Daily Global Market Summary - 15 October 2020

APAC and US equity markets closed mixed, while European markets were sharply lower. iTraxx and CDX indices closed wider, with CDX closing near the best levels of the day alongside a rally in the US equity market. The US dollar and gold closed higher, while oil and silver were lower on the day. The US initial claims for unemployment insurance came in higher than expected and even increased versus the prior week, which had set a somber tone at the open of the US markets.

Americas

1. US equity markets closed mixed, with all beginning the session lower and closing near the higher end of the day's range; Russell 2000 +1.1%, Nasdaq -0.5%, S&P 500 -0.2%, and DJIA -0.1%.
2. 10yr US govt bonds closed +1bp/0.74% yield and 30yr bonds closed +1bp/1.52% yield.
3. CDX-NAIG closed +1bp/57bps and CDX-NAHY +3bps/372bps, with CDX-NAHY as wide as +14bps at 9:15am EST.
4. DXY US dollar index closed +0.5%/93.82.
5. Gold closed +0.1%/$1,909 per ounce and silver -0.7%/$24.22 per ounce.
6. Crude oil closed -0.2%/$40.96 per barrel.
7. The chart below shows the number of bonds in IHS Markit's iBoxx USD Investment grade index that were quoted by 10 or more dealers versus CDX-NAIG spreads. The data shows the degradation of liquidity in mid-March for bonds as CDX-NAIG spreads widened significantly, but the chart also highlights that dealer quote depth had improved to the best levels since February during the week of 28 September.
8. The average rate for a 30-year, fixed US mortgage loan dropped to 2.81%, down from 2.87% last week and the lowest in almost 50 years of data-keeping, Freddie Mac said in a statement Thursday. It was the 10th record low this year. The previous record low rate of 2.86% held for about a month. (Bloomberg)
9. US seasonally adjusted (SA) initial claims for unemployment insurance rose by 53,000 to 898,000 in the week ended 10 October. The not seasonally adjusted (NSA) tally of initial claims rose by 76,670 to 885,885. (IHS Markit Economist Akshat Goel)
   • Seasonally adjusted continuing claims (in regular state programs), which lag initial claims by a week, fell by 1,165,000 to 10,018,000 in the week ended 3 October. Prior to seasonal adjustment, continuing claims fell by 1,188,202 to 9,631,588, marking the largest decline since mid-May. The insured unemployment rate in the week ended 3 October was down 0.9 percentage point to 6.8%.
   • There were 372,891 unadjusted initial claims for Pandemic Unemployment Assistance (PUA) in the week ended 10 October. In the week ended 26 September, continuing claims for PUA fell by 222,497 to 11,172,335.
   • In the week ended 26 September, there were 2,778,007 such claims for Pandemic Emergency Unemployment Compensation (PEUC) benefits.
   • The Department of Labor provides the total number of claims for benefits under all its programs with a two-week lag. In the week ended 26 September, the unadjusted total fell by 215,270 to 25,290,325.
10. Import price growth throttled down to 0.3% m/m in September as fuel import price growth finally turned negative, to -2.9% m/m, after a four-month hot streak. (IHS Markit Economist Gordon Greer)
    • The index of nonfuel import prices increased 0.6% m/m in September, while its 12-month growth rate was 1.5%.
    • Fuel import price growth fell into the red after a strong four-month streak, dropping 2.9% in September after a 3.9% increase in August. The cost of imported fuel was down 25.2% versus September in the prior year.
    • Among imported fuel price categories, the contribution from natural gas price growth, coming in at 26.2% m/m, was dragged down by a 4.2% m/m drop in petroleum prices, its first drop since September. Excluding petroleum, import prices rose 0.7% m/m in September.
    • Export prices advanced 0.6% m/m in September, with the 12-month growth rate rising 0.9 percentage point to -1.8%. Monthly growth of both agricultural and nonagricultural exports remained positive.
    • According to the Bureau of Labor Statistics (BLS), the collection method for data in the September report was unchanged. The response rate for surveyed firms was 5.6 percentage points lower than in September 2019. While top-level price indices were determined to be representative of total trade, several detailed indices were not published because of insufficient data.
11. IHS Markit's Dividends Forecasting analysts are forecasting a 10% year-over-year decline in the Russell 2000's Dividend Index Points (DIPs), with the real estate sector being the biggest driver of the decline ( https://cdn.ihsmarkit.com/www/pdf/1020/Russell-2000-DIPs-pdf.pdf). The below chart highlights the sector level drivers of the forecast.
