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Most major US and European equity indices closed higher, while
APAC was mixed. US and European government bonds closed sharply
higher. European iTraxx and CDX-NA both closed tighter across IG
and high yield. Oil closed lower, while the US dollar, gold,
silver, and copper were all higher on the day.
Americas
US equity markets closed mixed; Russell 2000 -0.8%, DJIA flat,
S&P 500 +0.2%, and Nasdaq +0.4%.
10yr US govt bonds closed -4bps/1.09% yield and 30yr bonds
-6bps/1.82% yield.
CDX-NAIG closed -2bps/50bps and CDX-NAHY -5bps/296bps.
DXY US dollar index closed +0.3%/90.36.
Gold closed +0.6%/$1,855 per ounce, silver +0.5%/$25.57 per
ounce, and copper +0.3%/$3.62 per pound.
Crude oil closed -0.6%/$52.91 per barrel.
The number of hospitalized COVID-19 patients was roughly flat
in the U.S. this week, and likely will begin declining for the
first time since September. The numbers are now dropping compared
with a week earlier in both the Northeast and Midwest, according to
the Covid Tracking Project. In the West, they were up 0.8%, the
least since Oct. 1 on a percentage basis. The South has the most
alarming momentum, with an increase of 4.2% from seven days
earlier. (Bloomberg)
The US Consumer Price Index (CPI) rose 0.4% in December
following a 0.2% increase in November. The price index for gasoline
rose 8.4%, contributing to a 4.0% increase in the CPI for energy
and accounting for more than one-half of the rise in the overall
CPI. The food index rose 0.4% while the core CPI, which excludes
the direct effects of movements in food and energy prices, rose
0.1%. (IHS Markit Economists Ken Matheny and Juan Turcios)
Twelve-month inflation rates show that inflation remains muted
despite a partial rebound from last spring. The overall CPI rose
1.4% over the 12 months through December, up from 1.2% as of
November. The core CPI rose 1.6% over the 12 months through
December, equal to November's reading. The 12-month change in the
core CPI fell from 2.4% in February 2020 to 1.2% as of May and June
and has recovered only partially over the past six months.
Rent inflation remains low after subsiding since last winter.
In December, both rent of primary residence and owner-equivalent
rent of residences rose just 0.1%. Their 12-month changes were 2.3%
and 2.2%, respectively, down 1.5 and 1.1 percentage points from
12-month readings as of February 2020. The CPIs for rent represent
about 32% of the overall CPI and 40% of the core CPI.
The price index for used cars and trucks fell 1.2% in December.
It declined 2.5% over the final three months of the year, partially
reversing a 15.1% increase from July to September. Also rising in
December were price indices for apparel (1.4%) and new vehicles
(0.4%).
The price index for gasoline jumped 8.4% in December. Since
May, the price of gasoline has risen 30.1%, reversing a little more
than one-half of the sharp decline that occurred over the first
five months of the year.
Archer, a startup looking to build electric vertical takeoff
and landing (VTOL) vehicles, has announced a deal with Fiat
Chrysler Automobiles (FCA) for access to its supply chain and
engineering experience. Archer claims to be developing the world's
first electric VTOL and aims to become an industry leader in the
new segment. According to the statement, Archer will manufacture
high-volume, composite eVTOL aircraft and aims to start production
in 2023. FCA has already collaborated on the cockpit design, Archer
notes, as well as other design elements. According to the
statement, FCA and Archer will work together to decrease cost of
production. Where and when Archer expects to produce the vehicle is
not clear, although FCA is not expected to be involved in the
manufacturing. Archer envisions a vehicle which can carry about two
dozen passengers in dense urban areas for short distances.
