China data point to steadier economy for now, but Trump victory adds to risks

BEIJING - China's economy largely showed further signs of steadying in October as expected, but disappointing retail sales growth and fears of US trade frictions under incoming President Donald Trump are increasingly clouding the outlook.

Fixed-asset investment quickened slightly and beat expectations in January-October as the government stepped up infrastructure spending to support growth, official data showed on Monday.

But a number of other indicators released over the past week from exports to bank lending, as well as expectations of a slowdown in the heated property market, suggest economic momentum may falter in the months ahead.

"On balance, today's data suggest that the recent recovery in economic activity continued into the fourth quarter," Capital Economics said in a note.

"We expect growth to hold up well for another quarter or two. However, with credit growth now slowing and the property market beginning to cool the drivers of the recent recovery look set to fizzle out early next year."

China's leaders have depended on a surging real estate market and government infrastructure spending to drive activity this year and look set to meet their growth target of 6.5 to 7 percent. The construction boom in turn has helped perk up the ailing industrial sector, spurring demand for cement to steel.

But top policymakers and investors are also clearly growing more concerned about the risks of prolonged debt-fueled stimulus.

China's overall debt has jumped to more than 250 percent of GDP from 150 percent at the end of 2006, the kind of surge that in other countries has resulted in a financial bust or sharp economic slowdown, analysts say.

"I believe the overall policy tone has turned to risk management as the authorities are concerned about asset bubbles," said Singapore-based economist Zhou Hao at Commerzbank, predicting that the government will throttle back its aggressive stimulus before the end of the year.

INVESTMENT STILL HEAVILY RELIANT ON GOVERNMENT

Fixed-asset investment expanded 8.3 percent in the first 10 months from a year earlier, slightly ahead of market expectations and supported largely by government spending.

Investment by state firms surged 20.5 percent, though the pace cooled slightly from the first nine months.

In an encouraging sign, growth of private investment picked up to 2.9 percent from 2.5 percent in January-September, though it remained sluggish after hitting a record low of 2.1 percent in the first eight months of the year.

Private investment accounts for about 60 percent of overall investment in China.

Chinese policymakers have been trying to lure private investors into big infrastructure projects through public-private partnerships, but many lucrative sectors are still dominated by less efficient state firms.

UNCERTAINTIES
The most surprising miss for October was found in retail sales, though analysts were quick to note it was too early to tell if slowing consumption would turn into a trend.

Retail sales growth cooled to a five-month low of 10.0 percent from 10.7 percent in September. Analysts had forecast they would hold steady.

On Friday, Alibaba Group Holding Ltd.'s Singles' Day festival posted a record 120.7 billion yuan ($17.73 billion) worth of sales, though the gala shopping day saw growth slow as Chinese shoppers searched for deeper discounts and lower price tags.

Statistics bureau spokesman Mao Shengyong blamed the sales slowdown on a high level of comparison with last year.

"Consumption can maintain stable growth. There should not be a problem achieving this year's GDP growth targets," he told a news briefing.

October industrial output also missed expectations but to a much smaller degree, rising 6.1 percent, the same pace as in September but marginally less than forecast.

Stronger factory prices have helped boost industrial profits, relieving some pressure on companies squeezed by higher costs and weak demand, though there are concerns some of the gains are due to speculation and are not sustainable.

Data last week showed a sharp slowdown in bank lending last month, suggesting demand for mortgages is cooling after a spate of steps by local governments last month to restrict home purchases to cool soaring prices.

While property investment growth quickened in October to its highest since April 2014, some analysts suggested it could be due to a last-minute push by developers to complete construction projects as home sales and surging prices start to slow.

October exports and imports also fell more than expected, adding to doubts that the pick-up in economic activity in the world's largest trading nation can be sustained even if a trade war with the US does not materialize.

Trump had lambasted China throughout the campaign, drumming up headlines with his pledges to slap 45 percent tariffs on imported Chinese goods and label the country a currency manipulator his first day in office.

China's top leaders are due to map out economic and reform plans for 2017 at the annual Central Economic Work Conference expected in December.

Analysts believe it's too early for the government to start withdrawing policy support now due to rising domestic and global uncertainties, despite the risk of added debt.

source: www.abs-cbnnews.com

Bracing for Trump, some in Canada see 'nothing good'

OTTAWA - Canada is one of America's closest allies and its largest trading partner but observers there worried Wednesday that a Donald Trump presidency might change that.

The real estate mogul, reality TV star and now US president-elect campaigned on isolationist and protectionist policies that horrified many Canadians.

But a lack of detail in his plans has made it hard to pin down the nature of the monster under the bed.

There is "nothing good" for Canada in any of it, according to Louis Belanger, a political science professor at Laval University in Quebec.

"The overall impact is likely to be negative," agreed Charles St-Arnaud, an analyst with Nomura Global Economics. "But it depends on the policies that will be put in place."

Canada sends about 75 percent of everything it produces south, amounting to a huge US$1.8 billion in daily trade with the United States.

