF projects may climb to a 20-year high of 55.9% this year. (Bloomberg)
Global food prices are rising again, pushed higher by costlier oil, strong demand from Asia and bad weather in parts of Europe, South America and the United States, the World Bank said. (Reuters)
China’s foreign reserves dropped by US$4.69bn from Feb to US$3.3tr in Mar due to losses in euro-denominated assets because the euro weakened against the US dollar. (China Daily)
Growth of China's tax revenues logged an increase of 10.3% yoy to Rmb2.59tr in 1Q12, pulling back 22.1% pt from the same period last year, as a result of the country's cooling economy. (Xinhua)
Non-performing loans in China's banking institutions dropped by 15.35% yoy down to Rmb1.05tr (US$166.47bn) as of the end of last year, due to government policies aimed at ensuring the strength of China's banking sector. (Global Times)
Japan’s total machine tool orders grew 1.6% yoy in Mar (-8.6% in Feb), whilst on a mom basis, the measure jumped 11.9% (5.7% in Feb). (Bloomberg)
Standard & Poor's cut its outlook on India's long-term sovereign rating from stable to negative, restating its rating of BBB- but warning of a one-in-three chance of a downgrade over the next 24 months “if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting.” (WSJ)
Philippines: Budget deficit in March as Aquino boosts spending
The Philippines reported a budget deficit in March, reversing a surplus the previous month, after the government stepped up spending to bolster the economy. The shortfall was PHP28.6bn (USD671m), compared with a previously reported PHP10.66bn-surplus for February. President Benigno Aquino plans to increase spending to a record this year while seeking USD16bn of investments in projects including mass rail systems and airports to boost growth. Government spending rose 15% in March while revenue climbed 7.7%. (Bloomberg)
South Korea: Economy expands at fastest pace in a year
South Korea’s economy expanded at the fastest pace in a year even as austerity measures in Europe and a slowdown in China cloud the outlook for exports. GDP rose 0.9% in the first quarter from the previous three months, when it gained 0.3%. The economy grew 2.8% y-o-y. Exports increased 3.4% in 1Q from 4Q2011, when overseas shipments declined 2.3%. Corporate investment in facilities rose 10.8% from 4Q2011, when it fell 4.3%, while government spending increased 3.1% after dropping 0.8%. Nonetheless, Bank of Korea governor Kim Chong Soo said last week that “downside risks are expected to remain high for some time” due to volatile oil prices and Europe’s sovereign-debt crisis. (Bloomberg)
UK: Succumbs to first double-dip recession since 1970s
The UK economy shrank in the first quarter as Britain slid into its first double-dip recession since the 1970s, forcing Prime Minister David Cameron to defend his spending cuts in Parliament. GDP fell 0.2% from 4Q2011, when it declined 0.3%. A technical recession is defined as two straight quarters of contraction. The economy was unchanged y-o-y. The quarterly drop in GDP was due to a 3% slump in construction, the most since the 1Q2009, and a 0.4% decline in industrial production. Manufacturing contracted 0.1% and services, the largest part of the economy, expanded by 0.1%, boosted by transport, storage and communication. The data contrasts with a gauge of factory optimism by the Confederation of British Industry showing confidence among manufacturers rose to the highest level in two years this month. The British Chambers of Commerce said the GDP data is likely to be revised higher by the statistics office. (Bloomberg)
ECB President Mario Draghi said euro-zone nations needed a "growth pact" to complement their existing agreements to enforce fiscal discipline, but gave nothing that suggested he would support loosening budget restrictions. (WSJ)
European Stocks Advance; Swedbank, Electrolux Rally(Source: Bloomberg)
European stocks advanced for a second day as companies from Apple Inc. to Swed bank AB and Electrolux AB reported earnings that beat estimates. The benchmark Stoxx Europe 600 Index gained 1 percent to 256.96 at the close of trading. The measure has advanced 5.1 percent this year as the European Central Bank disbursed more than 1 trillion euros ($1.3 trillion) to the region’s lenders to spur the availability of credit and boost the economy.
Stocks Advance on Earnings, Fed as Treasuries Trim Drop(Source: Bloomberg)
Stocks rose for a second day as earnings beat estimates at companies from Apple Inc. to Boeing Co., while Federal Reserve Chairman Ben S. Bernanke said he remains prepared to do more to stimulate growth if needed. Treasuries pared earlier losses and the dollar weakened. The Standard & Poor’s 500 Index jumped 1.4 percent to close at 1,390.69 at 4 p.m. in New York. The Nasdaq-100 Index rallied 2.7 percent, the most in 2012, with Apple surging 8.9 percent for its best gain in more than three years.
US: Drop in US durables orders masks investment gain
Orders for US durable goods fell in March by the most in three years, depressed by a pullback in demand for aircraft that masked gains in business investment. Bookings for goods meant to last at least three years dropped 4.2%. Sales of non-military capital equipment excluding planes, however, climbed for a second month. Demand for transportation equipment dropped 12.5%, led by a 48% plunge in civilian aircraft bookings. Bookings for automobiles and parts increased 0.1% after a 2% rise in February. Shipments of non-defense capital goods excluding aircraft, used in calculating GDP, increased 2.6% in March after rising 1.4% the previous month. (Bloomberg)
US: New home sales exceeds estimates
Demand for new US homes was stronger than projected in March, showing more jobs and cheaper borrowing costs are helping stabilize the market. Houses sold at a 328,000 annual rate (against forecast of 319,000), down from an upwardly revised 353,000 pace in February. However, new-home sales have lost their ability to forecast the broader market as demand shifts to previously owned houses. New properties made up almost 7% of the market last year, down from a high of 15% during the last decade’s housing boom. Sales of previously owned homes fell 2.6% in March to a 4.48m annual rate. The median new homes sales price increased 6.3% in March y-o-y to USD234,500. (Bloomberg)
US Treasury Secretary Timothy Geithner said the economy is “gradually getting stronger,” but warned that the US faces risks from the crisis in Europe, whilst the confrontation with Iran has driven up oil prices. The US will also be facing a “fiscal cliff” at year-end that will necessitate “bipartisan agreement on reforms to restore fiscal sustainability.” (Bloomberg)
More than 100 smaller US banks were able to tap government programs to pay off bailout money they received during the financial crisis but those still owing face a perilous future, federal watchdog Special Inspector General for the Troubled Asset Relief Program noted. (Reuters)
The US housing market is likely to remain weak and may take a generation or more to rebound due to a weak labour market, high gas prices and a general sense of consumer unease, co-creator of the Standard & Poor’s/Case-Shiller Home Price Index Robert Shiller said. (Reuters)
US: Bernanke “prepared to do more” after policy is left unchanged
Ben Bernanke said the Federal Reserve stands ready to add to its stimulus if necessary even after leaving its policy unchanged and upgrading its view of the economy for this year. “We remain prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target,” he said. Policy makers upgraded their forecasts and now see the jobless rate at between 7.8% and 8%, compared with January estimates of 8.2% to 8.5%. The economy is forecast to expand at 2.4% to 2.9%, compared with 2.2% to 2.7%. Projections for the inflation rate rose to 1.9% to 2%, from 1.4% to 1.8%. (Bloomberg)
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