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Major European equity markets closed higher, while APAC and US
indices were lower. US government bonds were almost flat on the day
and benchmark European bonds closed mixed. European iTraxx credit
indices closed slightly tighter across IG and high yield and CDX-NA
was modestly wider. Silver closed higher, while the US dollar, oil,
gold, and copper were all lower on the day.
Americas
US equity indices closed mixed modestly lower; Russell 2000
-0.6%, S&P 500 -0.2%, and DJIA/Nasdaq -0.1%.
10yr US govt bonds closed +1bp/1.04% yield and 30yr bonds
-1bp/1.79% yield.
CDX-NAIG closed +1bp/53bps and CDX-NAHY +3bps/310bps.
IHS Markit's AAA Municipal Analytics Curve yields rallied 2bps
for 1- to 5-year maturities and 3bps for 6-year and longer tenors
today.
DXY US dollar index closed -0.2%/90.17.
Gold closed -0.2%/$1,851 per ounce, silver +0.2%/$25.54 per
ounce, and copper -0.3%/$3.62 per pound.
Crude oil closed -0.3%/$52.61 per barrel.
Global expansion continues to ease middle distillate woe, but
can't offset missing jet fuel demand, as gasoline faces new
slowdowns in the services sector. Continued strength in basic
materials, trade and manufacturing during the latest wave of
coronavirus infections helps support diesel but with air travel
still limited, jet fuel remains down roughly 45%. Middle distillate
stocks remain the most oversupplied product at the outset of 2021,
and slower demand improvement may start feeding back into crude
spreads. High product stocks are contributing to low run rates
especially at European refineries with large middle distillate
cuts, which in turn contributes to a weakening in sales of West
African barrels in general and of Nigerian crude in particular. To
clear, these marginal barrels must now flow to China, where
purchases have been slowing. Physical weakness would appear first
in crude futures time spreads. Days of forward middle distillate
demand cover in the OECD needs to fall another 10 days to approach
pre-pandemic levels, and we are well off this mark. In the less
visible non-OECD, considerable stockpiling in key markets like
India will also need to be absorbed before a full market recovery.
Refined product markets will need to go through the arduous process
of normalizing inventories over the next few months. Recovering
demand will certainly help mop up the excess, but it will still
take time for that process to run its course and unshackle the
recovery in refinery runs, particularly in the Atlantic Basin. (IHS
Markit Energy Advisory's Roger Diwan, Karim Fawaz, Ian Stewart,
Edward Moe, and Sean Karst)
New York's apartment investors are suddenly waist-deep in
distress. By December, they were behind on $395 million of debt
backed by mortgage bonds, almost 150 times the level a year
earlier, according to Trepp data on commercial mortgage-backed
securities. Tenants in rent-stabilized units owe at least $1
billion in rent and wealthier ones are fleeing the city, leaving
behind vacancies and pushing newly-built luxury towers into
foreclosure. The developers who are in the most trouble pushed hard
into Harlem and the Brooklyn hipster hubs of Crown Heights,
Flatbush and Bushwick, squeezing out working-class residents by
building new expensive units. Now, they're grappling with eviction
bans and new tenant protections as rent falls across New York.
(Bloomberg)
The US Conference Board Consumer Confidence Index rose 2.2
points (2.5%) to 89.3 in January after falling 14.3 points over the
prior two months. (IHS Markit Economists David Deull and James
Bohnaker)
The headline index remained barely above its April 2020 low of
85.7. The still-depressed level of consumer confidence is
consistent with our expectation of essentially flat consumer
spending in the first quarter of 2021.
Although new COVID-19 cases skyrocketed during December and
January, consumer attitudes were supported by broad strength in
equity markets and the fiscal stimulus package enacted on 27
December, which included $600 relief payments for qualifying
Americans.
The January increase in the headline index was driven entirely
by expectations regarding conditions over the next six months. The
expectations index rose by 5.5 points to 92.5, a three-month high.
Meanwhile, the index measuring views on the present situation fell
2.8 points to 84.4, an eight-month low. This contrast suggests that
consumers view January as a low point but expect conditions to
improve in the coming months.