12. Electric vehicle (EV) maker Lucid Motors has announced a USD77,400, 480-hp version of the Air sedan, which is available to reserve for a USD300 fee. Lucid states that, after the US federal tax credit of USD7,500, the price is USD69,900. In a statement announcing the new version of the Air, Peter Rawlinson, CEO and chief technology officer, said, "The Lucid Air is a vehicle that thrills me personally because it delivers a level of performance, efficiency, and luxury that is currently unseen in today's EVs. Our vision from the beginning - what drives this company - is creating the world's best EV technology while making it progressively more attainable over time. With the starting price of the Lucid Air range announced today, we are setting the stage for broader adoption of the latest, game-changing EV technology." The company says this new version of the Air will deliver 406 miles of range. It has a single-motor powertrain, with a dual-motor, all-wheel-drive configuration optional, and has a 900+ ultra-high voltage electrical architecture with DC fast-charging capability. Customers making a reservation will also receive three years of complimentary charging using the Electrify America charging network. As standard, it will have a PurLuxe animal-free interior trim and a 34-inch Lucid glass cockpit curved floating display. Additionally, it is available with the DreamDrive advanced driver-assistance technologies. Lucid is announcing this more-accessible model about a month after announcing the top trims of the Air. The Dream Edition will have a price of USD139,000 and the price of the Air Touring starts at USD95,000, both before the US tax credit. (IHS Markit AutoIntelligence's Stephanie Brinley)
13. Car-sharing company Getaround has raised USD140 million in a Series E funding round led by PeopleFund, reports TechCrunch. The latest funding round saw participation from new investors including Reinvent Capital, Henry McGovern, Pennant Investors, Steve Girsky, Mary Chan, and Julia Steyn, as well as existing investors including SoftBank Vision Fund, Menlo Ventures, and more. The company plans to use the infused capital to develop connected car technology that enables a fully contactless experience. In addition, the funds will be used by the company to collaborate with strategic partners, expand its offerings, and strengthen its position. Sam Zaid, founder & CEO of Getaround, said, "As we work to continue to scale our marketplace, we are proud to have the support of our world-class investors. Closing a round of funding negotiated in such challenging times amidst the pandemic underlines their belief that Getaround is truly the future of mobility." Getaround allows private vehicle owners to rent out their cars through its platform and the service is available in more than 100 US cities and more than 170 European locations. The company has raised funding of nearly USD600 million since it was founded in 2009. (IHS Markit Automotive Mobility's Surabhi Rajpal)
14. Local Motors will trial the second generation of its connected electric autonomous shuttle, the Olli 2.0, in Toronto (Canada), reports TechCrunch. These trials will be conducted for a 6-12-month period carrying passengers on a fixed route starting in 2021. These shuttles aim to enhance Toronto's mass transit system by connecting the West Rouge neighborhood with its local Go train station. This deployment is a result of Local Motor's partnership with Pacific Western Transportation, TTC, and Metrolinx, with funding from Transport Canada. The shuttle has seating capacity for up to eight passengers and includes accessibility features such as a wheelchair ramp and securing points. An on-board safety operator will oversee vehicle operations manually in case of emergency. Two staff members, a certified operator from Pacific Western Transportation, and one customer service ambassador from either TTC or Metrolinx, will be on board to study each trip. Local Motors uses multiple micro-factories to design high-technology vehicles and developed the Olli autonomous electric shuttle, which made its debut at the National Harbor in Maryland (US) in 2016. The Olli is designed to provide last-mile transportation in low-speed environments, including campuses, hospitals, military bases, and universities. (IHS Markit Automotive Mobility's Surabhi Rajpal)
15. Domestic steel demand continued to remain strong in China (Mainland), leading to also increase in steel imports into the country. In September 2020, Chinese steel imports increased 29% over the month to 2.9 metric tons(mt). It was the highest import level last seen one and a half-decade ago in April 2004. In the nine months of this year, China steel imports stood at 15.1mt, up 72 % over the year. In another significant development, Tangshan regional government recently issued seasonal winter production control measures on emissions from blast furnaces and sintering operations at the steel mills in the region. This year the control measures are less stringent as air quality in the region is better compared to the last couple of years as mills added emission control measures. This time the control measures will run from 01 Oct 2020 until 31 March 2021, and the mills will be required to cut output basis a five-tier approach. A-category steel mills that have adequate emission control measures could undertake self-imposed production cuts. While B-category, B-Minus, C& D category mills to impose 10%, 20%, 35%, and 45%, respectively. This year production cuts in the Tangshan region are expected to run for 2.3weeks more, however, due to eased emission control measures, it will impact 3.5-4mt less production capacity. The announcement is anticipated to increase the usage of high-grade iron ore fines and lumps compared to previous winter demand. As a result of continued strong demand from China iron ore and pellets shipments from various Brazilian ports continued to remain strong. As per IHS Markit's Commodities at Sea, during September 2020, Brazilian iron ore and pellet shipments are calculated at 33.8mt, up 9% over the year. (IHS Markit Maritime & Trade's Rahul Kapoor and Pranay Shukla)

Europe/Middle East/Africa