So Trump's call to renegotiate, or if that fails, to nix the 1994 North American Free Trade Agreement (NAFTA) that binds 530 million consumers in Canada, the United States and Mexico, has caused alarm among many Canadians.

The unfettered flow of goods and people across the 49th parallel that separates the two nations "is vital for bilateral trade" and "critical to our economic health," said Perrin Beatty, president of the Canadian Chamber of Commerce.

Canada's exports to the US account for 20 percent of its gross domestic product.

Most analysts predict a drop in trade if Trump follows through with protectionist measures, with Desjardins Bank in Montreal last week predicting a recession in Canada if the US withdraws from NAFTA.

St-Arnaud, however, noted that the trade agreement is also important for the US, which sends 12.5 percent of its exports to Canada.

A drop in overall trade may also be mitigated by increased oil exports to the United States.

Canada's oil sector, which accounts for about 10 percent of its GDP, has been hit hard in the last year by plunging prices and a temporary halt in operations due to wildfires in May.

A transcontinental pipeline had been proposed in 2008 to move oil from the Alberta oil sands to US Gulf Coast refineries and greatly expand Canada's oil output, but US President Barack Obama, under pressure from environmentalists, has blocked the Keystone XL project.

Trump has vowed to relaunch it.

"People (in Canada) are appalled that the United States would elect a man who is a misogynist and a racist, but there is new hope for the Keystone XL pipeline," said Stephen Randall, a history professor at the University of Calgary and co-author of the book "Canada and the United States: Ambivalent Allies."

Others insisted the US would never seek to curb trade with Canada since their economies are so heavily intertwined.

Auto parts built in Detroit, Michigan, for example, may be sent to a plant in Windsor, Ontario, for assembly before the finished cars are sent back to the US for sale to consumers.

Thirty-four US states rely on trade with Canada, which supports nine million American jobs.

"On a day-to-day basis, billions of dollars in trade cross the border back and forth and that isn't going to change," said Randall.

Either way, Conservative MP Garnett Genuis, who traveled to the US to observe the election, told AFP: "Canada will need to engage actively (with the US), including with the general public, and be prepared to explain the benefit of both our countries that flow from security and economic cooperation."

Good relations between leaders have in the past helped smooth over differences.

"I can't see Trump and (Canadian Prime Minister Justin) Trudeau being particularly amiable with each other on a whole range of issues," Randall said. "Trump's social agenda runs completely counter to everything Canada's Liberal government stands for, including same-sex marriage, legal marijuana, abortion."

But, he added, "There's always been some disparity" between US and Canadian leaders, both in policy and personal terms.

And the two nations have remained close partners throughout the years.

source: www.abs-cbnnews.com

Thousands take to streets of US cities to protest Trump victory

CHICAGO/NEW YORK - Throngs of demonstrators marched in cities across the United States on Wednesday to protest Republican Donald Trump's surprise victory in the U.S. presidential election, blasting his controversial campaign rhetoric about immigrants, Muslims and other groups.

In New York, thousands of protesters filled streets in midtown Manhattan as they made their way to Trump Tower, Trump's gilded home on Fifth Avenue, while hundreds of others gathered at a Manhattan park and shouted "Not my president."

In downtown Chicago, an estimated 1,800 people gathered outside the Trump International Hotel and Tower, chanting phrases like "No Trump! No KKK! No racist USA."

Chicago police closed roads in the area, impeding the demonstrators' path. There were no immediate reports of arrests or violence.

"I'm just really terrified about what is happening in this country," said 22-year-old Adriana Rizzo in Chicago, who was holding a sign that read: "Enjoy your rights while you can."

Protesters railed against Trump's campaign pledge to build a wall along the border with Mexico to keep immigrants from entering the country illegally.

Hundreds also gathered in Philadelphia, Boston, Seattle and Portland, Oregon, on Wednesday evening, and organizers planned rallies in San Francisco, Los Angeles and Oakland, California.

In Austin, the Texas capital, about 400 people marched through the streets, police said.

A representative of the Trump campaign did not immediately respond to requests for comment on the protests. In his victory speech, Trump said he would be president for all Americans, saying: "It is time for us to come together as one united people."

Earlier this month, his campaign rejected the support of a Ku Klux Klan newspaper and said that "Mr. Trump and his campaign denounces hate in any form."

"DREAMERS" FEAR DEPORTATION

Earlier on Wednesday, some 1,500 students and teachers rallied in the courtyard of Berkeley High School, in Berkeley, a San Francisco Bay Area city known for its liberal politics, before marching toward the campus of the University of California, Berkeley.

Hundreds of high school and college students also walked out in protest in Seattle, Phoenix, Los Angeles and three other Bay Area cities, Oakland, Richmond and El Cerrito.

A predominantly Latino group of about 300 high school students walked out of classes on Wednesday morning in Los Angeles and marched to the steps of City Hall, where they held a brief but boisterous rally.

Chanting in Spanish: "The people united will never be defeated," the group held signs with slogans such as "Not Supporting Racism, Not My President" and "Immigrants Make America Great."

Many of those students were members of the "Dreamers" generation, children whose parents entered the United States with them illegally, school officials said, and who fear deportation under a Trump administration.