According to Automotive News, Archer says it plans its first
vehicle will be able to travel as far as 60 miles at 150 miles per
hour. Doug Ostermann, FCA's head of global business development,
said in the statement, "Electrification within the transportation
sector whether on roads or in the air is the future and with any
new and rapidly developing technology, scale is important. Our
partnership with Archer has mutual benefits and will enable
innovative, environmentally friendly transportation solutions to be
brought to market at an accelerated pace." The vehicle is due to be
unveiled in early 2021, and Archer expects the deal with FCA to
enable the lower cost of manufacturing and enable Archer to meet
its goal for affordably priced aircraft. (IHS Markit
AutoIntelligence's Stephanie Brinley)
The CEO of Lordstown Motors has said the company has more than
100,000 non-binding production reservations for its upcoming
Endurance pick-up, according to web site Trucking Info.com. The
company says the average order size has been for nearly 600
vehicles per fleet. CEO Steve Burns is quoted as saying, "Receiving
100,000 pre-orders from commercial fleets for a truck like the
Endurance is unprecedented in automotive history. Adding in the
interest we have from federal, state, municipal and military fleets
on top of that, I think you can see why we feel that we are about
to revolutionize the pickup truck industry." The report notes that
Lordstown has begun beta production and is on track for saleable
production in September 2021, which also suggests a delay from
deliveries once expected in January 2021. Lordstown became a
publicly traded company in November 2020, after revealing its truck
midway through the year. The company has previously confirmed range
of 250 miles and ability to tow 7,500 pounds, with a starting price
around USD45,000. The Endurance, unlike GMC's Hummer electric
vehicle (EV) due later in 2021, Rivian's upcoming pick-up and
Ford's F-150 EV due in 2022, which are all aimed at personal use
more heavily than work (although Ford is also prioritizing work
capability), is aiming at fleet work trucks. (IHS Markit
AutoIntelligence's Stephanie Brinley)
IFF is aiming for 4-5% annual currency-neutral sales growth
through 2023, driven by top positions in a number of end markets
and a strong R&D pipeline, the company said in an investor
presentation yesterday. IFF announced new growth and synergy
targets in conjunction with its $26.2-billion merger with DuPont
Nutrition & Biosciences (N&B), which is slated to close on
1 February. (IHS Markit Chemical Advisory)
The combined company will have about $11.1 billion in annual
revenue, and generate about $1.4 billion/year in free cash flow,
both the highest figures among its peer set, according to IFF. The
next-largest peer company—unidentified in the investor
presentation—generates about $7.1 billion/year in revenue. IFF
says the combined company will have the top position in many end
markets with in its four segments: flavor and fragrance; pharma;
health and bioscience; and food and beverage.
IFF is also aiming for 26% EBTITDA margins, $400 million in
revenue synergies, and $300 million in cost synergies by the end of
the third year after the DuPont N&B deal closes. The company
expects to realize $20 million in cost synergies and $45 million in
revenue synergies by the end of this year, and plans to reduce net
debt to 3 times (x) EBITDA by end of 2023.
Divestitures will be a part of the strategy for meeting the
debt reduction target. "We are evaluating some of the smaller
non-core operations in our existing business portfolio," IFF
president and CFO Rostam Jilla said during an investor call
yesterday. "Upon the completion of the N&B transaction, we also
intend to evaluate possible non-core divestiture candidates from
that business portfolio." Proceeds from divestitures "will be used
primarily to achieve the leverage reduction commitments," Jilla
adds.
The company, post-close, will well-positioned to capitalize on
major trends, including sustainability and traceability, clean
labels, and increasing consumer interest in healthy foods,
according to chairman and CEO Andreas Fibig. "We have seen
acceleration and evolution of consumer trends through the pandemic
with long-term impacts," Fibig says. "Customers across end markets
expect more from their value chain partners and the new IFF is
well-positioned to deliver."
Electric vehicle (EV) manufacturer BYD has announced that it
has won cumulative orders to supply 1,002 units of electric buses
to Bogotá (Colombia), according to company sources. According to
the automaker, this is the largest order for electric buses outside
China to date. BYD aims to partner with local bus manufacturers
Superpolo and Busscar for bus body parts. The buses will be
delivered during 2021 and the first half of 2022. They will be
deployed for operation on 34 bus routes across five regions of
Bogotá. Stella Li, president of BYD Motors, said, "This more than
1,000 buses order marks a fresh start, which will effectively
promote the rapid development of green transportation in Latin
America and the coming era of global bus electrification." She
added, "In the move towards electrification globally, BYD will
continue to make great contributions moving forward." BYD's
operations in Colombia, which will include assembly of bus body
parts, will enable job creation and improve the environment. In
June 2020, BYD authorized Motores y Máquinas S.A. (Motorysa), an
auto distribution company, to distribute its EVs in Colombia. (IHS
Markit AutoIntelligence's Tarun Thakur)
The Central Bank of Chile (Banco Central de Chile: BCC)
published on 12 January its credit conditions survey covering the
final quarter of 2020. From a supply side, the main results
highlight a loosening in household credit standards in most
institutions, with 25% of banks stating that the conditions are
less restrictive now than in the previous quarter. (IHS Markit
Banking Risk's Alejandro Duran-Carrete)
The supply of credit to the corporate sector is perceived to be
more restrictive than a quarter before; nevertheless, it is at its
lowest level of restrictiveness since the final quarter of 2019.