1. European equity markets closed sharply lower; Italy -2.8%, Germany -2.5%, France -2.1%, UK -1.7%, and Spain -1.4%.
2. 10yr European govt bonds closed mixed; Italy +4bps, Spain +2bps, France/Germany -3bps and UK -4bps.
3. iTraxx-Europe closed +3bps/56bps and iTraxx-Xover +9bps/336bps.
4. Brent crude closed -0.4%/$43.16 per barrel.
5. British electric commercial vehicle (CV) start-up Arrival has announced that it has raised a further USD118 million of funding for its project. According to a statement, this comes from funds managed by investor BlackRock. The company said that this investment will be used to support its growth plans including the launch of a microfactory in York County (South Carolina, US). The company adds that investment into this location will be USD46 million and will create 240 jobs. Operations are expected to begin there in the second quarter of 2021, before production begins in the fourth quarter of the same year. Arrival has been developing a "flexible skateboard platform" model for its products, which will allow it to not only create core van and bus products for customers, but also allow for more bespoke offerings depending on customer needs. However, another key part of its strategy is the establishment of relatively small microfactories for the assembly of its vehicles, building either 10,000 vans or 1,000 buses per year. These require low initial capital expenditure that can be located around the world and are rapidly scalable, while the use of such production facilities would also reduce the emissions for shipping such vehicles when completed. (IHS Markit AutoIntelligence's Ian Fletcher)
6. The Volkswagen (VW) passenger car brand has announced that it is accelerating its plant investments relating to readying its production facilities for electric vehicle (EV) production. According to a company statement, the VW brand has now ordered more than 1,400 robots from Japanese manufacturer FANUC for its production facilities at Chattanooga (US) and Emden. VW Commercial Vehicles has also ordered another 800 robots for its Hanover plant from ABB of Switzerland. The robots will be mainly used for body production and battery assembly. Christian Vollmer, VW passenger cars' member of the board of management responsible for Production and Logistics, said, "At Emden and Chattanooga, we are developing two of the most advanced production facilities in the automotive industry for the transformation to e-mobility. We are investing in the latest technologies such as digitalization and automation for this purpose even in the present situation." (IHS Markit AutoIntelligence's Tim Urquhart)
7. The BMW Group has outlined the technology offering behind the charging infrastructure of its fifth generation of electrified vehicles, according to a company statement. The company has built on its previous experience with this area having launched its first electric vehicle (EV), the BMW i3, in 2013. It is now offering the latest version of the BMW Flexible Fast Charger with the new iX3 battery electric vehicle (BEV), the third full EV in the company's range. The Flexible Fast Charger adjusts to the charging infrastructure available, while the high-performance BMW Wallbox with a charging capacity of up to 22 kW can be purchased as an option. This would allow the iX3 to receive a full charge in a domestic environment in about 3.5 hours. BMW has worked to make its domestic charging offering as straightforward and practical as possible, and to this end the wallbox can be controlled through cloud services. All charging solutions can be combined with a comprehensive installation package for a set price (as long as structural requirements are met). A green electricity tariff is also included in the service. For the public charging offering, BMW's charging card gives BMW BEV drivers access to one of the world's largest charging networks, with around 450,000 charging points. This includes 24,000 charging points in Germany and 160,000 across Europe, with charging points displayed in the vehicle's navigation system. (IHS Markit AutoIntelligence's Tim Urquhart)
8. Porsche CEO Oliver Blume has said that he expects that fully synthetic fuels will be available for use in production vehicles in about a decade. Blume made the statement at a summit for the automotive sector organized by the Institute of Automotive Economics in Nürtingen, near Stuttgart (Germany). Porsche is devoting resources to its synthetic fuel development program. Blume said that synthetic fuels "do not compete with electric mobility, but complement it". He added, "If you think about the fact that we have billions of vehicles driving around the world, we have to look in both directions: both forward, clearly electromobility, but also backwards, synthetic fuels." Porsche recently announced a major research project to develop synthetic fuels. Although the company is heavily invested in electric vehicles (EVs), as evidenced by the launch of the Taycan last year, battery vehicles are limited in their ability as track vehicles and electric motorsport also has obvious limitations regarding range capability. These are both fields in which Porsche has a major involvement and in which it has traditionally excelled. (IHS Markit AutoIntelligence's Tim Urquhart)