The labor index (the percentage of respondents viewing jobs as
plentiful minus the percentage viewing jobs as hard to get) fell
1.3 points to -3.2, the lowest since May. The employment report for
December showed the first outright decline in payrolls since the
recovery began.
Purchasing plans rose in January. The share of respondents
planning to buy autos in the next six months increased 0.9
percentage point to 10.7%, while the share planning to buy homes
recovered 1.2 points to 7.2%, indicating a still-hot market. The
share with plans to purchase major appliances ticked up 0.1 point
to 48.4%.
Historically, views on the present situation are more closely
related to consumer spending trends than expectations. This report
suggests that consumer spending will continue to stagnate early in
2021 before (hopefully) thawing in the spring.
The S&P CoreLogic Case Shiller indices indicate continued
strength in November as Boston (10.4%), Phoenix (13.8%), San Diego
(12.3%), and Seattle (12.7%) reach double-digit y/y gains. (IHS
Markit Economists Troy Walters)
For the ninth month in a row, data in November were limited to
only 19 cities, as opposed to 20 under normal circumstances. Data
for Wayne County, Michigan, were unavailable so there are no data
for Detroit in this release. Data for previously missing months
(March through October) are now available.
Monthly home price growth decelerated slightly in November.
Both the 10-city and 20-city composite indices were up by a strong
1.4% month on month (m/m) following a 1.6% increase in
October.
Monthly price appreciation was positive in all 19 cities
reporting. With the exception of Cleveland and San Francisco, price
gains were at the 1.0% mark or higher.
In year-over-year (y/y) terms, home prices grew at a faster
pace in November. The 10-city index was up 8.8% y/y while the
20-city index was up 9.1%.
Growth in the national index approached double-digit territory
in November, at 9.5% y/y.
According to data for the three months ending in November, US
home prices accelerated sharply for the fifth straight month.
The slight retreat in the pace of monthly appreciation in
November did little to slow y/y growth; the national index
increased by 9.5% y/y.
Home prices growth, already strong prior to the onset of the
COVID-19 pandemic because of limited and shrinking inventories,
strengthened considerably in the July-November period. Many sales
that would normally have occurred during the 2020 spring buying
season were delayed until later in the summer because of business
shutdowns and social distancing regulations across the country.
A Bechtel-Reed & Reed Joint Venture has been selected by
Clearway Energy Group to build the Black Rock wind farm in Grant
County and Mineral counties, West Virginia. The Bechtel-Reed &
Reed JV will engineer, procure, and construct the farm. The project
will include 23 Siemens-Gamesa SG 5.0-145 wind turbines on
107.5-meter tall towers, producing 115 MW of electricity at the
point interconnection to the First Energy electrical grid. The
project is expected to create around 200 jobs in the area during
construction, with several permanent jobs when operational. The
wind farm is currently scheduled to be operational in late 2021.
(IHS Markit Upstream Costs and Technology's Dag Kristiansen)
Corn put in another strong gains Tuesday. March corn closed 20
3/4 cents higher at $5.32 1/4. The market is now up 32 cents since
Friday's close. The price adjustment higher was likely in response
to strong US corn export sales to China. USDA announced via the
daily export sales reporting system that private exporters reported
sales of 1,360,000 tons (53.5 million bushels) of US corn to China
and 102,800 tons (4.0 million bushels) to unknown destinations for
2020/21. This was the largest daily sales announcement to China
since late July and the 16th largest daily sale on record. Weekly
US corn inspections at 54.8 million bushels reported Monday was
also supportive as they reminded of strong demand. Funds bought a
net 47,500 contracts, traders said. (IHS Markit Food and
Agricultural Commodities' Anamaria Martins)
Specialty chemicals technology firm Atotech (Berlin, Germany),
owned by private equity company Carlyle Group, says it has started
an initial public offering (IPO) in the US that could raise up to
$750 million. (IHS Markit Chemical Advisory)
The IPO for 34.15 million of its common shares is expected to
be at a price range of $19.00-22.00 per share, it says.