From a demand side, banks experienced an increase in credit
appetite from households. However, large, medium-sized, and small
corporations were all perceived by banks to have reduced their
demand for credit in the second half of 2020.
Credit conditions have tightened since the final quarter of
2019 when in October of that year protests and riots began. The
COVID-19-virus pandemic has increased restrictions on lending
standards, reaching its tightening peak in June 2020. The loosening
of these restrictions means that banks expect a recovery in this
segment of borrowers and are experiencing fewer risks in this type
of credit.
As a result, it is likely that there will be a jump in the
growth of household credit, which is at record-low growth levels.
This segment of credit increased by 1.9% year on year in September
2020, when last reported. This is the lowest figure in our records,
covering the past 12 years of credit by borrower.
Corporate credit is likely to end 2020 with slightly lower
figures than those observed during the year. This segment had a
rapid surge in 2020, aided mostly by the credit guarantee scheme
introduced in April that year. It may be revived over the first
half of 2021 if a second version of the credit guarantee program is
introduced.
Shipping company Hapag-Lloyd will implement its Asia Express
service (AN1 service) to reduce the transit time from Valparaiso to
Hong Kong during the Chilean fruit seasons. The service, with 24/7
support from the sale team, will begin working on week 3 with the
Corcovado ship departing from Valparaiso on January 20, 2021 and
will run until week 13. The seasonal express service quickly
connects Valparaiso and Hong Kong as it has a transit time of 22
days. It has a connection to Shanghai via Hong Kong in 27 days and
an extensive network of feeders that ensures flexible and express
delivery of cargo to other destinations in Asia via Hong Kong.
Starting in October, Chilean cherry exports to Asia peak in
January. Cherries are very popular winter fruits in China,
especially during the Lunar New Year festive season. 2021's Lunar
New Year is 12 February. In November 2019 - November 2020, over
USD1.0 billion fob worth of Chilean cherries were sent to mainland
China. (IHS Markit Food and Agricultural Commodities' Hope
Lee)
According to the Central Bank of Paraguay (Banco Central del
Paraguay: BCP), in November 2020 the monthly index of economic
activity (MIEA) declined in seasonally adjusted month-on-month
(m/m) terms for only the second time since April. Nonetheless, the
MIEA and the index of business sales have continued to make
year-on-year (y/y) improvements. (IHS Markit Economist Jeremy
Smith)
The MIEA fell by 1.4% m/m in November, the first such decrease
since August and only the second since recovery began in May,
although this left economic activity just 0.7% below 2019 levels in
cumulative annual terms. As in recent months, drag from various
service industries and hydroelectric output outweighed strength in
construction, manufacturing, livestock, government services, and
telecommunications.
Meanwhile, the monthly index of business sales rose by 0.2% y/y
in November after shrinking at an average of 1.2% y/y over the
previous three months. Nonetheless, all commercial categories aside
from construction materials and mobile phone services remain in
contraction, with many worsening from the previous month.
Consumer confidence jumped back to the neutral level of 50 in
November, the highest since March, after hovering in the low- to
mid-40s from May to October. Confidence in the current economic
situation registered at 28, extremely low in historical terms but a
notable improvement from recent months.
The consumer price index rose by 2.2% y/y in November and
December; Paraguay thus concluded 2020 with its average annual
inflation of 1.8%, which falls outside the BCP's target range of 4%
+/- 2%. Monetary policy remains highly accommodative, with the
policy interest rate at 0.75%, and the tone and guidance of BCP
monetary policy communiqués have changed little in recent
months.