9. Dyno Therapeutics (US) has announced a new collaboration and license agreement with Roche (Switzerland) for the development of next-generation adeno-associated virus (AAV) vectors for gene therapies for central nervous system (CNS) diseases and liver-directed therapies. Under the terms of the agreement, Dyno will design the novel AAV capsids for gene therapy, and Roche and its subsidiary Spark Therapeutics will conduct all preclinical, clinical, and commercialization activities related to these candidates. In exchange, Dyno will receive an undisclosed upfront payment from Roche, and will be eligible for additional research, clinical, and sales milestone payments exceeding USD1.8 billion, as well as royalties for resulting products. The promising new gene therapy candidates developed under this partnership would likely strengthen Roche's and Spark Therapeutics' portfolios. The collaboration will leverage Dyno's artificial intelligence (AI)-powered proprietary CapsidMap platform technology, which utilizes novel AAV capsids or the cell-targeting protein shell of viral vectors that are optimized to target tissue and evade the immune system, while providing improved packaging capacity and manufacturability, according to Dyno. These next-generation gene therapies overcome some of the limitations of gene therapies currently on the market or in development, which are confined to naturally occurring AAV vectors. (IHS Markit Life Sciences' Margaret Labban)
10. EasyMile has deployed an EZ10 autonomous shuttle in the city of Louvain-La-Neuve (Belgium) for a six-month trial period. The autonomous shuttle will be deployed in mixed traffic, connecting riders to a train station and a business park in the city. This deployment is a result of EasyMile's partnership with Ush, an autonomous shared mobility provider, and Le TEC, a local transport operator, to ensure the smooth running of the service. The trial is part of the Navajo project, which aims to offer a new mobility service and test autonomous vehicles in a complex environment. The trial will be conducted over three evolving phases to analyze the acceptance levels of passengers and other road users. EasyMile has developed autonomous mobility solutions and has built the EZ10, a fully electric shuttle bus that is capable of Level 4 autonomous operation. The shuttle is deployed with LiDAR, cameras, and GPS to ensure safety. The company has deployed 200 EZ10 shuttles on public and private roads in more than 30 countries to improve last-mile transport. (IHS Markit Automotive Mobility's Surabhi Rajpal)
11. Miratorg, one of Russia's largest meat producers, has announced three new investment projects while at the same time launching an initiative to start selling its products through an online delivery service. The investments - worth a combined RUB18.4 billion (USD235 million) will be covered by a new mechanism, known as an SZPK, which provides certain guarantees and stability of the legal regime for large-scale projects. In the Kaliningrad region, Miratorg said it plans to implement a RUB4.9 billion project to expand the production of frozen semi-finished meat products. The increase in capacity will make it possible to produce 71,000 tons of finished products per year. In the Moscow region, the group aims to invest a further RUB10 billion in a project involving the development of centers for wholesale distribution and food innovation. Another RUB3.5 billion will be invested in a project for the production and processing of oilseeds - some of which will be used for animal feed. Located in the Oryol region, the facility will have the capacity to process 420,000 tons of raw materials per year. Meanwhile, the group is making it easier for Russian consumers to access its products by linking up with Delivery Club, Russia's largest ready-to-eat food delivery service. At the first stage, Delivery Club couriers will deliver orders to four districts of Moscow and St. Petersburg. By the end of 2020, it is planned to connect to the service a total of 60 Miratorg stores in all cities where the chain is present. (IHS Markit Food and Agricultural Commodities' Max Green)