Underwriters of the offering will also have a 30-day option to buy
up to an additional 5.12 million common shares from affiliates of
The Carlyle Group, it says. Atotech has applied to list its common
shares on the New York Stock Exchange, it adds.
Citigroup, Credit Suisse, BofA Securities, and J.P. Morgan are
lead book-running managers for the proposed IPO, with additional
book-running managers including Barclays, Deutsche Bank Securities,
Jefferies, RBC Capital Markets, UBS Investment Bank, Baird, BMO
Capital Markets, and HSBC. The co-managers are TCG Capital Markets
and Mischler Financial Group.
Atotech, which generated annual sales of $1.2 billion for its
financial year ending 30 September 2019, has operations in Europe,
the Americas, and Asia, and is a market leader in specialty
electroplating solutions, manufacturing chemicals and equipment for
technology applications.
At the top end of the price range, Atotech's market value would
be approximately $4.0 billion. Carlyle agreed to acquire Atotech
from Total in 2016 in a deal worth $3.2 billion, including debt.
Carlyle first began planning a stock market listing for Atotech in
August 2018.
US-based electric vehicle (EV) startup Faraday Future plans to
open a new plant in China in a renewed effort to start volume
production of its EVs in the country, reports Reuters, citing
sources who declined to be named. According to the report, the new
plant is to be located in a "tier one Chinese city" and it will
have a production capacity of 100,000 vehicle per annum. The report
also indicates that Geely is likely to provide contract
manufacturing services to the startup company, as well as provide
engineering and smart-vehicle technologies, including automated
driving functions. Geely and Faraday Future declined to comment on
the matter when approached by Reuters. A Reuters report in October
last year indicated that Faraday Future intended to work with a
contract manufacturer to build its first EV, the FF91, in Asia.
Carsten Breitfeld, CEO of Faraday Future, said the company would
begin volume production in about 12 months provided a deal was
struck. The planned launch of the FF91 has already been delayed by
a year due to a series of financing issues. According to a
Bloomberg report, Faraday Future is in talks with special-purpose
acquisition companies (SPACs) to go public. It is still too soon to
tell whether the reported talks with Geely on a contract
manufacturing deal will come to fruition; however, Geely does
appear to be a possible partner for newcomers entering the EV
space. The Chinese automaker intends to share its SEA EV
architecture with other automakers or tech companies interested in
making their own EVs. Baidu, for instance, is to form a joint
venture with Geely to develop EVs in China. New models under the
partnership are to be manufactured by Geely. (IHS Markit
AutoIntelligence's Abby Chun Tu)
The Brazilian animal health sector has posted annual sales of
over R$6 billion ($1.2 billion) for the first time. According to
national industry body Sindicato Nacional da Indústria de Produtos
para Saúde Animal (SINDAN), its members posted revenues of R$6.51bn
in 2019. This represented year-on-year growth of 9.4%. SINDAN
members - over 80 of the leading animal health businesses in Brazil
- have collectively recorded annual sales growth in excess of 5% in
all but one of the last 10 years. The average annual growth rate
for the companies over the last decade is just under 10%. In fact,
the size of the Brazilian animal health market has more than
doubled in the last decade. Growth has been fueled by an
increasingly prominent domestic companion animal sector. The
Brazilian animal health sector is heavily weighted towards the
livestock segment, specifically cattle production. However,
companion animal ownership and spending are rapidly expanding in
Brazil. In 2009, pet products represented 11% of sales from SINDAN
members. This proportion doubled to 22% by 2019. The Brazilian
sector has also witnessed higher sales of therapeutics and
biologicals in recent years - at the same time as a decline in
revenues from antimicrobials, supplements and feed additives.
Founded in 1966, SINDAN now represents around 90% of the overall
Brazilian animal health industry. According to Brazil's top
domestic veterinary medicines manufacturer Ouro Fino Saúde Animal,
the country is the world's third-largest animal health market -
behind the US and China, and ahead of France and Germany. (IHS
Markit Animal Health's Joseph Harvey)
Europe/Middle East/Africa
European equity markets closed higher; Germany +1.7%, Italy
+1.2%, France/Spain +0.9%, and UK +0.2%.
