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Equity markets closed higher across all major global markets,
with Europe's iTraxx and CDX-NA credit indices also higher across
both IG and high yield. US government bonds were close to flat and
European bonds closed mixed. The US dollar was weaker on the day,
while oil, gold, and silver were all higher. As the world continued
to wait for the final results for the US presidential election,
today's US initial claims for unemployment insurance was almost
unchanged versus last week and there were no major surprises from
the FOMC meeting. In addition to the US election and continuous
announcements of new COVID-19 restrictions, the markets will be
focusing on tomorrow morning's US non-farm payroll report for
October to gauge the speed of the recovery of jobs lost due to the
first wave of the COVID-19 pandemic
Americas
As of 9:32pm EST, NY Times reports Presidential candidate Joe
Biden having won 253 electoral votes versus President Donald
Trump's 214 (same tally as Wednesday night), with Nevada, Arizona,
Georgia, North Carolina, Pennsylvania, and Alaska still undecided.
(NY Times)
Democrat Joe Biden strengthened his hold on the race for the
White House on Thursday, steadily chipping away at Donald Trump's
early lead in a pair of crucial swing states as the president's
campaign peppered the courts with legal complaints. (Bloomberg)
Trump's lead in Georgia had dwindled to just 3,600 votes on
Thursday evening, while his lead in Pennsylvania was down to
64,000, according to the Associated Press.
In Nevada, Biden's lead widened to 11,400, from 7,600 at the
start of the day.
New tallies out of Arizona show Biden's lead has fallen to
46,257 votes ahead of Trump - a drop of 10,576 votes from the
previous total.
US equity markets closed higher for the fourth consecutive day;
Russell 2000 +2.8%, Nasdaq +2.6%, and DJIA/S&P 500 +2.0%.
10yr US govt bonds closed flat/0.77% yield and 30yr bonds
-1bp/1.53% yield.
CDX-NAIG closed -4bps/54bps and CDX-NAHY -21bps/363bps.
DXY US dollar index closed -0.8%/92.66.
Gold closed +2.7%/$1,947 per ounce and silver +5.4%/$25.19 per
ounce.
Crude oil closed -0.9%/$38.79 per barrel.
The U.S. became the first country to top 100,000 cases in one
day, according to data compiled by Johns Hopkins University and
Bloomberg. Illinois, Ohio, Michigan and Indiana were among states
reporting record Covid-19 infections on Thursday. A Height Capital
Markets analyst estimated that U.S. hospitals could reach capacity
and trigger lockdowns before the Thanksgiving holiday if infections
continue at the current pace. In Europe, France warned of a
"violent" second wave and Greece imposed a three-week lockdown.
(Bloomberg)
The Federal Open Market Committee (FOMC) finished its two-day
policy meeting this afternoon. The statement issued at the
meeting's conclusion was similar to the one issued on 16 September,
with minor updates to its assessments of recent inflation
developments and financial conditions. The FOMC chose, as expected,
to keep the target for the federal funds rate at a range of 0-0.25%
and maintained forward guidance implying that the target will
remain at that level for a few years, until achieving benchmarks
for labor markets and inflation that were not revised. The chair's
press conference began at 2:30 pm EST. He is likely to repeat calls
for additional fiscal support for the economic recovery, prospects
for which remain clouded with uncertainty over the outcome of
elections for the US president and the US Senate. (IHS Markit
Economists Ken Matheny and Kathleen Navin)
Today's post-FOMC press briefing with Chair Powell offered
insight on topics ranging from the pace of and risks to the
recovery, need for additional fiscal stimulus, potential changes to
the Fed's asset purchase program, and possible extensions of its
emergency lending programs ("13-3"). With most 13-3 programs set to
expire in December, we look for an announcement on this soon.
During his prepared comments, the Chair announced that beginning in
December, the FOMC will release the full set of materials for the
Summary of Economic Projections, some of which do not currently
become available until the release of the meeting minutes three
weeks later. Overall, the Chair's remarks during today's press
briefing were consistent with our current forecast and assumptions
for monetary policy. (IHS Markit Economists Ken Matheny and
Kathleen Navin)
Seasonally adjusted (SA) initial claims for unemployment
insurance fell by 7,000 to 751,000 in the week ended 31 October.
Despite trending down, initial claims remain at historically high
levels—the high during the Great Recession was 665,000. The not
seasonally adjusted (NSA) tally of initial claims fell by 543 to
738,166. (IHS Markit Economist Akshat Goel)
Seasonally adjusted continuing claims (in regular state
programs), which lag initial claims by a week, fell by 538,000 to
7,285,000 in the week ended 24 October. Prior to seasonal
adjustment, continuing claims fell by 537,898 to 6,951,731. The
insured unemployment rate in the week ended 24 October was down 0.3
percentage point to 5.0%.
There were 362,883 unadjusted initial claims for Pandemic
Unemployment Assistance (PUA) in the week ended 31 October. In the
week ended 17 October, continuing claims for PUA fell by 992,169 to
9,332,610.
In the week ended 17 October, there were 3,961,060 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 17 October, the unadjusted total fell by 1,152,854 to
21,508,662.
US productivity (output per hour in the nonfarm business
sector) rose at a 4.9% annual rate in the third quarter following a
10.6% increase in the second quarter. Hours worked rose at a 36.8%
rate in the third quarter following a 42.9% decline, while
compensation per hour declined at a 4.4% rate after rising 20.0% in
the second quarter. (IHS Markit Economists Ken Matheny and Lawrence
Nelson)
Data on productivity and costs have been severely impacted by
fallout from the COVID-19 pandemic, so the implications of recent
quarterly data for longer-run trends are unclear. Output and hours
worked each fell sharply in the second quarter following smaller
declines in the first quarter. Both rebounded sharply in the third
quarter.
However, hours fell further than output over the first two
quarters and rebounded by less than output in the third quarter,
resulting in a higher path for productivity. On balance over the
first three quarters of the year, compensation per hour rose by
even more than productivity, as employment in lower-wage sectors
was more severely impacted than employment in higher-wage
sectors.
Unit labor costs rose at a 2.7% annual rate over the first
three quarters of 2020.
Looking ahead, we expect both productivity and compensation per
hour to reverse portions of their recent increases as activity
rises in lower-wage sectors. Unit labor costs are poised to trend
higher.
Productivity rose by less than we expected in the third quarter
while compensation per hour declined by more than expected. Unit
labor costs declined at an 8.9% pace in the third quarter, a
slightly smaller decline than we had anticipated.