12. UAE-based smart transportation company ION has completed the trial of autonomous shuttles at Sharjah University City, reports Trade Arabia. During the trials, the company used French driverless technology firm NAVYA's Autonom shuttles to ferry students around the university. These shuttles are wheelchair accessible and can carry up to 15 passengers per journey. Khalid bin Butti Al Hajri, director general of Sharjah University City, said, "Our campus was selected as a site for the pilot trial because it is a leading education and research and development hub in the Middle East. Our mandate at the University City is to improve the quality of the educational experience, while focusing on creativity and innovation. As part of this quest, it is vital to conduct advanced research and development projects and adopt future technologies that ensure we keep pace with modern trends. This mindset ensures that our educational district competes with prestigious universities globally." NAVYA's Autonom shuttle is already operating in Masdar City. Earlier this year, ION and NAVYA partnered to develop autonomous transportation in the Gulf Cooperation Council (GCC) region. The GCC region is scaling up operations in the field of autonomous vehicles, with Volkswagen (VW) announcing recently that it plans to integrate Level 4 autonomous electric shuttles and buses into the public transport network by 2022 in Qatar's capital city Doha. (IHS Markit Automotive Mobility's Surabhi Rajpal)
13. Zambia is at risk of defaulting on its USD3-billion Eurobond interest rate commitment to the amount of USD42 million within 30 days if a debt-service suspension agreement is not in place, the Zambian authorities have reported. A group of bondholders rejected the government's request for a six-month suspension of interest payments on 30 September. (IHS Markit Economist Thea Fourie)
    • The decision to reject the Zambian authorities' request follows in the wake of insufficient disclosure of information on the Zambian authorities' Chinese debt holdings and uncertainty over a sustainable fiscal path for the future. "Two big concerns we have are the lack of clarity on what debt relief they are getting from other creditors, and the lack of a medium-term fiscal framework to put the debt back on a sustainable path," said investor Kevin Daly, a fund manager at Aberdeen Standard Investments, reports the Financial Times.
    • The Zambian authorities confirmed, however, that they intend to continue servicing debt for a few priority projects that have an immediate economic and social impact. A list of these projects is to be circulated at a later stage.
    • A collapse of import demand and stronger terms of trade left Zambia's current account in surplus by USD658 million during the first half of 2020, from a deficit of USD4.9 million for the same period a year earlier. COVID-19 virus outbreak-related lockdown measures and supply-chain disruptions during the second quarter of the year curtailed domestic spending and ultimately overall imports over the period.
    • External debt-servicing costs, however, will average 147.5% of total foreign-reserves holdings in 2020, IHS Markit's estimates show. Zambia's high external-debt burden, slowing GDP growth rate, and lack of fiscal consolidation in recent years underline the weaker solvency position of the country.
    • IHS Markit's medium-term sovereign risk rating for Zambia is currently set at 65/100 (CCC on the generic scale), with a Negative outlook. A default on debt interest payments would push our medium-term sovereign risk rating to 75/100 (or C on the generic scale).
14. The Bank of Botswana decided to slash the key policy rate by 50 basis points to 3.75% at the 8 October meeting of its monetary policy committee (MPC), as overall risks to the medium-term inflation outlook remain firmly tilted to the downside. (IHS Markit Economists Archbold Macheka)
    • The COVID-19 pandemic containment measures implemented since April 2020 continue to disrupt consumption and spending patterns in Botswana, keeping domestic demand pressures and foreign prices contained through the short term.
    • The latest official consumer price index data from Statistics Botswana show inflation remained below the lower bound of the central bank's objective range of 3-6%, although up marginally from 0.9% year on year (y/y) in July to 1.0% y/y in August. Upside risks to the inflation outlook emanate from higher-than-anticipated international commodity price increments and pressures caused by supply constraints due to travel restrictions and lockdowns.
    • The central bank's MPC noted that the COVID-19 pandemic containment measures have severely dampened economic activity not just in Botswana, but also globally, impacting on production, supply chains, project implementation, and provision of goods and services.
    • Revised estimates from the International Monetary Fund (IMF) show Botswana's economy shrinking by 9.6% in 2020, before rebounding to 8.6% growth in 2021. New projections by the Ministry of Finance and Economic Development (MFED) show a GDP contraction of 8.6% in 2020, and a recovery of 7.7% in 2021.