10yr European govt bonds closed mixed; Italy -4bps, Spain/UK
flat, and France/Germany +2bps.
iTraxx-Europe closed -1bp/50bps and iTraxx-Xover
-4bps/260bps.
Brent crude closed -0.1%/$55.64 per barrel.
According to the UK's Office for National Statistics (ONS), the
early estimate for December 2020 suggests that the number of
workers on payroll plunged by 2.7%, or 793,000, since December
2019. However, it rose by 0.2% month on month (m/m) after falling
in the previous nine months. (IHS Markit Economist Raj Badiani)
The new release is based on the experimental data of the number
of employees on payroll using the HM Revenue and Customs' Pay As
You Earn Real Time Information.
The claimant count, which measures the number of people
claiming benefit principally for being unemployed, increased
slightly to 2.6 million in December 2020 and represented an
increase of 113.2%, or 1.4 million, since March 2020. The claimant
count also includes the increasing number of people becoming
eligible for unemployment-related benefit support despite still
being employed.
The ONS also published its traditional headline employment and
unemployment data for the three months to November 2020.
According to the ONS, total UK employment (all aged 16 plus
years) shrunk by 88,000 to 32.5 million in the three months to
November 2020 compared with the three months to August.
In annual terms, the number of employed people in the three
months to November 2020 was 398,000, or 1.2%, lower compared with a
year earlier.
The number of unemployed people based on the Labour Force
Survey (LFS) or the International Labour Organization (ILO) measure
increased by 202,000 in the three months to November 2020, standing
at 1.724 million.
The unemployment rate increased to 5.0% in the three months to
November 2020, up from 4.5% in June-August. However, governor of
the Bank of England Andrew Bailey argues that the rate is higher at
6.5%, or 2.2 million people, but he acknowledges the uncertainty
surrounding the number due to shifts in those deemed economically
inactive.
The pace of job losses remains brisk. Specifically, the number
of redundancies increased by 168,000 to an all-time high of 395,000
in September-November 2020 compared with the three months to August
(see chart).
The highest incidence of redundancies fell on the age cohort of
25 to 34, with a redundancy rate of 16.2 per 1,000, which is five
times higher than a year ago. This reflects the high incidence of
young workers in the most exposed sectors of hospitality and retail
to the COVID-19 virus restrictions.
The number of redundancies could rise after the imposition of
tighter COVID-19 virus restrictions across the United Kingdom,
which entails the closure of hospitality, accommodation, and
entertainment services. Industry body UKHospitality warns that "so
many pubs, restaurants, bars, cafes and hotels, having invested so
much to make their venues safe, are only just clinging on by the
skin of their teeth".
In addition, the UK is likely to endure a double-dip recession
with GDP now likely to shrink in the final quarter of 2020 and the
first quarter of 2021.
However, the rate of job losses is likely to be pushed back by
the government's decision to extend the furlough scheme until April
2021. The extended furlough scheme will again pay up to 80% of an
employee's wage up to GBP2,500 per month.
The extended furlough scheme is available to all UK companies
regardless of whether they are open or closed.
Lotus has revealed that it will end production of its current
range of sports cars. According to a statement, the Elise, Exige
and Evora have all entered their final year of production during
2021. (IHS Markit AutoIntelligence's Ian Fletcher)
The company added that it is undertaking GBP100-million-worth
of investment at its facilities in Hethel (UK) as part of its Lotus
Vision80 strategy, to create a way towards their replacements. This
will begin with what Lotus is calling the 'Type 131', prototype
production of which will start later this year.
The announcement that it will end production of its current
range of vehicles is a huge step to moving the business in which
Geely Automotive took a majority stake in 2017 forward.
The Elise has been the mainstay product of its range for 25
years now. Although it has evolved during this time it has remained
broadly on the same architecture, and while enthusiasts are still
fond of it, it is showing its age.
The Evora (12 years old) and Exige (12 years old, shares its
platform with the Elise) will also end production.