US employers announced 80,666 planned layoffs in October,
according to Challenger, Gray & Christmas—down 32% from
September's 118,804. October's total is the lowest since February
but is still 60% higher than the number of cuts announced in
October 2019. (IHS Markit Economist Juan Turcios)
October was the eighth month to report job-cut announcements
specifically because of the COVID-19 pandemic, which totaled 7,803
for the month, behind other reasons including cost-cutting and
restructuring. However, just as in the prior months of this
pandemic, the number does not include furloughed workers.
For the year to date (YTD), 2,162,928 job cuts have been
announced, 320% higher than the same period in 2019. The current
YTD total has already surpassed the record annual total of
1,956,876 announced job cuts in 2001, with two months remaining in
the year (Challenger began tracking job-cut announcements in
January 1993).
Of the total job cuts announced so far this year, 1,099,726
were because of COVID-19, according to employers.
According to Andrew Challenger, senior VP of Challenger, Gray
& Christmas, "The lower numbers certainly indicate some
companies impacted by shutdown orders were able to reopen and stave
off cutting jobs. However, as case counts rise and more
jurisdictions impose stricter enforcement, and stimulus money dries
up with no coming legislation, uncertainty is likely guiding many
company decisions on retaining workers."
Unsurprisingly, the hardest-hit sector and recipient of the
lion's share of the coronavirus-related cuts this year continues to
be the entertainment/leisure sector, which encompasses bars,
restaurants, hotels, and amusement parks. Year to date, companies
in the entertainment/leisure sector have announced 845,954 cuts, a
whopping 833,646 higher than during the same period in 2019. The
entertainment/leisure sector announced 14,804 cuts in October, the
highest number of announced cuts out of the 30 industries tracked
by Challenger.
Energy companies and transportation companies announced the
second and third highest job cuts in October with 11,787 and
11,475, respectively.
Rounding out the top five most adversely affected sectors year
to date were retail (179,520 job cuts), transportation (159,674 job
cuts), services (151,250), and automotive (86,169 job cuts).
According to Challenger tracking, the number of hiring
announcements in October was 255,198. In large part this reflected
hiring plans by retailers in anticipation of the upcoming holiday
season.
A California judge on Thursday (Nov. 5) remanded FDA's approval
of AquaBounty's genetically engineered salmon back to the agency to
reconsider the potential environmental risks if the biotech fish
escape and become established in the wild. The ruling from US
District Judge Vince Chhabria requires FDA to update its
environmental assessment under the National Environmental Policy
Act (NEPA) and its Endangered Species Act (ESA) analysis. It is a
blow to FDA but also unlikely to fully appease the plaintiffs who
were keen to see the court strike down FDA's 2015 decision to allow
AquaBounty to commercialize its GE salmon. Chhabria's decision is,
however, clearly a win for AquaBounty, which warned of "devastating
harms" to the company if FDA's approval were vacated. FDA approved
AquaBounty's GE salmon in November 2015, declaring it as "safe and
nutritious to eat" as conventional salmon after completing a new
animal drug review under the Federal Food, Drug and Cosmetic Act
(FDCA) that spanned more than 20 years. The agency's NEPA review
found "no significant environmental impacts" associated with
AquaBounty's plan to grow GE salmon at a hatchery on Canada's
Prince Edward Island and a now-defunct facility in Panama. The
salmon is the first - and only - GE animal FDA has approved for
human consumption. The fish is an Atlantic salmon that contains a
gene from a Chinook salmon and a DNA sequence from an ocean pout.
The modification allows it to grow to market size in about half the
time compared to a normal Atlantic salmon. A coalition of
anti-biotech organizations and fishing groups filed their lawsuit
in March 2016 in the US District Court for the Northern District of
California, alleging the agency ran afoul of the FDCA, NEPA and the
ESA. In December 2019 Chhabria tossed out the plaintiffs' challenge
to FDA's authority under the FDCA to review and regulate biotech
animals, but kept alive six claims related to its NEPA review and
one claim the agency failed to comply with the ESA's consultation
requirements. The judge also kept in play the plaintiffs' claim
that FDA should have conducted an environmental review under the
FDCA. Both sides filed for summary judgment earlier this year. (IHS
Markit Food and Agricultural Policy's JR Pegg)
Dana has announced that it is acquiring part of Modine
Manufacturing's automotive segment business. Dana expects the
acquisition to benefit its Power Technologies business unit. Dana
is acquiring the business for the purchase price of USD1, although
it will also assume certain financial liabilities. In the
announcement, Dana chairman and CEO James Kamisickas said, "Dana's
in-house engineering and manufacturing of thermal-management
technologies is an important differentiator, and this acquisition
is synergistic to our current portfolio, making it a natural fit
for our Power Technologies business. In addition to strengthening
relationships with core customers in Europe and Asia, it presents
opportunities to leverage our scale to expand business with new
mobility manufacturers and optimize the business to deliver
significant value to our shareholders." Dana expects the new
business to add about USD300 million in revenue and USD30 million
in adjusted EBITDA, once the new unit is integrated. With the
expanded thermal content and complementary manufacturing processes
and supply chains, Dana expects this will increase the scale of its
Power Technologies business by 30%, as well as accelerate Dana's
electrification strategy. The acquisition is expected to strengthen
relationships with new and existing light-vehicle manufacturers, as
well as help Dana diversify its Power Technologies business
footprint. In a statement on the deal, Modine Manufacturing said
that the sale represents about 70% of the company's automotive
business revenue. Dana expects the deal to be closed in the first
half of 2021, and the business acquired will be consolidated in the
Power Technologies segment. The acquisition will include eight
major facilities with operations in China, Germany, Hungary, Italy,
the Netherlands, and the United States, with the business serving
global manufacturers. (IHS Markit AutoIntelligence's Stephanie
Brinley)
Argentine light-vehicle registrations increased 14.6% year on
year (y/y) in October, according to the latest data from the
Automotive Dealers' Association of the Republic of Argentina
(Asociacion de Concesionarios de Automotores de la Republica
Argentina: ACARA). (IHS Markit AutoIntelligence's Tarun Thakur)
The increase in sales due to a resumption of production at all
plants, rapid rebuilding of inventories, and offers by vehicle
dealers. Argentina was in total lockdown for a few days in May
owing to the COVID-19 pandemic, but most plants reopened by 8 June,
and by mid-July, all light-vehicle assembly plants were back on
line. In the year to date (YTD; January to October), Argentina's
light-vehicle sales declined 31.4% y/y.