"A child should not live in fear that they will be deported," said Stephanie Hipolito, one of the student organizers of the walkout. She said her parents were U.S. citizens.

There were no immediate reports of arrests or violence.

Wednesday's demonstrations followed a night of protests in the San Francisco area and elsewhere in the country in response to Trump's victory against heavily favored Democratic rival Hillary Clinton.

Demonstrators smashed storefront windows and set garbage and tires ablaze late on Tuesday in downtown Oakland. A few miles away, students at the University of California, Berkeley protested on campus.

source: www.abs-cbnnews.com

Trump victory shocks global firms reliant on open trade

HONG KONG/SHANGHAI - Donald Trump's victory in the U.S. election sent shockwaves through industries that rely on open trade, from airlines to cars and IT outsourcing, even though many executives remain unsure what his protectionist rhetoric will mean in practice.

Throughout his presidential campaign, Trump has vowed to revive the U.S. economy by slashing taxes, preventing companies from making products overseas, renegotiating trade accords and imposing tariffs on imports from countries like China.

"People are in shock. It seems commentators misread the mood of the country," said veteran U.S. aerospace consultant Jerrold Lundquist, managing director of The Lundquist Group.

In Asia, shares in airlines with significant exposure to global trade, such as cargo giant Korean Airlines, fell as much as 5 percent as Trump closed in on the White House. Air China's Hong Kong-listed shares tumbled to their lowest level since June, and automakers like Toyota, for whom the United States is a top market, fell 6.5 percent.

"This is part of a much broader problem that we've seen in the world, in which countries are turning inwards and reacting against globalization and open borders," said aerospace analyst Richard Aboulafia, vice president of Virginia-based Teal Group.

Investors at a major Airline Economics finance gathering in Hong Kong last week expressed alarm at a surge in unconventional politics from Britain to Washington and the Philippines - a trend that many expect will leave its mark regardless of how it translates into real policies.

That comes as an industry that depends entirely on the flow of goods and people faces doubts over its own economic cycle.

POPULIST POLITICIANS

"We have seen a large section of the population that has not benefited in the past decade and we are seeing support for populist politicians with simple answers," Brian Pearce, chief economist of the International Air Transport Association told Reuters ahead of the election.

"Unfortunately, a lot of those answers are for protectionist policy solutions and air transport flourishes with open borders, so that is quite a dangerous development."

International trips make up 64 percent of global air traffic, according to IATA.

Executives at U.S. auto companies said they were concerned about Trump’s stance on free trade, especially his tough talk on the North American Free Trade Agreement. They all have production sites in Mexico.

But industry executives and analysts said aviation had a history of riding out economic and political shocks. On average, plane makers insist, air traffic doubles every 15 years.

"If there are brakes on trade, there could be some impact on international travel. But you have seen more or less 5 percent annual growth in traffic for decades," Lundquist said.

And the defense industry could benefit, as a Trump administration spends more on the military and encourages even allies to shoulder more of the security cost. Defense stocks, including listed land mine manufacturer Ishikawa Seisaku, jumped.

REALITY BITES?

After a bitter election campaign, trade experts said it remained unclear how Trump's statements in favor of protectionist trade measures and tough immigration controls would translate into policy.

"The honest answer is that no one knows; even Trump himself doesn't know," said Bertrand Grabowski, a managing director at Germany's DVB Bank which specializes in financing trade.

"He campaigned not on ideas but on anger and frustration."

Tighter rules could impact Indian IT services firms supporting companies in the United States. Shares in companies like Infosys and Tata Consultancy Services were sharply down as Trump closed in on the White House.

But Narayana Murthy, co-founder of Infosys and a key figure in India's outsourcing industry, said realism would prevail.

"They may fine tune it here and there, but let’s remember that he is the president of 300 million U.S. people and I’m sure he’ll do what is in the best interest of America. And what is in the best interest of America is for its corporations to succeed, for its corporations to create more jobs," he said.

For now, acquisitions at least will cool off, especially Chinese purchases of U.S. companies, as a Trump presidency pushes up regulatory scrutiny.

"If he now requires a certain percentage of manufacturing parts to be made in America, it's going to be protectionist... and that increases the risk and cost of doing business," said Stephanie Yuen, an M&A lawyer in Singapore.

"He's not just building a Mexican wall, he builds an economic wall around America."

And for key sectors, competition will heat up. Europe's Airbus and U.S. rival Boeing in the $100 billion annual jet market could become even fiercer with more government lobbying support, adding stridency to efforts to compete for jobs.

Trump's victory may also raise questions over plans to sell over 200 Western airplanes to Iran under a deal to lift sanctions that the president-elect has severely criticized.

Airbus is seen close to finalizing a tranche of 17 jets, but needs U.S. approval to complete plans for another 80 or so because the jets are built with many U.S. parts.

Boeing has U.S. approval to finalize a deal for some 100 jets but Middle East sources say progress has been slow so far.

"It further reduces the prospect of the deals going ahead," Aboulafia said.


source: www.abs-cbnnews.com