The Lotus Vision80 plan was devised in 2018 as a strategy that
would take the company through the next decade to its 80th
anniversary. Among its key goals are to deliver sales volumes and
increase the efficiency of production to make the business more
sustainable and enable it to support new program and business
growth.
This has already started to take place; investment at Hethel in
recent years has focused both on manufacturing and research and
development.
The company has also now completed the consolidation of
production of its lightweight structures and steel fabrication
production at a single site in Norwich. This will help support the
increase in volumes that Lotus is aiming for as it rolls out its
new range.
The European Commission has said that the EU's free trade
agreements (FTAs) with third countries could lead to a significant
growth in EU agri-food exports over the next ten years. On 26
January, the EU executive published an analysis of the economic
effects of 12 FTAs on the EU's agri-food sector and found that the
industry's exports could grow between 25-29% by 2030 - an increase
worth around €4.7-5.5 billion. The Commission's Joint-Research
Centre (JRC) conducted the study and based its estimates on the
FTAs recently concluded or implemented by the EU - including those
with Mexico and Vietnam - as well as some yet-to-be ratified
agreements, such as the controversial Mercosur deal. The analysis
focused on two scenarios for the 12 FTAs: full tariff
liberalization of 99.5% and a 50% tariff cut for certain vulnerable
goods, and a more conservative approach where full tariff
liberalization was set at 97%, with a 25% tariff removal on
sensitive products. Agriculture Commissioner Janusz Wojciechowski
said at a press conference today: "The study is not forecast, or a
prediction of the possible outcome of trade negotiations, [but] it
nevertheless provides a growth direction and magnitude of the
accumulated impacts of trade agreements on the agricultural sector
by 2030." (IHS Markit Food and Agricultural Policy's Steve
Gillman)
Lanxess has provided a trading update based on preliminary and
unaudited figures, and says it estimates that EBITDA pre
exceptionals for the fourth quarter was about €200.0 million
($242.9 million), exceeding average market expectations of €181
million by 10% and ahead of the year-earlier level of €197 million.
(IHS Markit Chemical Advisory)
The company says its fourth-quarter result was positively
influenced by a stronger-than-expected increase in demand
especially from the automotive industry, with December the
strongest month.
Lanxess supplies the automotive industry mainly through its
engineering materials segment. The advanced intermediates and
specialty additives segments also recorded a business development
above expectations, the company says. The consumer protection
segment performed well, as expected, it says.
The company notes that these positive developments more than
offset the effects of an unplanned production shutdown in Belgium
in the engineering materials segment and adverse currency effects
from a weaker dollar.
Lanxess will release its fourth-quarter and full-year 2020
results on 11 March 2021.
Driven by working-day effects and a low base, Poland's
unadjusted industrial output growth surprised on the upside in
December 2020, surging by 11.2% year on year (y/y). Seasonally
adjusted growth was more subdued, at 7.1% y/y and 0.5% month on
month (m/m). (IHS Markit Economist Sharon Fisher)
December 2020 industrial output growth benefitted from the
recovery of mining activity, as well as strong y/y gains in a
number of key manufacturing branches. Output of coke and refined
fuel products continued to decline.
By industrial grouping, consumer durables and intermediate
goods reported double-digit gains, while production of capital
goods jumped by 9.8% y/y. Energy production dropped by 2.7%
y/y.
In 2020 as a whole, Polish industrial production fell by just
1.0%, a far better result than in most other European countries.
The renewal of COVID-19 virus restrictions had virtually no impact
on Poland's manufacturing sector in the fourth quarter of 2020,
with unadjusted output up by 6.8% y/y, an improvement over the
third-quarter-2020 result.
The positive results for industry were matched by a surprising
upswing in construction activity, which rose by 3.4% y/y in
December 2020, thanks to a revival of building construction.
Seasonally adjusted output fell by 2.4% y/y but increased by 1.9%
m/m.
In 2020 as a whole, construction activity was down by 2.2%
owing to declines in both civil engineering (-2.0%) and building
construction (-4.9%).
Benefitting from the reopening of shopping centers prior to
Christmas, the retail trade sector also outperformed expectations
in December last year, with sales (including the automotive sector)
down by just 0.8% y/y in both real and nominal terms. Seasonally
adjusted real sales increased by 2.4% m/m, following three straight
months of declines.