Coronavirus disease 2019 (COVID-19) cases spiked in November
and remain elevated, prompting a halt to the economy reopening and
new regulations around the holiday season. Paraguay had
successfully warded off the initial surge, but is now proving to be
more vulnerable as COVID-19 cases rise again across South
America.
According to a report by Automotive Business, Ford's shutdown
announced on 11 January will result in 5,000 employees being laid
off and costs of USD4.1 billion. According to the automaker, it has
about 6,171 employees in Brazil, and the closure of the plants will
affect around 5,000 employees (including employees in Argentina and
at the Camaçari plant, Taubaté engine plant, and Belo Horizonte
plant in Brazil). Earlier this week, Ford announced that it would
end production in Brazil in 2021. However, it will continue to
operate sales and services in the country and in the wider South
America region, using vehicles from its global network. Ford will
continue production in Argentina and completely knocked down (CKD)
production in Uruguay, and these operations will supply the region
with the all-new Ranger, as they do today. In Brazil, Ford will
maintain its South American headquarters in São Paulo, its product
development center in Bahia, and its proving grounds in Tatui, São
Paulo. Initially, the move will cost Ford USD4.1 billion. Ford's
revenue has been declining in the region on the back of lower
volumes and weaker currencies. Ford's decision to exit
manufacturing in Brazil carries some risk as the country's taxation
system is friendlier to automakers that invest in the region. (IHS
Markit AutoIntelligence's Tarun Thakur)
Europe/Middle East/Africa
Most European equity markets closed higher except for UK -0.1%;
Italy +0.4%, France/Spain +0.2%, and Germany +0.1%.
10yr European govt bonds closed sharply higher; Italy -8bps,
France -6bps, and Spain/UK/Germany -5bps.
iTraxx-Europe closed -1bp/49bps and iTraxx-Xover
-10bps/252bps.
The fall in Italy's industrial production between October and
November was expected in the face of stricter COVID-19 related
measures. Specifically, industrial production declined by 1.4%
month on month (m/m) in November after a 1.4% m/m gain in October.
(IHS Markit Economist Raj Badiani)
Falling output in November was across all the main categories.
The main falls on a m/m basis arose from consumer durables (6.5%)
and investment goods (0.6%).
Therefore, the average output in October and November was 0.5%
lower than in the third quarter of 2020.
Meanwhile, on a working-day-adjusted basis, the picture was
bleaker, with industrial output falling by 4.2% year on year (y/y)
in November. This implies that production contracted by 12.1% y/y
in the first 11 months of this year, compared with a 1.0% drop in
2019.
Some of the largest y/y falls in November occurred in
manufacture of textiles, wearing apparel, leather and accessories
(26.7%), coke and refined petroleum products (18.3%) and machinery
and equipment (6.8%).
Despite not being affected directly by the tighter COVID-19
restrictions during November, industrial activity appeared to
endure some residual damage.
The Italian government adopted a three-tier system in early
November 2020, which entailed red (high-risk), orange (medium-risk)
and yellow (low-risk) zones. The most restrictive measures apply in
the red zone, and include the closure of bars, pubs, restaurants,
and most shops. In addition, people can only leave their homes for
essential trips, namely for work and health reasons, or taking
children to school. Six regions reside in the red zones, and they
are Tuscany, Campania, Calabria, Lombardy, Piedmont, and Val
d'Aosta.
Falling industrial output in November supports our narrative of
renewed GDP losses in the final quarter of 2020, with tighter
regional lockdowns targeting yet again the hospitality, transport,
and the retail sectors.
The latest survey data suggest manufacturing activity regained
marginal momentum in December. The IHS Markit Italy Manufacturing
Purchasing Managers' output index improved from 51.8 in November to
52.0 in December, which is above 50.0 to signify expansion for the
seventh straight month. This was due to order books returning
growth, albeit marginally. However, firms reported that COVID-19
measures continued to affect supply chains, with delays being the
most severe since last May.
We expect industrial activity remained under pressure in
December for two reasons.
First, a new spike in new COVID-19 infections forced the
government to place the whole of Italy under the toughest
restrictions during Christmas and effective until 6 January,
implying the closure of non-essential shops.
Stricter COVID-19 restrictions across Europe during December
probably affected the demand for Italian exports of goods. Italy is
vulnerable to any regional trade disruptions with its open economy,
highlighted by exports accounting for 32% of its GDP.