    • IHS Markit's October estimations put Botswana's average annual inflation for 2020 and 2021 at 1.8% and 2.9%, respectively. We expect food prices to continue to soften, largely reflecting favorable agriculture yields and inflation trends in neighbor South Africa, were most of the food is imported from. Furthermore, transport costs are likely to experience soft growth in line with our benign short- to medium-term global Brent oil-price outlook of USD40.95 and USD46.78 per barrel in 2020 and 2021, respectively.
    • IHS Markit now expects Botswana's economy to contract by about 10.6% in 2020 (downgraded from our September 2020 forecast of an 8.8% decline), largely due to the disruptive impact of the COVID-19 pandemic on both the domestic and external sectors and weak global demand for diamonds, the country's major export commodity.

Asia-Pacific

1. Most APAC equity markets closed lower except for Australia +0.5%; India -2.6%, Hong Kong -2.1%, South Korea -0.8%, Japan -0.5%, and Mainland China -0.3%.
2. China raised $6 billion with its latest international bond sale, matching a record set last year, ahead of economic data that is likely to show growth is recovering toward pre-pandemic levels. U.S. buyers snapped up large chunks of the four-part deal, including 47% of a $500 million offering of 30-year debt, according to one of the banks that handled the sale. (WSJ)
3. Falling pork prices will likely further drive down Mainland China's Consumer Price Index (CPI) inflation in fourth-quarter 2020; moderate recovery in the PPI is expected to continue. (IHS Markit Economist Lei Yi)
   • Mainland China's CPI increased 1.7% year on year (y/y) in September, down 0.7 percentage point from August, according to the National Bureau of Statistics. Month-on-month (m/m) CPI inflation came in at 0.2% compared with August's reading of 0.4%, staying in positive territory for the third straight month.
   • By component, slowing food price inflation—driven by declining pork prices in particular—remains the main contributor to the headline decline in CPI inflation in September.
   • Although non-food price inflation continues to be weak, services prices strengthened back into inflation territory in September, rising 0.2% y/y.
   • With schools restarting nationwide and offline activities resuming, education, culture, and recreation prices rose 0.7% y/y in September compared with 0.0% y/y in the preceding month.
   • The core CPI, which excludes food and crude oil prices, rose 0.5% y/y, unchanged from August's reading.
   • Mainland China's Producer Price Index (PPI) fell 2.1% y/y in September, edging down slightly from a 2.0% y/y decline in August as the economy recovered at a slower pace entering into the third quarter.
   • In m/m terms, PPI inflation fell by 0.2 percentage point to 0.1% m/m in September, with 15 out of 40 surveyed industrial sectors reporting m/m price gains and 19 experiencing m/m price declines.
   • As expected, swings in global commodity prices during September weighed on the PPI's continued recovery. Prices in oil-related sectors, including petroleum and natural gas exploration and fuel processing, fell m/m, while m/m inflation continued to slow in ferrous metals and non-ferrous metals smelting and pressing. All sub-categories of consumer goods manufacturing reported weaker y/y inflation in September, resulting in a producer price deflation of 0.1% y/y in overall consumer goods, compared with a 0.6% y/y inflation in the preceding month.
   • Cumulatively, CPI had been up by 3.3% through the end of third-quarter 2020, down from 3.5% y/y in the first eight months of the year; the PPI fell by 2.0% through September, unchanged from the first eight months.
   • The latest release is in line with our annual CPI forecast, which currently stands at 3.0% y/y for 2020. Despite the tailwinds generated by sustained economic recovery and a pickup in services consumption, CPI inflation is expected to decline towards the end of the year.
4. SAIC Motor Corporation's sales grew 9.5% year on year (y/y) to 602,318 units in September. This sales figure includes the group's joint ventures (JVs) and subsidiaries. (IHS Markit AutoIntelligence's Abby Chun Tu)
   • In the year to date (YTD), SAIC's sales have fallen by 18.14% y/y to around 3.61 million units.
   • Sales of SAIC-VW, SAIC's JV with Volkswagen (VW), contracted by 1.2% y/y to 175,000 units last month; in the YTD, SAIC-VW's sales have fallen by 25.9% y/y to 1.03 million units.
   • Sales of SAIC-GM, SAIC's JV with General Motors (GM), increased by 9.5% y/y to 153,326 units in September; the JV's YTD sales are down 22.0% y/y at 951,561 units.