Despite the better-than-expected December results, seasonally
adjusted real retail trade (including cars) fell by approximately
2.3% quarter on quarter (q/q) in the fourth quarter of 2020, after
surging by 15.6% q/q in the previous quarter. In contrast, both
industry and construction recorded significant q/q growth.
Poland is scheduled to publish preliminary 2020 GDP figures on
29 January, and the latest data indicate that IHS Markit's latest
estimate (at -3.3%) was too pessimistic. Assuming a seasonally
adjusted decline of about 1.0% q/q in the fourth quarter, the
actual result was probably closer to -2.8%.
Asia-Pacific
APAC equity markets closed lower; Hong Kong -2.6%, South Korea
-2.1%, Mainland China -1.5%, India -1.1%, and Japan -1.0%.
Hefei city government in China is to invest CNY2 billion
(USD308 million) in electric vehicle (EV) startup company
Leapmotor, according to an Xcar report. However, the reported
planned investment by the Hefei authorities has not been confirmed
by Leapmotor. Local media reports indicate that Leapmotor plans to
go public in China within the year. According to the Xcar report,
the investment by the Hefei government is likely to be completed
before Leapmotor's initial public offering (IPO). On 8 January, the
startup entered into an agreement with the municipal government of
Hefei. Under the agreement, Leapmotor will invest in a new
manufacturing plant in Hefei, Anhui province, which will be its
second production facility in China. The new plant will increase
the startup's production capacity by 200,000 units per annum,
although much of that added capacity will not be used given
Leapmotor's current sales volumes. Leapmotor currently has three
models on the market, the S1 electric sedan, T03 mini-EV, and C11
mid-size electric sport utility vehicle. In 2020, Leapmotor sold
11,391 vehicles in China. The T03 made up nearly 90% of its sales
last year. (IHS Markit AutoIntelligence's Abby Chun Tu)
In an attempt to ease the supply shortage of semiconductors
adversely affecting operations in the automotive industry, the
Japanese government has asked Taiwan to ramp up production of
semiconductors. According to a report by Kyodo News, Japanese
Economy, Trade, and Industry Minister Hiroshi Kajiyama said, "In
coordination with the auto industry, the Japanese government is
requesting Taiwan authorities to work for an increase in
[semiconductor] output through the Japan-Taiwan Exchange
Association." The ministry added that it continues to closely
monitor the situation as semiconductors are still short in supply.
Taiwan is home to semiconductor giant Taiwan Semiconductor
Manufacturing Co Ltd (TSMC). In a previous report by Reuters,
Taiwan's Ministry of Economic Affairs confirmed that it had
received requests through diplomatic channels to help ease the
semiconductor shortage in the automotive sector. It went on to say
that it has begun talks with domestic companies in this space in
response to these requests and asked to "provide full assistance".
Recently, Subaru announced plans to cut its car production in Japan
and the United States by 30,000 units in February while Honda
announced plans to cut production by around 4,000 units per month,
which would mainly affect the Fit, built at its Suzuka facility.
(IHS Markit AutoIntelligence's Isha Sharma)
KBR has been contracted by SK E&S to provide technical
advisory solutions for its hydrogen development business in South
Korea. KBR will provide technical solutions to support SK's plan to
build a 30,000 Mtpa liquefied hydrogen facility and supply
liquefied hydrogen to various metropolitan areas in South Korea.
The initial phase of the project includes KBR reviewing key
licensor technologies. KBR has licensed over 260 syngas projects
involving hydrogen production and has completed a large number of
projects involving gas compression and cryogenic handling and
storage. (IHS Markit Upstream Costs and Technology's Jie Sheng
Aw)
As per IHS Markit's Commodities at Sea, thermal coal imports
into South Korea during December 2020 dropped 26% y/y to 9mt.