Volvo Cars has announced that it has agreed a new
EUR1.3-billion revolving credit facility. According to a statement,
this is an evolution of an existing undrawn revolving credit
facility signed in 2017. However, its interest rate is now linked
to the automaker's progress in reducing carbon emissions. It has
been coordinated by financial institutions Citi, HSBC, Nordea, and
SEB and is backed by 21 participating banks. It has a three-year
term with two one-year extension options and is intended to serve
as a back-up facility for general corporate purposes. Separately,
the company has said that it is working with its home town
Gothenburg (Sweden) to support its climate neutrality. In a
statement, it said that new emission-free urban zones in the city
under the Gothenburg Green City Zone initiative will be used as
testbeds for future sustainable technologies. Volvo said that this
will enable it to accelerate "the development of technologies and
services in the areas of electrification, shared mobility,
autonomous driving, connectivity and safety". It noted that as part
of its test program, Volvo plans to run "robotaxis" operated by its
mobility provider M. Other potential examples include fully
electric mobility hubs and a complete, easy-to-use charging network
for electric cars. The initiative is expected to start in early
2021 and will gradually be scaled up. The two initiatives are
broadly related to Volvo's push to reduce emissions. The new
revolving facility follows the recent successful issuance of its
first EUR500 million Green Bond in the wake of it establishing a
'Green Finance Framework', which would allow the company to fund
its low-emission and electrification strategy. This would provide
transparency for this type of investment given that it specifies
how these projects are identified, selected and managed. These
initiatives will give it a financial incentive to maintain the
momentum of its push towards ending the sale of internal combustion
engine (ICE) vehicles and becoming carbon-neutral by 2040. (IHS
Markit AutoIntelligence's Ian Fletcher)
Norway's parliament has approved the 2021 budget, which
includes over NOK10.5 billion (USD1.23 billion) for offshore carbon
transportation and storage projects, the development of hydrogen
infrastructure, and mapping of seabed minerals. The minority
coalition government led by the Conservative Party (Høyre)
subsequently allocated NOK10.4 billion of that sum to the Northern
Lights facility, the transport and storage component of the
full-scale carbon capture and storage (CCS) Longship project. The
state funding commitment provides certainty to upstream investors
that seek to mitigate the net environmental impact of their
offshore operations and signals broad political support of the oil
and gas industry's efforts to contribute to Norway's climate goals.
The government's decision to finance two-thirds of the
NOK14.3-billion Northern Lights project reinforces its commitment
to the development of the offshore CCS industry in collaboration
with upstream players and confirms the state's leading role in
advancing clean-energy initiatives on the Norwegian Continental
Shelf (NCS). The remaining portion of the project cost (NOK3.9
billion) will be covered by the project partners - Equinor, Total,
and Royal Dutch Shell. Parliament has also approved the funding of
carbon capture facilities at the Norcem cement plant in Brevik and
Fortum waste-treatment plant in Oslo, for which the government will
provide around 75% of the total funding. The construction of the
carbon capture plant in Brevik is starting in January with the view
to commission the facility in the first half of 2024, while the
implementation of the Fortum project is contingent on additional
financing from private sources and potentially the European Union's
Innovation Fund. (IHS Markit E&P Terms and Above-Ground Risk's
Aliaksandr Chyzh)
Turkey attracted a net inflow of portfolio investment in
November 2020, contributing to the lira rally from its early-month
low-point. Soaring gold imports sent the current-account deficit
surging, though. Tighter monetary policy in 2021 will reduce import
demand, moderating the gap and maintaining net inflows of portfolio
investment. (IHS Markit Economist Andrew Birch)
For the second consecutive month, in November, portfolio
investments flowed inward on a net basis to Turkey. In October, a
public debt offering drew in USD2.5 billion. In November, equity
securities drew the gross inflows, reflected by a rise in the
Istanbul Bourse's main index over the month.
Despite the net inflows in October-November, for the first 11
months of 2020 as a whole, Turkey suffered a severe loss of
capital. In January-November 2020, net portfolio investment outflow
topped USD10.6 billion, on track to be the largest year of net
outflows since 2015.
