The Star Online: Business
The Star Online: Business |
- New Zealand's annual current account deficit widens
- Japan Aug exports rise 2.8 pct yr/yr
- UBS chief still confident of board support despite trading loss
| New Zealand's annual current account deficit widens Posted: 20 Sep 2011 05:38 PM PDT WELLINGTON, Sept 21 (Reuters) New Zealand's annual current account deficit widened in the second quarter, driven by a large overseas investment deficit and less tourist spending, official data showed on Wednesday. The deficit for the year to June 30 widened to NZ$7.47 billion ($6.2 billion) from a revised deficit of NZ$7.20 billion in the previous quarter, equating to 3.7 percent of GDP compared with the forecast of 4.0 percent of GDP in a Reuters poll. There were significant revisions to previous data after the official statistics agency expanded its make up of the international investment position, which reduced New Zealand's foreign liabilities and increased its overseas earnings. However, the current account deficit, which hit a 21 year low of 2.5 percent of GDP early last year, is expected to worsen further as the economy picks up and demand for imports rises. "Over the next 18 months, we expect a further deterioration as the 'mix' of growth becomes less favourable for external imbalance improvement," said Goldman Sachs economist Philip Borkin. The New Zealand dollar bobbled around after the data, settling around $0.8210/15 from about $0.8220 before the data. Interest rate futures were unmoved. The data does not normally affect the monetary stance of the Reserve Bank of New Zealand (RBNZ), which has held its cash rate at a record low 2.5 percent since a 50 basis point cut in March to cushion the economy after the Christchurch earthquake. The bank, aided by an improving domestic economy, has said it is ready to raise rates when global risks subside. The latest Reuters poll has 10 of 18 analysts expecting the first RBNZ rate move in 2012, with the rest sticking with a start this October or December. Market pricing implies a 10 percent chance of a hike next month, with 48 basis points of tightening over the next 12 months unchanged from last week. The current account deficit in the June quarter returned to a deficit of 921 million from a surplus of NZ$90 million surplus in March. That was revised from a deficit of NZ$97 million. The annual balance showed steady trade surplus, while investment deficit the gap between earnings for foreign investors in New Zealand, and the country's foreign investments narrowed slightly to NZ$9.7 billion from NZ$9.78 billion. The services deficit widened slightly for the year as tourism receipts fell because of the earthquake. The capital account posted a surplus of NZ$12.2 billion, after quake insurance payments boosted the March quarter surplus to NZ$8.4 billion. The central bank has forecast the annual current account gap to rise to 5.4 percent of GDP by March 2014 as the economy returns to normal growth, increasing imports and investment earnings for foreigners. New Zealand's chronic current account deficit has been a long standing concern for ratings agencies, more so recently because of the heightened global sensitivity to debt. "While New Zealand's external vulnerabilities have not been revised away, at the margin the revisions should be welcome news for credit rating agencies," said ANZNational Bank's head of market economics, Khoon Goh. Standard & Poor's and Fitch Ratings have both kept their outlook for New Zealand's credit ratings on negative watch because of concerns about the high foreign debt levels. Because of low levels of household savings and overspending, New Zealand has relied heavily on foreign borrowing. New Zealand's net foreign liabilities, measured by international investment positions rose to 70 percent of GDP from a downwardly revised 68.7 percent in the previous quarter and from a peak 84.6 percent at March 2009. By comparison Australia's level is around 60 percent. ($1=NZ$1.21) |
| Japan Aug exports rise 2.8 pct yr/yr Posted: 20 Sep 2011 05:33 PM PDT TOKYO, Sept 21 (Reuters) Japan's exports in August posted their first annual increase since the March 11 earthquake as companies restored damaged supply chains, but export growth missed expectations as sovereign debt woes threaten the global economy. KEY POINTS: Exports rose 2.8 percent in August from a year earlier, compared with a median forecast for an 8.0 percent annual increase, Ministry of Finance data showed. Compared to the previous month, exports rose 0.3 percent. Imports rose 19.2 percent in the year to August, more than the median estimate for a 14.0 percent annual rise. The nation's trade balance registered a deficit of 775.3 billion yen ($10.1 billion), versus the median forecast for a 218.8 billion yen deficit. Shipments to China rose an annual 2.4 percent while those to the United States rose 3.5 percent. COMMENTARY: YOSHIMASA MARUYAMA, ECONOMIST, ITOCHU CORP, TOKYO "Growth in exports was slower than expected. The recovery in auto exports seems to be losing momentum, and electronics exports were not so good either, with inventory adjustments going on globally. "Another negative factor is the firmer yen. With the yen's appreciation and power supply constraints, more factories could move overseas, putting