Reduced imports were primarily due to government-induced
restrictions on coal-fired generation to improve air quality during
winters. Although during this period, HDDs (benchmark Seoul) were
15% higher y/y. It meant an increase in total electricity demand
and possibly coal burn at the plants during the month. (IHS Markit
Maritime and Trade's Pranay Shukla)
As per the latest KEPCO data, total electricity generation in
South Korea during November 2020 stood at 45TWh, marginally lower
from the previous year's level. In terms of fuel mix, electricity
generation from coal, gas, nuclear, and renewables stood at 14TWh
(down 24percent y/y), 12.8TWh (up 1%), 14TWh (up 37%), and 2.7TWh
(up 38%), respectively.
Overall, during November 2020, the total South Korean
electricity generation stood at 62.5GW with the share of
coal-fired, gas, nuclear and remaining sources at 19.9GW, 17.8GW,
19.5GW, and 5.3GW, respectively.
During the full year of 2020, HDD and CDD (benchmark Seoul)
were 7% and 11% lower y/y. As per Kepco data, during Jan-Nov 2020,
total electricity generation in South Korea stood at 501TWh, down
2% y/y. In terms of fuel mix, there was an increase in electricity
generation from nuclear power plants (145TWh, up 8% y/y), Gas (129
TWh, up 0.5%), hydro (6.7TWh, up 16%), and renewables (29.2TWh, up
2%). While generation declined from coal-fired plants (180 TWh,
down 13% y/y). The decline in coal-fired generation due to
government-led restrictions capping operating capacity at 80% and
was quite visible in thermal coal imports into the country.
Due to government restrictions on coal-fired power plants,
during 2020, total thermal coal imports stood at 87.2mt, down 18%
y/y. In terms of export countries, there has been a decline in
arrivals from Australia (32.7mt, down 13% y/y), Indonesia (22.6mt,
down 23%), Russia (17.3mt, down 12%), Canada (6.4mt, down 3%),
Colombia (4.6mt, down 15%), and South Africa (1.7mt, down
58%).
Hyundai has announced an automated customer service robot pilot
program. DAL-e is an acronym for Drive you, Assist you, Link with
you-experience, the company says. The new robot uses language
processing, facial recognition and automated mobility for "seamless
wall-to-wall services under COVID-19 situation," the company
statement says. Dong Jin Hyun, vice-president and head of Hyundai's
robotics lab, said, "The DAL-e is a next-generation service
platform that can offer automated customer services anytime. It is
expected to become a messenger capable of delivering consistent
messages to customers in a more intimate and personal way than
conventional robots. With continuous updates and improvements, the
DAL-e will provide fresh, pleasant experiences to our valued
customers in a contact-free environment. Our objective is to enable
the DAL-e to engage in a smooth and entertaining communication with
customers and present valuable services to them." The robot was
unveiled on 25 January, and started its pilot program the same day
at a Hyundai showroom in southern Seoul. Hyundai intends to use the
robot at other Hyundai and Kia showrooms over time. Hyundai says
its DAL-e is lighter and more compact than other customer service
and guide robots in the market. Along with providing information on
products and services and responding to verbal and touch screen
commands, Hyundai says that if the robot sees a customer come in
without a mask, it will advise the customer to wear one. The DAL-e
can assist customers who would prefer not to talk to a person or,
Hyundai notes, provide assistance to customers during busy peak
times. While the DAL-e is first being used at the Hyundai showroom
in Seoul, the company plans further optimization, updates and
improvements. The effort is part of Hyundai's larger plans for
getting further into mobility and robotics services, and follows
the company's intent to purchase of Boston Dynamics in 2020. There
is significant focus in the pilot program for the opportunity to
create an environment where the robot can help customers who are
concerned about working with humans during the pandemic, but the
company is expecting to increase and perfect is operational
capabilities over time. Although there is no indication of when the
pilot would be expanded, it is significant for Hyundai's ongoing
research efforts. (IHS Markit AutoIntelligence's Stephanie
Brinley)
The Reserve Bank of India (RBI) released a discussion paper on
22 January, entitled "Revised Regulatory Framework for NBFCs - A
Scale-Based Approach", in which the RBI proposes changing the
regulation regarding non-bank financial companies (NBFCs). For the
smallest NBFCs, which make up around 97% of the total NBFC number,
the RBI proposes increasing the net-owned fund floor tenfold to
INR200 million (USD2.7 million) and tightening the
non-performing-loan definition from 180 days to 90 days. The
largest 30 NBFCs will be regulated in a similar way to banks, with
limits to large, single-borrower exposure and a tier-1 capital
ratio minimum of 9%. (IHS Markit Banking Risk's Angus Lam)
This is a risk-positive development for the financial sector in
India. In recent years there have been problems related to loan and
debt defaults by a key NBFC that triggered banks' risk averseness
towards these companies (see India: 9 October 2018: Indian
government's takeover of IL&FS highlights liquidity risks in
financial sector, increases likelihood of infrastructure contract
reviews).