While a return of net portfolio investments is a positive
development for Turkish external financing, the current-account
deficit continued to soar in November, maintaining high pressure on
the country's ability to meet external obligations. In November,
surging demand for gold sent imports soaring, up 15.9% year on year
(y/y).
In 2020, IHS Markit estimates that Turkey's current-account
deficit will have reached 5.6% of GDP, a drastic turnaround from
the 1.1%-of-GDP surplus registered the previous year. Sustained
expansionary economic policies kept import growth strong long after
exports faltered in the face of collapsed demand from the European
Union and other key trade partners.
The combination of the current-account deficit and the net
outflow of portfolio investment put tremendous upward pressure on
the country's external debt and took a heavy toll on the lira,
which was the second-worst performing major emerging market
currency over the course of 2020 - bested only by the Brazilian
real - losing 25% of its value against the dollar.
The pivot to much more restrictive economic policies under the
new central bank governor that began in November is likely to
substantially limit import demand in both December and early 2021.
The continued intensification of the current-account deficit should
abate. However, sustained weakness of export demand will limit the
improvement we expect. For the year as a whole, we anticipate that
the current-account deficit will narrow to only around 4% of
GDP.
South Africa's real seasonally adjusted manufacturing
production slowed by 1.3% month on month (m/m) and 2.6% year on
year (y/y) during November 2020, latest numbers of the Statistics
South Africa (StatsSA) shows. This leaves overall manufacturing
production down by 12.1% y/y for January-November 2020. (IHS Markit
Economist Thea Fourie)
The slowdown in manufacturing production was broad based.
Sectors that recorded negative monthly changes during November
included food and beverages (down 1.3%), petroleum, chemical
products, rubber and plastic products (down 3.5%), motor vehicles,
parts and accessories and other transport equipment (down 4.5%),
furniture and other manufacturing (down 3.7%), glass and
non-metallic mineral products (down 0.5%) and electrical machinery
(down 2.7%).
The radio, television and communication apparatus and
professional equipment sub-sector recorded the strongest monthly
gain and output increased by 5.3% m/m.
IHS Markit has been of the view that manufacturing production
could have lost some of its upward momentum during the fourth
quarter of 2020. The opening up of the economy during the third
quarter of 2020 following harsh COVID-19 virus-related lockdown
measures introduced in the previous quarter lifted real seasonal
adjusted manufacturing growth by 33.3% quarter on quarter (q/q)
during the third quarter of 2020. A strong boost in manufacturing
production during October will however balance some of the softer
manufacturing production numbers expected over the
November-December period.
Sluggish domestic demand and a fall in production of key
exporting goods such as motor vehicles, parts and accessories
underline the sluggish manufacturing output during the fourth
quarter of 2020. These drivers are likely to spill over to the
first quarter of 2021. COVID-19 related lockdown measures
introduced in some of South Africa's major exporting partners in
the European Union over the December-January period combined with
more stringent COVID-19-related local lockdown measures introduced
before Christmas until 15 February underline this expectation.
Togo has announced pineapple production of 30,150 tons in 2019,
which represents an increase of nearly 12% from the 27,000 tons
recorded in 2017, according to the latest government statistics.
The sector, which employs more than 3,200 producers, generated over
XOF6.0 billion (USD11.1 million) per year over the 2017-19 period.
Togo processes some of the fruit into organic pineapple juice. In
2019, production was about 1.0 million liters (about 1,050 tons) of
single-strength juice, 20% of which is organic and is mostly
exported to Europe. Europe accounts for 60% of Togo's fresh and
processed pineapple exports. Driven mostly by the growth of the
pineapple industry and a rising demand for organic products, the
number of businesses processing and exporting the fruit in Togo has
risen from 30 to 50 in the 2017-19 period. Pineapple (the Cayenne
and Brazza varieties) is mainly grown in the coastal and plateau
regions (south and central regions). Besides juice production, it
is also dried and used to make jam. IHS Markit's short-term
sovereign risk assessment of Togo comments: "Our short-term
sovereign credit risk rating is supported by Togo's membership of
the West African Economic and Monetary Union and success in
progressing on structural reforms in revenue administration and
public financial management. "Progress has been made on collection
of tax arrears and steps towards program-based budgeting. However,
our rating remains constrained by the imbalance between exports and
imports and high exposure and vulnerability to externalities, as
the export base remains narrowly focused. With a weak financial
system, Togo remains highly dependent on external assistance to
meet its liquidity needs." Togo's real GDP growth is estimated at
1% in 2020 and forecast to be over 4% this year. (IHS Markit Food
and Agricultural Commodities' Neil Murray)
Asia-Pacific
APAC equity markets closed mixed; Japan +1.0%, South Korea
+0.7%, Australia +0.1%, India -0.1%, Hong Kong -0.3%, and Mainland
China -0.3%.