a cap on Japan's exports. "Japan is counting on reconstructionrelated demand and exports for its economic recovery. But exports may not be as strong as expected in the months to come, and that could be a factor that pushes Japan's monetary policy in the direction of further easing, although I don't expect this piece of data alone to have an immediate impact on the policy front." NORIO MIYAGAWA, SENIOR ECONOMIST, MIZUHO SECURITIES RESEARCH & CONSULTING, TOKYO "Things are improving but the pace is quite slow. The global economy was slowing and we saw some weak signs from other Asian economies. "From here on, worries about Europe's sovereign debt woes could lead to stock market declines, which could hurt consumer spending overseas. The strong yen is having some impact on the value of exports. "The government's strong yen package won't have an impact on the markets. It also won't have much impact on the economy in the short term. It is trying to address more longterm problems. "The Fed decision could be priced into markets, but if it feeds into expectations that the global economy could reach a bottom, this could help the yen stop rising. "Japan's economy could still grow based on overseas demand, but part of the precondition for that is that Europe solves its economic problems." TAKESHI MINAMI, CHIEF ECONOMIST, NORINCHUKIN RESEARCH INSTITUTE, TOKYO "The impact of the slowing global economy is starting to become visible in Japan's export figures while the effect of the recovery in output after the March disaster has run its course. "In coming months, exports may go back to posting yearonyear declines, meaning the economy will have no sufficient support factor unless the government quickly implements reconstruction spending. "There is also a possibility the yen will strengthen further on the outcome of the FOMC meeting today. Companies are likely to have no choice but to raise prices abroad in the near term to cope with a strong yen, which could cause declines in export volumes." BACKGROUND: Economists say Japan is likely to resume growing in the third quarter after three consecutive quarters of contraction, boosted by a rapid recovery in supply chains following the March 11 earthquake, but the outlook further ahead looks increasingly in doubt due to a strong yen and Europe's sovereign debt crisis. Europe's woes, weak economic growth in other advanced countries and moderating growth in emerging markets top the agenda for a Group of 20 finance ministers' meeting this week. Japan is trying to recover from its worst crisis since World War Two after the March 11 earthquake and tsunami devastated its northeast coast and triggered radiation leaks at the Fukushima Daiichi nuclear power plant. ($1 = 76.450 Japanese Yen) |
| UBS chief still confident of board support despite trading loss Posted: 20 Sep 2011 05:29 PM PDT SINGAPORE, Sept 21 (Reuters) UBS chief executive Oswald Gruebel said on Wednesday he still has support from the Swiss bank's board of directors, after unauthorized trading caused a $2.3 billion loss. Arriving in Singapore for meetings with the bank's management and board, he laughed when asked by reporters at his hotel if he still had the board's backing and said, "Yes... always,". Gruebel is expected to ask the Swiss bank's board to back plans for a radical overhaul of investment banking under his leadership at a meeting in Singapore. The bank's executive board was due to meet on Wednesday at their main offices in the city's business district before its wider set of board members meet later in the week. This is one of the four regular meetings it holds every year and strategic changes to the investment bank are on the agenda, said several sources with direct knowledge of the plans. Alexander WilmotSitwell, the bank's AsiaPacific cochairman and cochief, told reporters outside UBS's office that this was a normal regular meeting. The trading loss is a heavy blow to the reputation of Switzerland's biggest bank, which had just started to recover after its near collapse during the financial crisis and a damaging U.S. investigation into its aiding wealthy Americans to dodge taxes. UNDER PRESSURE UBS is already under pressure to scale down, ringfence or even split off its risky investment banking business from its core wealth management unit in order to shield private clients. But a source at the bank told Reuters that the board will not be rushed into dumping the investment bank following the rogue trades. The bank's biggest shareholder, Singaporebased sovereign wealth fund GIC, said on Tuesday it had discussed the alleged fraud with UBS management, adding it was disappointed by the case and urged UBS to take "firm" action to restore confidence. GIC, which has a 6.4 percent stake in UBS and has lost about 77 percent of its 11 billion Swiss franc investment in the bank, said it had sought details on how UBS was tightening controls. Gruebel said on Sunday he would "bear the consequences" of the trading loss that was discovered last week but did not want to quit, adding the affair would influence the future strategy of the investment bank. The bank's meeting in Singapore coincides with the city state hosting the Formula One Grand Prix, of which UBS is a major sponsor. |
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