Argentina's light commercial vehicle (LCV) registrations
increased 16.2% y/y in October, and passenger car sales were up
13.7% y/y. Argentina's light-vehicle market is still driven by
passenger-car sales, which accounted for 65.5% of total
light-vehicle registrations in October.
However, this share was down from 66% in October 2019. Sport
utility vehicle (SUV) sales increased 8.8% y/y in October. In
October 2020, SUVs held a light-vehicle market share of 21.4%,
compared with 22.5% in October 2019.
Argentina's light-vehicle sales dropped 43.5% in 2019. IHS
Markit projects a sharp 32.1% decline in Argentina's light-vehicle
sales in 2020, followed by a 0.9% increase in 2021, which may be
characterized as a step towards stability, since the projection for
2022 is 4.8% growth.
As of now, we anticipate a quick recovery for Argentina, as any
time the currency depreciates quickly an increase in exports and a
quick recovery in light-vehicle sales follows. We will continue to
monitor the market to evaluate if a revision to our 2021 outlook is
needed, as when this phenomenon occurred previously, we saw a
vacuum effect. The forecast is for a release of pent-up demand and
growth in 2021 to 2027. Argentina is not forecast to see annual
light-vehicle sales of over 500,000 units again until 2027.
Europe/Middle East/Africa
European equity markets closed higher; Spain +2.1%, Germany
+2.0%, Italy +1.9%, France +1.2%, and UK +0.4%.
10yr European govt bonds closed mixed; Italy -3bps,
France/Spain flat, Germany +1bp, and UK +3bps.
iTraxx-Europe closed -4bps/54bps and iTraxx-Xover
-18bps/321bps.
Brent crude closed -0.7%/$40.93 per barrel.
As expected, the Bank of England (BoE) made no changes to
record-low interest rates but increased its wider support for the
economy in its November session. (IHS Markit Economist Raj Badiani)
The BoE's Monetary Policy Committee (MPC) voted unanimously to
maintain the Bank Rate at 0.1% at its meeting ended 4 November and
did not hold a vote to impose negative rates.
The MPC voted unanimously for the BoE to continue with its
existing programmes of UK government bond and sterling
non-financial investment-grade corporate bond purchases, financed
by the issuance of central bank reserves, maintaining the target
for the total stock of these purchases at GBP745 billion (USD967.8
billion) by the latter stages of this year.
As of 4 November, the total stock of the Asset Purchase
Facility (APF) was GBP717 billion, representing a rise of GBP272
billion as part of the combined GBP300-billion programs of asset
purchases announced on 19 March and 18 June. This consists of
GBP262 billion of UK government bonds and GBP10 billion of sterling
non-financial investment-grade corporate bonds.
In addition, the MPC voted unanimously to purchase another
GBP150 billion of government bonds to raise the total amount of
quantitative easing (QE) from GBP745 billion to GBP895 billion over
the course of 2021.
The BOE's governor stated that the additional policy stimulus
was to mitigate the "dramatic impact" of rising coronavirus disease
2019 (COVID-19) cases and the tougher lockdown restrictions across
the United Kingdom.
The inflation outlook is benign. The rate stood at a multi-year
low of 0.5% in August and is set to remain below 1.0% until early
2021, below the BoE's 2% target. Lower inflation is due to the
impact of lower energy prices and the temporary cut in VAT for the
hospitality sector, holiday accommodation, and tourism attractions.
However, inflation is expected to be "around 2% in two years' time"
because of increasing domestic price pressures as spare capacity
diminishes.
The MPC's central projections assumes "an immediate but orderly
move to a comprehensive free trade agreement (FTA) with the
European Union on 1 January 2021". The EU-UK FTA could mirror the
Comprehensive Economic and Trade Agreement (CETA) in place between
Canada and the European Union, which removes most tariffs on goods
and increases quotas. However, it fails to encourage trade in
services, with trade in financial services not included.
The BoE could decide to increase the target stock of purchased
UK government bonds for the fourth time during the COVID-19 virus
crisis. The triggers could be as follows:
A second wave of infections spills into 2021, triggering an
extended national lockdown. Indeed, the MPC continues to
acknowledge that growth and inflation developments depend "on the
evolution of the pandemic and measures taken to protect public
health".
The termination of the CJRS in March 2021 triggers a second
wave of substantial job losses and a more elevated unemployment
rate.
The risk that the UK-EU trade talks could fail, with the UK
having to resort to World Trade Organization (WTO) terms when
trading with the EU from 1 January 2021. We believe that this could
trigger a new recession in the UK in the first half of 2021, and we
would anticipate a further expansion of the QE program.
According to IHS Markit's October update, the economy is likely
to contract by 11.0% in 2020. However, it appears that the UK is on
course for a sharper contraction, probably by at least 12.0% in
2020.
UK passenger car registrations slid by 1.6% y/y during October.
According to the Society of Motor Manufacturers and Traders (SMMT),
registrations fell to 140,945 units, from 143,251 units in October
2019. (IHS Markit AutoIntelligence's Ian Fletcher)
Fleet registrations were the biggest drag, declining by 3.3%
y/y to 77,249 units, while private registrations were flatter,
growing by 0.4% y/y to 60,422 units.
Registrations among business customers increased by 4.0% y/y to
3,274 units.
Fuel-type data for October reflect the big swings in both
consumer preference and technology availability. Gasoline
(petrol)-engine passenger car registrations dropped by 21.3% y/y to
69,704 units during the month, and diesel registrations plummeted
by 38.4% y/y to 20,941 units.
The shift is partly explained by the fact that mild-hybrid
electric vehicles (MHEV) are becoming more prevalent, with sales of
diesel MHEVs increasing by 56.6% y/y to 6,129 units in October and
registrations of gasoline MHEVs expanding by 545.8% y/y to 16,023
units.
Other customers are making a more conscious move in the
direction of alternative-powertrain technologies. Traditional
hybrid registrations rose 39.0% y/y to 11,038 units, and plug-in
hybrid electric vehicles (PHEVs) recorded an even bigger percentage
increase, jumping 148.7% y/y to 7,775 units.
Battery electric vehicle (BEV) registrations also rose by
195.2% y/y to 9,335 units. Nevertheless, the market share of these
three vehicle types remained in single figures.
The latest registrations data come on the same day that England
enters a new, stricter lockdown. This follows the imposition of a
"firebreak" lockdown in Wales since 23 October, which will remain
in place until 9 November, and which has seen the closure of
non-essential retailers including vehicle showrooms.
The slide in October registrations, along with the steep
declines earlier this year as a result of the COVID-19
virus-related lockdown, means that the market is now down 31% y/y
in the year to date (YTD) at 1,384,601 units.