China is considering allowing autonomous vehicle (AV) testing
on highways, reports China Daily. The Ministry of Industry and
Information Technology (MIIT) has published this proposal as a
draft national guideline on its official website for public
opinion. The draft guideline mentions that "provincial and
municipal governments can select representative roads and regions,
including highways, in their administrative areas" to test AVs. The
draft regulation also allows unmanned vehicles to apply for road
tests for professional use. The proposal is an update of a
guideline released in 2018. Currently, in China there is no
national regulation that allows AV testing on highways. This
creates a barrier for tech companies towards the commercialization
of AVs, especially autonomous trucks. The draft regulation also
states that tech companies are eager to test their AVs in a wide
range of scenarios, including expressways. Currently, Germany, the
United Kingdom, South Korea, and Singapore have allowed AV testing
on highways. China is pushing to commercialize autonomous smart
vehicles, which is a key part of the country's 'Made in China 2025'
plan. Recently, the country released the 'Technology Roadmap for
Intelligent-Connected Vehicles 2.0', which expects vehicles with
partial autonomous functions to account for 50% of new vehicle
sales by 2025. Under this plan, new vehicles with Level 2 or Level
3 automation will represent 70% of new vehicle sales by 2030. (IHS
Markit Automotive Mobility's Surabhi Rajpal)
Automotive Research & Testing Center (ARTC) has developed
Taiwan's first autonomous electric minibus, the WinBus, in
collaboration with more than 20 industry groups. The WinBus has
received a license for a one-year experimental "sandbox" operation
in central Taiwan. Initially, the bus will undergo a two-month
trial to collect technical and operational data, with the aim of
beginning free shuttle services for the general public in June. The
WinBus has Level 4 autonomous capabilities and is deployed with
sensors such as camera, LiDAR, and radar. The autonomous minibus
will travel along a 12.3-km fixed route under different scenarios,
encountering pedestrians, traffic lights, and tricky junctions.
ARTC president Jerry Wang said, "Under the sponsorship from [the]
Department of Industrial Technology (DoIT) under MOEA [Ministry of
Economic Affairs], ARTC has completed the construction of the
WinBus and will continue to tie up with local partners for creating
new and innovative business models that are crucial in future's
self-driving vehicle industry development in Taiwan." (IHS Markit
Automotive Mobility's Surabhi Rajpal)
Seajacks Japan LLC, a wholly-owned subsidiary of Seajacks
International, won a second contract with Kajima Corporation for
wind turbine installation work at Akita Offshore Wind Corporation's
139 MW Akita Port and Noshiro Port wind farms located off Akita
Prefecture, Japan. The work scope includes transportation and
installation of 33 MHI Vestas V117-4.2 MW wind turbines. Wind
turbine installation is expected to commence in 2022. Seajacks will
deploy wind farm installation jackup Seajacks Zaratan for the
scope, following foundation installation work which is to be
completed in an earlier campaign from April to October. The
projects will consist of 13 units of 4.2 MW wind turbines at Akita
Port wind farm, 20 units of 4.2 MW wind turbines at Noshiro Port
wind farm, and an onshore substation. The new contract represents a
strengthening expansion for Seajacks into the emerging Asia-Pacific
(outside of mainland China) wind market. The company secured its
first contract for the Akita and Nasiro Port projects in March
2020, and has pocketed three installation contracts in the Taiwan
offshore wind market since 2018. (IHS Markit Upstream Costs and
Technology's Genevieve Wheeler Melvin)
US-based electric vehicle manufacturer Tesla has incorporated a
new subsidiary in India, called Tesla India Motors and Energy
Private Limited. According to a report by the Times of India, the
company was registered on 8 January in Bangalore. The company has
three directors: Vaibhav Taneja, Tesla's chief accounting officer;
Venkatrangam Sreeram; a Bengaluru-based startup entrepreneur; and
David Feinstein, global senior director at Tesla. It is unclear
whether the new company will undertake manufacturing, sales, or
research and development (R&D). This latest development marks
Tesla's first concrete move towards an Indian market entry. Tesla
CEO Elon Musk indicated last month on Twitter that the automaker
could enter the Indian market this year. According to previous
reports by local media, customers will be able to order a Tesla car
beginning from this month, with deliveries expected in June. It was
also reported that Tesla's first product in the market would be the
Model 3. According to IHS Markit light-vehicle data, the automaker
could launch the Model X in the country first, with sales expected
to reach 79 units this year. This will be followed by the Model 3
and Model Y in 2022. (IHS Markit AutoIntelligence's Isha
Sharma)
The Thai government has announced a stimulus package worth
THB210 billion (USD7 billion) to counter the COVID-19-induced blow
on the domestic economy. (IHS Markit Economist Jola Pasku)
The latest proposal came in response to the biggest wave of
COVID-19 infections domestically since the pandemic began in 2020.