   • Sales of the SAIC-GM-Wuling JV grew by 19.7% y/y to 176,000 units in September; in the YTD, its sales are down 12.6% y/y at 985,040 units.
   • SAIC Maxus, SAIC's commercial vehicle (CV) company, sold 21,199 units in September, up 40.3% y/y; in the YTD, SAIC Maxus's sales are up 19.1% y/y at 121,454 units.
   • Sales of SAIC's wholly owned brands, Roewe and MG, managed by SAIC Passenger Car Company, totaled 60,366 units last month, up 5.9% y/y; sales of the two brands have fallen 14.5% y/y to 403,268 units in the YTD.
   • Sales of SAIC's Indian subsidiary, MG India, stood at 2,745 units in September, down 0.2% y/y; in the YTD, a total of 17,893 vehicles have been sold in India.
   • SAIC subsidiary SAIC-GM-Wuling Indonesia sold 511 vehicles in September, compared with 2,750 units in the same month last year.
5. According to the Reserve Bank of India (RBI)'s "FAQs on Resolution Framework for Covid-19 related stress", which appeared on its website on 14 October, the RBI has clarified several matters related to the recently introduced resolution framework. First, only loans that were not default by more than 30 days on 1 March are eligible; no additional loans after that date are included. Second, the loans that had started being repaid but were overdue by 30 days on 1 March will not be eligible for the resolution framework. Third, the definition of micro, small and medium enterprises (MSMEs) for the benefit of this resolution framework will be the narrower definition of MSMEs as of 1 March, which is based on investments, rather than the revised definition based on turnover as of June. (IHS Markit Banking Risk's Angus Lam)
   • The Supreme Court has granted an extension on the loan moratorium because of the uncertainty surrounding the one-off loan restructuring under this resolution framework.
   • The clarification by the RBI serves as a timely reminder that borrowers are keen to be included in the resolution framework to lower their repayment pressure, as commercial banks have started introducing generous restructuring schemes.
   • From a banking risk perspective, by disallowing loans that are already in arrears by 30 days by 1 March, this will reduce the chance of bad loans appearing as performing. However, considering the generous provisioning for restructured loans under this scheme (0.4-1.0%, as per normal loans, compared with 15.0% for bad loans), this tighter definition will reduce banks' savings on provisioning and increase their capital needs.
   • However, it is unclear whether there will be further petitions to the Supreme Court that will place further delay on the implementation. There have been several instances in the past 12 months where the Indian court system has stopped RBI policies, and that includes the classification of overdue loans to non-banking financial companies (NBFCs) as non-performing, which reduces RBI's effectiveness as a banking regulator.
6. POSCO has won an order for electric vehicle (EV) parts from Vietnamese automaker VinFast in partnership with South Korean parts firm Erae AMS, reports the Korea Herald. The companies will supply halfshafts, which act as a driveshaft in an EV, to VinFast. The products will be supplied from 2021, after detailed adjustment and testing, according to the report. POSCO will supply the components for the 100,000 EVs that VinFast is seeking to manufacture. "This order is to supply parts to VinFast's first electric vehicle. By winning orders for electric vehicle parts, which are future strategic models, it [has] laid the foundation for expanding businesses such as localization and investment in the future," the firm said. Erae AMS is a component manufacturer that specializes in producing automotive parts such as driving, braking, and steering components. The company began its co-operation with POSCO in 2011 and currently supplies driving parts to Fiat Chrysler Automobiles (FCA) in North America. (IHS Markit AutoIntelligence's Jamal Amir)
7. Covestro has added a new production line for polycarbonate films at its plant in Map Ta Phut Industrial Estate (Thailand), according to a company press release. It has invested more than EUR100 million (USD117.4 million) in the expansion, which is expected to add 100 new jobs. "With this additional production line using state-of-the-art technology, we are investing in future growth in the Asia-Pacific markets, which are very important to us. At the same time, we are responding to the rapidly growing demand for specialty films in this region and are supporting the expansion of promising technologies and industries," said Covestro chief commercial officer Sucheta Govil. Covestro has been operating a production facility for specialty films in Thailand since 2007. The films are used in several industries including automotive. The range comprises polycarbonate films from the 'Makrofol' range and 'Bayfol' products made from polycarbonate blends. (IHS Markit AutoIntelligence's Jamal Amir)

Posted 15 October 2020 by Chris Fenske, Head of Fixed Income Research, Americas

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