Eurozone retail sales volumes dropped by 2.0% month on month
(m/m) in September, a larger fall than expected (the market
consensus was -1.0% m/m according to Reuters' survey). August's m/m
surge of 4.4% was revised marginally downwards to 4.2%. (IHS Markit
Economist Ken Wattret)
The third quarter registered a record q/q increase in sales of
10.2% despite the latest drop, with the level of sales in September
just over 1% higher than where it was in February prior to the
COVID-19 virus-related collapse in March and April.
However, the breakdown of September's figures showed weakness
across the board. Sales of textiles, clothing, and footwear in
particular plunged (-7.6% m/m) and remained around 11% below their
February level.
Mail order and internet sales, which have unsurprisingly
outperformed during the pandemic, also dropped sharply in September
(-5.5% m/m), although the level of sales remained almost 15% above
where it was in February.
Across other categories of spending, the picture remains mixed.
Sales of audio and video equipment and household appliances were
well above February's level (+7%), along with sales of computers,
software, and telecoms (+2%), although both showed m/m declines in
September.
The third quarter's record increase in retail sales was boosted
by exceptionally strong "carry-over" effects stemming from the very
large gains from May to July as containment measures were eased and
spending rebounded.
The reverse effects points to a much weaker outcome in the
fourth quarter, however, reflecting the resurgence in COVID-19
cases and related restrictions, with the eurozone headed for a
double dip
Record low core inflation, deteriorating economic prospects,
and the elevation of the euro exchange rate have raised the
probability of a reduction in the European Central Bank's (ECB)'s
Deposit Facility Rate (DFR). (IHS Markit Economist Ken Wattret)
The ECB has lowered its DFR below zero on five occasions, each
time by 10 basis points (to the present level of -0.5%). However,
only one of those five reductions has occurred since 2016, in
September 2019 at the tail end of Mario Draghi's presidency.
The significance of the latter change was that it was
accompanied by the introduction of a two-tier system for reserve
remuneration, in which part of commercial banks' holdings of excess
liquidity at the ECB are exempt from the negative interest rate,
thereby limiting its cost to banks (and avoiding potentially
adverse effects on the cost and supply of loans).
The introduction of this tiering process signaled that the ECB
had not yet reached the lower bound for the DFR, keeping the option
open for further (modest) reductions should the need arise for
additional policy accommodation. This is reflected in the ECB's
forward guidance, which states that the policy rates are expected
to remain "at their present or lower levels", conditional on
inflation prospects.
The ECB's implied preferences regarding its various policy
instruments are reflected in the DFR having hardly moved in over
four years, while the ECB's asset purchase programs and long-term
liquidity provision to banks have continued to drive huge
balance-sheet expansion.
Given the various factors highlighted above, we now conclude
that a DFR cut of 10 basis points in December is likely, as part of
a package of stimulus measures reflecting the material change in
the outlook and the ECB's eagerness to demonstrate both that it is
sensitive to these developments and that it has not run out of
policy ammunition. We will incorporate this into our updated
baseline forecast in mid-November.
We recognize that the arguments are not all one way when it
comes to the DFR and the ECB could concentrate on other policy
instruments instead. The Pandemic Emergency Purchase Programme
(PEPP) remains the ECB's preferred policy tool and we expect at
least a EUR500-billion uplift in December, whether the DFR is
lowered or not.
There is also likely to be some reluctance within the ECB's
Governing Council to take the DFR even further below zero, given
the possible adverse side effects on the bank lending channel. We
also acknowledge that a 10 basis-point rate cut will not make a
radical difference to short-term growth and inflation
prospects.
However, it can still have a positive impact on monetary
conditions in the eurozone, by lowering expectations of the future
path of policy rates, leaning down in turn on longer-term interest
rates and at the margin, and households' and corporates' borrowing
costs.
The German passenger car market posted a 3.6% y/y decline in
October to 274,303 units, according to the latest data from the
KBA. This brings the year-to-date (YTD) figure for the first three
quarters of the year to 2,316,134 units, a decline of 23.4% y/y.
(IHS Markit AutoIntelligence Tim Urquhart)
The private market continued to show signs in October that it
is responding to the twin government stimulus measures introduced
at the beginning of July - a reduction in VAT from 19% to 16% and
extended subsidies for electric vehicles (EVs) and plug-in hybrid
electric vehicles (PHEVs).
Private registrations last month rose 6.8% y/y, to take an
unusually high market share of 38.1%. However, any gains in private
registrations were counteracted by declines in dealer, business,
and fleet registrations, which fell by 9.1% y/y to take a 61.8%
share of the market.
In terms of the fuel split of passenger car sales, gasoline
(petrol) cars took a 42.1% share of the market, although volumes
fell by 29.8% y/y to 115,382 units, while diesel witnessed a big
decline as well, taking a 26.0% of the market with volumes of
71,370 units.
Pure battery electric vehicle (BEV) sales were up by 365.1% y/y
to take an 8.4% share of the market, while hybrid sales were up by
138.5% y/y to 62,929 units to take a share of 22.9%. Of these
62,929 units, 24,859 were PHEVs, equating to an overall market
share of 9.1% y/y.
The October market in Germany probably reflected the
uncertainty that is currently prevalent within society and among
the country's economic and business institutions, as it becomes
ever more apparent that there will not be a short-term fix to the
COVID-19 virus pandemic.
Another month-long lockdown was imposed on 28 October, although
car dealerships are allowed to remain open if they follow strict
procedures. However, the psychological impact of this second
lockdown on consumer and business confidence remains to be
seen.
The significant reduction in business registrations in
September suggests an increasingly cautious approach to
pre-registering vehicles in order to manage inventory.
German turbine engineering company Aerodyn Engineering has
obtained a statement of feasibility from DNV GL for its variant
super compact drive (SCD) technology nezzy2 floating wind turbine.