The authorities confirmed a daily record of 754 new infections last
week that were spread across several provinces, including Bangkok.
The new surge in infections prompted localized containment
measures, but the government has so far refrained from imposing a
strict national lockdown.
The stimulus package that is up for approval on 19 January
includes fiscal measures and loan programs. A monthly cash stipend
program starting in February will distribute THB3,500 per month to
about 30 million people working in the informal and farming
sectors. State-funded programs to boost domestic spending and
tourism may also be extended after current virus curbs are
lifted.
The government has also directed state-owned banks to boost
liquidity to businesses and farmers affected by the new wave of
infections. Sizeable loans ranging from THB5 billion to THB20
billion will be extended to farmers, exporters, importers, and
small businesspeople.
The price of electricity and water will be reduced for two
months, and the land and building taxes will be cut by 90% for
another year to ease the burden on the population.
The latest stimulus package will soften the shock from the new
wave of infections, but is likely to fall short from expediting
Thailand's economic recovery in the short term. The short-term
outlook for Thailand's economy remains grim, and a full recovery in
2021 is highly unlikely at this point. Thailand's economic recovery
will probably depend on how rapidly the country can inoculate its
population and when the tourism industry can return to
pre-COVID-19-crisis trends.
Despite being a production hub for AstraZeneca (UK), Thailand
has yet to secure sufficient COVID-19 vaccine doses for its
citizens. The country has so far secured about 26 million doses
from those that will be produced domestically, which are set to be
delivered in June 2021.
The Bank of Thailand released a Thai-language press statement
on 12 January extending the loan moratorium for retail borrowers by
six months to the end of June 2021, from the original deadline of
31 December 2020. Additionally, the notice specified that debt
restructuring, such as turning unsecured loans into term loans;
working capital disbursements; and delaying repayment of micro,
small, and medium-sized enterprise (MSME) loans as part of the soft
loan package will continue. (IHS Markit Banking Risk's Angus Lam)
The Bangkok Post has released further detail, stating that
unsecured personal loans, including credit card loans, can be
transformed into a term loan or rescheduled into a 48-month loan,
with interest rates capped at 12% for credit cards and 22% for
personal loans. At the same time, financial institutions are
allowed to lower the monthly repayment of "car-title" loans by 30%
and cap the interest rate at 22%.
Other neighboring countries, such as Malaysia, have also
extended their loan moratorium for some sectors of the economy,
such as low-income households, instead of a blanket loan
moratorium.
The loan moratorium for households follows previous
announcements allowing banks to convert unsecured loans into
secured loans and term loans, which was reiterated in this latest
announcement. IHS Markit expects that this will have an impact on
banks' profitability, but will lower capital pressure from higher
non-performing loans.
Our main concern is in line with our previous assessments
regarding extending the MSME loan moratorium and that this will
continue to delay the rise of NPLs and hide credit risk in the
meantime. Overall, considering that the loan moratorium for MSMEs
and retail customers will expire in June, depending on economic
recovery and progress, further extension is unlikely.
Posted 13 January 2021 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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