Although there have already been some regulation changes in
recent years to improve risk oversight of NBFCs, the sector remains
largely under-regulated, despite performing a similar function to
banks.
From the banking sector's perspective, the key improvement
comes from the tighter regulatory stance on smaller NBFCs because
this will bring their loan classification standards in line with
those of larger NBFCs and allow banks to better understand the risk
of lending to the sector.
As of November 2020, lending to NBFCs accounts for 8% of total
lending, up by 2% from two years ago, and most of this is likely to
be to smaller NBFCs as larger ones can obtain funding from
elsewhere. However, the higher net-owned fund requirements may
result in the sector merging to form larger NBFCs and loans to the
economy from NBFCs are likely to fall as a result of tighter
regulation - lending by NBFCs had already fallen to around 5% year
on year in September 2020. This could lead to lending by banks as
the key driver again.
Sumitomo Corporation has awarded JGC a FEED contract for its
hydrogen-related project planned in Gladstone, Australia. This
project is part of broader program that aims long term to build
local hydrogen production and consumption in Gladstone by producing
hydrogen from electrolysis of water using electricity from solar
photo-voltaic as the main power source. The planned hydrogen
production plant will have an initial capacity of 250-300 metric
tons of hydrogen annually. (IHS Markit Upstream Costs and
Technology's Jie Sheng Aw)
New Zealand's headline consumer price index (CPI) rose 0.5% q/q
on a non-seasonally adjusted basis in the December quarter, which
was led by accommodation prices, according to official figures from
Statistics New Zealand. (IHS Markit Economist Andrew Vogel)
The largest contributor to the uptick in CPI in the fourth
quarter was domestic accommodation services prices - including
prices for hotels, motels, caravan parks and camping grounds, and
privately rented accommodation - which were up 20% q/q (or 6.2%
y/y), because the COVID-19 virus pandemic's continued impact on
international tourism forced New Zealanders to travel domestically.
Similarly, cars (including used cars) and transportation costs were
a key contributor to inflation for the quarter.
Furniture and electronics costs also rose notably owing to
fewer holiday discounts for these categories. This was balanced out
by a sharp fall in food prices, driven by a 22% q/q fall in
vegetable prices.
Construction costs also rose, with new home build prices rising
1.3% q/q - the largest rise in more than two years. This coincided
with an increase in rent prices of 0.5% q/q (or 2.9% y/y).
The inflation rate of tradeables increased slightly in the
December quarter, bringing the annual change to -0.3% y/y, largely
driven by lower oil prices. The inflation rate of non-tradeables
continued to rise during the quarter due to rising property rates
and tobacco prices, and was offset by cheaper telecommunication
services costs.
The inflation result in the December quarter was higher than
IHS Markit's forecast of 0.9% y/y, putting annual inflation for
2020 at 1.7%. Barring continued issues with food imports and
housing prices, annual average inflation in 2021 is likely to ease
to the low 1% range, supported the expected strength of the New
Zealand dollar containing tradeables prices.
Furthermore, we expect continued weakness in consumer demand
through the first half of 2021 caused by reduced net inward
migration, and weak services exports, contributing to lower
employment levels and subdued inflation. In fact, we expect
inflation to stay contained well below the bank's informal target
of 2.0% (the official target range is 1-3%) into 2023.
Posted 26 January 2021 by Chris Fenske, Head of Fixed Income Research, Americas
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