The endorsement of safety, quality, and performance standards by
DNV GL will allow Aerodyn to secure investments to embark on a
full-scale test. The current model is a 1:10 model, and is being
tested in the Bay of Greifswald off German. The nezzy2 is a dual
downwind driven system that uses the same floating body,
self-aligning and anchoring system as its predecessor SCDnezzy. The
model has one central tower which branches into two leaning steel
towers with the SCD turbines sitting at the tip, and secured by
preloaded steel rods. Aerodyn has said that the 18 meter tall scale
model was fitted with 180 sensors during the trial and measurements
showed that the unit performed well under different wind and wave
conditions, surviving a storm equivalent of a category four to five
hurricane with waves reaching 30 meters high. (IHS Markit Upstream
Costs and Technology's Melvin Leong)
French pure-play company in floating foundations for offshore
wind, Ideol, has teamed up with Swedish concrete structures
producer Bygging Uddemann (BYUM) to advance the serial production
of Ideol's concrete floater design. The companies will work
together in optimizing a gantry slipforming solution that will be
easily implementable by all leading construction companies around
the world. Ideol currently has its floating concrete foundation
deployed as a demonstrating for a 2 MW Vestas V80 wind turbine at
the EOLMED project. In September, it announced a strategic
partnership with mooring cables and rope supplier Bridon Bekaert
Ropes Group (BBRG) to develop and new synthetic mooring solution
specifically for the floating offshore wind market. The product
will focus on cost-reduction, capacity, and lead-time expectations
to meet the growing demands of the floating offshore wind industry.
(IHS Markit Upstream Costs and Technology's Melvin Leong)
Portugal's unemployment rate stood at 7.8% during the third
quarter, according to non-seasonally adjusted figures released by
Statistics Portugal. It rose by 1.7 percentage points compared with
the same period of 2019 and 2.2 percentage points compared with the
second quarter of the year. A rebound in the labor force was a key
factor driving the unemployment rate up. (IHS Markit Economist
Diego Iscaro)
While the gradual reopening of the economy since May led to a
1.5% quarter-on-quarter (q/q) increase in employment, the number of
jobs fell by 3.0% year on year (y/y). Employment in the
manufacturing sector waned by 1.5% y/y during the third quarter,
while employment in the services sector declined by a stronger 3.4%
y/y. Within services, employment in the real estate and arts and
recreation sectors fell strongly.
The reopening of the economy also led to a large increase in
the labor force on a q/q basis (+3.9%). However, the labor force
during the third quarter was still 1.3% below its level a year
earlier.
The number of unemployed people jumped by 45.1% q/q, its
strongest increase on record. Almost half of the unemployed
population was formerly employed in the service sector, while a
similar percentage had been seeking for a job for less than 12
months.
Labor market conditions are expected to deteriorate further
during the fourth quarter, as the renewed tightening of
restrictions takes its toll on firms' hiring decisions.
Denmark culled 17 million mink to prevent COVID-19 mutation
causing renewed pandemic. The mutated strain has been transmitted
to 12 people in Northern Jutland, where a large majority of
Denmark's farms are located. Up to 17 million animals will be
culled, in a move to ensure development of a vaccine against
COVID-19 and efforts to control the disease will not be in vain.
Danish prime minister Mette Frederiksen explained the Statens Serum
Institut has found examples of the mutated COVID-19 virus in people
showing reduced susceptibility to antibodies - meaning the strain
poses the risk an upcoming vaccine will not work effectively. The
first mink farms in Northern Jutland found to be infected with the
COVID-19 virus were identified in mid-June. The virus has since
spread to 207 farms across Jutland, as of November 4. Statens Serum
has identified infection involving the mutated strain on 168 mink
farms in the Northern Jutland region since August. Minister for
food and fisheries Mogens Jensen said: "We are facing one of the
biggest health crises the world has ever experienced. The Danish
government and I are painfully aware of what this means for all the
Danish mink farmers who are about to lose their livelihood and for
some their entire life's work. But it is the right thing to do in a
situation where the vaccine, which is currently the light at the
end of a very dark tunnel, is in danger." The Danish government
will provide an economic incentive of DKK20 ($3) for each mink if
farmers cull all their animals within 10 days, or five days for
farms with under 7,500 animals. (IHS Markit Food and Agricultural
Policy's Sian Lazell)
Valmet Automotive has announced that it is expanding battery
pack production at its facility in Salo (Finland). According to a
statement, construction work has already started and includes
buildings for logistics and manufacturing functions. The
installation of a new production line will also allow for a broader
range of products. The work is expected to be completed by
mid-2021. Valmet added that the expansion will require an increase
in the number of employees from around 200 to more than 400 during
2021 and 2022. Production began at the battery pack site, run by
Valmet Automotive's EV Systems business line, during 2019. However,
strong demand for battery packs - underlining the growth in vehicle
electrification - has led to the company undertaking further
investment in this area. The company notes that it already has
three contracts with unnamed businesses, and further manufacturing
contracts are in the pipeline. In addition, the EV Systems business
line also offers battery engineering and testing services. (IHS
Markit AutoIntelligence's Ian Fletcher)
According to a 'flash' GDP estimate for the third quarter by
Statistics Sweden (SCB), the Swedish economy grew by 4.3% quarter
on quarter (q/q) and declined by 3.5% year on year (y/y) on a
calendar-adjusted basis. (IHS Markit Economist Daniel Kral)
This is almost fully in line with our forecast growth of 4.4%
q/q and means that the Swedish economy recovered just over half of
the lost output in the second quarter, when it contracted by 8.3%
q/q.
There is no breakdown available accompanying the release, but
the SCB notes that the recovery in the third quarter was driven by
a strong export performance, which is supported by monthly
data.
Although Sweden has suffered a much shallower downturn than the
eurozone, their levels of output in the third quarter compared with
pre-pandemic levels (the fourth quarter of 2019) are almost
identical. The Swedish economy was 4.2% and the eurozone 4.3%
smaller than pre-pandemic levels.
Although Sweden's approach to containing the spread of the
COVID-19 virus has differed from most European countries, relying
on voluntary behavioral changes rather than a lockdown, the level
of restrictions in Sweden throughout much of the third quarter was
stricter than in many major West European economies, likely
weighing down on parts of the services economy
Turkey's merchandise trade deficit surged in the third quarter,
fueled by a 10.7% year-on-year (y/y) jump in merchandise imports.
Imports of gold had a particular impact on the trade deficit.
Regardless of the cause, the wider trade gap will add to the
country's current-account deficit, exacerbating external financing
concerns. (IHS Markit Economist Andrew Birch)
In the third quarter of 2020, Turkey posted a merchandise trade
deficit of USD13.9 billion, widening by more than USD6.6 billion
compared with the same period of 2019. Overall for
January-September 2020, the trade gap reached USD37.9 billion, up
by nearly USD16.8 billion y/y.
The spread of the COVID-19 virus globally severely undercut
demand from key Turkish export markets. Shipments to the European
Union - typically receiving over 40% of all Turkish exports -
dropped by 14.3% y/y in the first three quarters of 2020, driving
down overall exports by 10.9% y/y.
Meanwhile, overall merchandise imports continued to grow in
January-September, by 1.5% y/y. Surging gold imports inflated the
overall import total, increasing by 132.4% y/y in the first nine
months. This surge in gold demand was most likely due to a mixture
of "in kind" trade (corresponding with an uptick in imports from
Iraq), the central bank needing to replenish its gold reserves, and
the population seeking to switch their savings into a safe
haven.
Without the gold imports, merchandise imports would have
dropped by 30.7% y/y in the first nine months. However, in
August-September, non-gold imports were growing again, by 4.5% y/y.
Expansionary economic policies, the relaxation of social-distancing
requirements, and expanding industrial activity all fueled a
re-acceleration of import demand.
The surge in the merchandise trade deficit - regardless of
whether or not imports of gold were the contributing factor -
raises external financing risks significantly. The concurrent rise
in the current-account deficit, exacerbated by a severe drop-off in
service exports, puts a heavy burden on foreign capital inflows for
financing.
Turkey's annual consumer price inflation remained elevated in
October, essentially unchanged since December 2019. The lira's
sharp depreciation since the end of July has contributed to upward
price pressures, with fresh losses since late October threatening
to push inflation higher in the final months of the year. (IHS
Markit Economist Andrew Birch)
Annual consumer price inflation in October stood at 11.9%.
Annual price growth accelerated slightly compared with the previous
month, by 0.14 percentage point, but was generally where it has
been since December 2019.
Consumer prices grew by 2.1% month on month (m/m) in October. A
seasonally influenced surge in clothing and footwear prices (up
6.8% m/m) contributed heavily to the headline increase in prices
but, more generally, expansionary monetary policy and the sliding
lira fueled inflationary pressures.
Although the Central Bank of the Republic of Turkey (Türkiye
Cumhuriyet Merkez Bankası: TCMB) has been tightening monetary
policy through various "back-door" measures, it has failed to slow
annual credit growth significantly, keeping demand pressures
high.
Meanwhile, the lira has been depreciating rapidly since the end
of July, having depreciated by 23.7% against the US dollar to the
end of October. The lira has tumbled particularly sharply since 22
October following the TCMB's decision to not raise its main policy
rate, falling by more than 14% against the US dollar since that
meeting. The sharp lira losses are contributing to upward pressure
on the supply side.
IHS Markit's current, end-2020 inflation forecast is 12.2%.
However, we had anticipated that the TCMB would raise interest
rates once again at its October meeting. With the central bank not
having taken action, the lira losses will be more severe than we
had previously anticipated, fuelling higher inflation. In our
November forecast revision, we project that the end-2020 rate is
likely to be closer to 13%. For 2021, we currently forecast
end-year inflation to fall to 10.2%, although that projection will
also rise.
The Turkish lira fell to a record level of 8.52 against the US
dollar on 3 November. The currency has lost more than 40% of its
value this year against the US dollar. (IHS Markit Country Risk's
Firas Modad)
Turkey is unlikely to default on debts, even as the
government's foreign-currency reserves have now dropped to below
zero when excluding swap operations. In late September, the US
ambassador to Turkey announced that Turkey owes USD2.3 billion to
healthcare companies and pharmaceutical companies. Healthcare
companies operating in Turkey have not been paid for 16 months by
public hospitals and 36 months by university hospitals. Similarly,
Turkey faces difficulties in managing contingent liabilities from
Public Private Partnerships (PPP), many of which include explicit
minimum revenue guarantees as well as debt guarantees from the
Turkish government. According to Turkish media, payments owed to
contracts in PPP projects have been delayed by 6 months; and the
total debt of the Directorate-General of Highways to construction
companies reached TRY12 billion (USD1.52 billion). Turkey's foreign
debt in foreign currency, which is due for payment within a year or
less, amounted to USD123.7 billion dollars, while foreign reserves
dropped to USD36 billion. The central bank had a USD50 billion net
negative position in the swap market by September, up from net
negative USD18 billion in December 2019. The net negative position
in the swap market and commercial bank reserves required to be held
at the central bank, and which do not belong the central bank.
Turkey's low level of government debt was one of its strength in
the economy. The government is likely to accelerate its borrowing,
while the worsening foreign currency shortage increases the risk of
non-payment to PPP contractors.
A Biden presidency would lead to further deterioration in
Turkey's financial position. A Biden presidency would likely better
align with both the US foreign policy community's desires and
congressional demands that the US take a tougher line against
Turkey.
Turkey is increasingly likely to impose capital controls by
introducing transaction taxes and putting a limit to other similar
transactions between Turkish banks and foreign counterparts. In May
2020, Turkey increased tariffs up to 20% on over 400 goods during
the COVID-19 outbreak.
President Erdogan is very unlikely to permit Turkey to go to
the International Monetary Fund (IMF) in the near future, opting
instead to raise foreign debt to buy time. Erdogan has repeatedly
and publicly rejected the possibility of an official IMF
program.
The Azeri economy is heading for its worst downturn since the
late 1990s as both the oil and non-oil sectors continue to shrink,
while the military campaign over Nagorno Karabakh is set to
aggravate existing challenges. (IHS Markit Economist Lilit
Gevorgyan)
The recent series of data released by Azerbaijan's state
statistical committee show a further decline in Azeri economic
activity in the third quarter. Real GDP contracted by 3.9% year on
year (y/y) in January-September, following a 2.7% y/y fall in the
first half of the year.
Both the oil and non-energy sectors shrank in the three-month
period. The all-important oil and gas sector fell by 6.4% y/y,
while the non-energy sector declined by 2.4% y/y. Capital
investment also fell markedly during January-September, by 3.8%
y/y.
The Azeri statistical service has also provided a breakdown of
the contribution to value added. The top contributor was the
industrial sector, making up 34.7% of total value added, followed
by trade on 11.4%, agriculture on 7.6%, and transport on 7.4%.
Industrial production declined by 4.5% y/y during the first nine
months of the year.
Although non-energy industrial sector output expanded by 10.8%
y/y, the sector's contribution to overall production is limited and
it was only partially able to offset the 6.1% y/y contraction in
the oil and gas sector.
The Azeri mining sector makes up 60% of total industrial
output, whereas manufacturing comprises only 33.8%, therefore the
sector's performance is determined by mainly external demand for
Azeri energy exports.
It is noteworthy that in September the industrial sector fell
sharply by 15.7% y/y, the steepest fall in over a decade. This
contrasts with declines of 10-11% y/y in April-May, at the height
of the first wave of the COVID-19 virus pandemic.
IHS Markit is planning a downward revision of its Azeri real
GDP projections for 2020-21 in its November forecast round. The
Azeri economy is now expected to see a much deeper fall of 5.9% in
2020 compared with 4.6% in our current baseline scenario. The
rebound will also be weak in 2021, with real GDP expanding that
year by only 2.0% (compared with 2.8%), mostly due to the
statistical base effect.
The Ministry of Transport and Communications (MoTC) has
announced the signing of two memoranda of understanding (MoUs) with
Nasser Bin Khaled & Sons Holding Co. and Q-Auto to provide free
electric vehicle (EV) chargers in Doha (Qatar), reports the Qatar
Tribune. Under the MoUs, the two companies will provide EV chargers
for free and will perform periodic maintenance of the charging
units. The location for installation of the charging units will be
specified by the MoTC. The MoTC's director of the Technical Affairs
Department, Sheikh Mohamed Al Thani, said, "The two MoUs come
within the framework of putting into effect MoTC's Electric Vehicle
Strategy developed in collaboration with the bodies concerned. The
country continues reinforcing the participation of the private
sector in government developmental projects and encouraging its
partaking in mobility and transportation projects in such a way
that helps enrich private sector companies' investment ideology,
thus bolstering the localization of expertise and the technology in
use." (IHS Markit AutoIntelligence's Tarun Thakur)
Angolan private consumption is expected to decline by 4.3% in
2020 as inflationary pressures persist. Annual headline inflation
in Angola remained elevated in September and October, limiting
space for the central bank to cut interest rates further in the
near term to support small and medium-sized enterprises and raise
private consumption. (IHS Markit Economist Alisa Strobel)
Although official data is currently not available as an
aggregated number for annual average headline inflation in October,
the figures available as of 4 November from Angola's central bank,
the National Bank of Angola (Banco Nacional de Angola: BNA),
suggest that price levels stood at 22.9%.
September's annual headline inflation rate rose to 23.8%.
Annual headline inflation reached the 20% mark back in April. In
addition, April registered the highest increase on a month-on-month
basis, at 2.1%, identical to the monthly price growth observed in
January. Monthly headline inflation in September fell to 1.8%, down
by 0.3 percentage point from the previous month.
We maintain our view that interest rate hikes or further rate
cuts by the BNA are unlikely in the near term amid expected
continuous high inflationary pressures. IHS Markit expects Angola's
annual average headline inflation rate to reach around 21.8% in
2020. Although softening moderately, inflationary pressures are
expected to remain elevated in the near term, before tempering in
2022.
The higher price levels in tandem with a weaker exchange rate
of the kwanza, which is the result of oil price softness, are
expected to continue to burden private-sector business growth, in
particular, and IHS Markit expects private consumption to decline
by 4.3% in 2020, before gradually recovering during the second half
of 2021. This outlook remains under high risk, however, from the
outcome and duration of a second wave of the COVID-19 pandemic
globally.
Given little scope to adjust interest rates, we have seen other
prompt action by the Angolan government to support households and
businesses in 2020 during the pandemic. These included exemptions
from value-added tax (VAT) on goods imported as humanitarian aid
and donations, but also VAT tax credits on imported capital goods
and raw materials for producing essential consumption goods.
Additional liquidity support to banks and a liquidity line to
buy government securities from non-financial corporations have also
been implemented to support business activity.
According to the Angolan National Institute of Statistics (INE),
the unemployment rate during the third quarter of 2020 is estimated
at 34%, 1.3 percentage point higher than in the second quarter and
3.9 percentage points higher than in the third quarter in 2019. To
mitigate the negative impacts of the COVID-19 pandemic, the BNA
announced in September plans to implement a deferral measure in the
constitution of impairments for regulatory effect.
Asia-Pacific
APAC equity markets closed higher across the region; Hong Kong
+3.3%, South Korea +2.4%, India +1.8%, Japan +1.7%, and
Australia/Mainland China +1.3%.
Acrylonitrile butadiene styrene (ABS) consumption surged as a
result of home quarantines imposed to curb the spread COVID-19,
sending cash margins to unprecedent levels at above $500/mt and set
to surpass $600/mt in 2021, said Daniel Siow, IHS Markit director
for styrenics at the Eight Asia Petrochemical Conference on Nov. 5.
The global economy plunged when COVID-19 blighted nations in early
2020 and a second wave is now emerging in major European countries
and the U.S. This meant that cities were locked down once more and
working or schooling from home become the norm until an effective
vaccine can be discovered and large populations inoculated. This
disruption to daily live turned out to be a boon for ABS, an
engineering thermoplastic resin widely used in appliances and
electronics, said Siow. The shift to home schools and offices meant
that computers and peripherals such as monitors, mouses and
keyboards are now essential products, and being cooped up at home
has led to rising demand for television sets and refrigerators, he
added. "Asian ABS producers, particularly those in mainland China,
have benefitted from the surge in demand and several producers have
already sold out their cargoes in recent months to meet orders from
end product manufacturers," said Siow. China's refrigerator output
for September was 9.36 million units, up 27% year-on-year and
washing machine production reached 7.99 million units, up 11%
year-on-year. Based on IHS Markit assessment, the pent-up demand
for computers and home appliances may take a longer time to pan out
as millions of people worldwide are expected to continue "flexible
work arrangements or telecommuting," resulting in more demand for
these products, he said. The Chinese automotive sector also
rebounded strongly with September output rising to 2.46 million
units, up 10.9% year-on-year and passenger vehicle increased 12.9%
year-on-year to 2.57 million units. With world consumption of ABS
at 9 million mt/year and concentrated mainly in Asia, it is
critical that this region does not go through another massive
COVID-19 lockdown, which will impede its road to recovery, he
added. (IHS Markit Chemical Advisory's Sok Peng Chua)
China attaining self-sufficiency in paraxylene (PX) meant that
producers who traditionally export to the country will struggle to
place their products amid falling demand, said Duncan Clark, IHS
Markit vice-president for aromatics and fibers at the Eighth Asia
Chemical Conference on 5 Nov. This will lead to a significant
shakeup of the industry where significant capacity globally would
have to shut as the PX-naphtha margin fell below $300/mt, he added.
IHS Markit expects nameplate PX capacity to exceed domestic China
demand by as early as 2023 and this could have a significant impact
on the overall import requirements from other exporters around the
world. Chinese PX imports peaked in 2018 at 16 million mt and are
expected to decline to 8 million mt by about 2023. On paper, China
should achieve self-sufficient by 2023 but poor production margins
globally, associated with oversupply, will drive existing capacity
within China to shut down so some PX imports will still be required
but at a much lower level, Clark said. Historically, when the
PX-naphtha margin fell below $300/mt, some aromatics units will
close on a temporary basis as producers turn their focus to
gasoline production instead. This typically rebalances the
supply/demand and facilitates the recovery of the PX-naphtha spread
to above $300/mt. However, recently the spreads are closer to
$125-$140/mt and show little signs of improving, indicating that
insufficient global capacity is shutting down relative to the new
supply brought online in China and Brunei, said Clark. From 2021 to
2025, IHS Markit expects new Chinese PX demand to increase by about
9 million mt/year but this will be matched against more than 12
million mt/year of new capacity. As such, there will be a further
reduction of global operating rates to around 69%, which on a
nameplate basis is the lowest ever. (IHS Markit Chemical Advisory's
Sok Peng Chua)
Chinese automaker BYD has reported a sales increase of 16.1%
year on year (y/y) to 47,731 units during October. Sales of BYD's
new energy vehicles (NEVs), including battery electric vehicles
(BEVs) and plug-in hybrid electric vehicles (PHEVs), were 23,217
units in October, up 84.7% y/y. Meanwhile, sales of BYD's
traditionally fueled vehicles fell by 14.2% y/y to 24,515 units
last month. Passenger BEVs remained the top-selling category in the
automaker's NEV line-up, reaching 14,919 units in October, up 96.6%
y/y, while sales of its PHEVs rose 60.0% y/y to 7,126 units. In the
year to date (YTD), BYD's total sales are down 16.0% y/y at 316,707
units, including 134,158 NEVs, down 34.6% y/y, and 182,549
traditionally fueled vehicles, up 6.3% y/y. BYD's sales continued
to improve during October thanks to rising demand for its NEVs. The
launch of the BYD Han EV, a flagship model in its Dynasty line-up,
and China's efforts to boost NEV sales in rural areas helped boost
BYD's NEV sales in October. In comparison, sales of its
traditionally fueled vehicles contracted in October, although the
automaker's traditional vehicle product line-up remains its main
sales driver in the Chinese market. From January to October, sales
of sport utility vehicles with conventional gasoline (petrol)
engines, the best-selling vehicle type in BYD's line-up, increased
67.8% y/y to 133,733 units. (IHS Markit AutoIntelligence Abby Chun
Tu)
Mitsubishi Motors has posted a consolidated net loss of
JPY209.8 billion (USD2 billion) during the first half of fiscal
year (FY) 2020 (1 April-30 September), compared with a net profit
of JPY2.598 billion in the first half of FY 2019, according to a
company statement. Operating loss stood at JPY87.01 billion during
first half of FY 2020 compared with a profit of JPY1.246 billion in
the first half of FY 2019. Net sales for the period were down by
49% year on year (y/y) to JPY574.9 billion. Of this, Japanese sales
stood at JPY179.8 billion and accounted for 31.2% of total sales
during the period. Association of Southeast Asian Nations (ASEAN)
sales accounted for 19.35%, while European sales accounted for
14.0% of total sales and North America contributed 11.4%. In terms
of sales volume, the automaker sold 351,000 units globally in the
first half of the FY compared with 592,000 units in the same period
last year. Mitsubishi sold maximum volumes in Europe at 75,000
units during the period, followed by 71,000 units in ASEAN and
51,000 units in North America. According to IHS Markit
light-vehicle sales data, Mitsubishi's light-vehicle sales are
expected to decline by 30.5% y/y to 833,150 units in 2020 and will
reach 890,400 units in 2021. (IHS Markit AutoIntelligence's Nitin
Budhiraja)
Andhra Pradesh's government is setting up 400 electric-vehicle
(EV) charging stations across the state in the first phase of a
plan to promote the adoption of EVs, according to a report by the
Times of India. The government also plans to set up testing
facilities for vehicles and components, and testing tracks for EVs,
with an investment of INR2.5 billion (USD33.5 million). State
Energy Secretary Srikant Nagulapalli said during a webinar on the
'Go Electric' campaign, organised by the Bureau of Energy
Efficiency and AP State Energy Conservation Mission (APSECM), "We
want to make more charging stations available to citizens in coming
days. Installing charging stations will boost the confidence of
users of electric vehicles and will also encourage companies to
launch new electric vehicles." Several state governments in India
have announced their own EV policy to encourage uptake of such
vehicles and attract investment. A lack of charging infrastructure
is one of the major impediments that hinders uptake of EVs and the
latest initiatives will help to address this challenge. The Andhra
Pradesh state government released an electric mobility policy in
May 2018 to promote the use of EVs. Under the plan, the state
government announced offer incentives to consumers, automakers,
battery manufacturers, and charging infrastructure companies. The
policy also offers full reimbursement of road tax and registration
fees on sales of EVs until 2024. The state aims to have 1 million
EVs on its roads in the next five years and has also set a target
of attracting INR300 billion for EV manufacturing. (IHS Markit
AutoIntelligence's Isha Sharma)
Tamil Nadu state government in India has exempted electric
vehicles (EVs) from payment of motor vehicle tax until the end of
2022, in a bid to promote their adoption. The move is part of the
state's Electric Vehicle Policy 2019 unveiled last year. According
to a report by The New India Express, the state government passed
an order stating, "In exercise of powers conferred under Section 20
of Tamil Nadu Motor Vehicles Act, 1974 - and in supersession of
Home Department notification of Part II Section 2 of Tamil Nadu
Gazette Notification dated October 1, 2008 - the governor exempted
the battery-operated vehicles, both transport and non-transport,
from payment of Motor Vehicle Tax from 03 November 2020 to 31
December 2022." EVs are subject to a 4% road tax payment in the
state. With the latest move, Tamil Nadu has become the second state
in India to waive road tax on EVs, after Delhi. (IHS Markit
AutoIntelligence's Isha Sharma)
The IHS Markit Vietnam Manufacturing Purchasing Managers'
Index™ (PMI®) posted 51.8 in October, down marginally from 52.2 in
September but still signaling expansion in the manufacturing sector
and representing a substantial recovery from April's record low of
32.7. The latest survey showed improving operating conditions in
the consumer and intermediate goods sectors. However, investment
goods firms posted a deterioration, amid further declines in both
output and new orders. (IHS Markit Economist Rajiv Biswas)
In October 2020, industrial production rose by 5.4% y/y,
reflecting a substantial rebound in manufacturing output and export
orders as lockdowns eased in major export markets. For the first
ten months of 2020, industrial production rose by 2.7% y/y,
reflecting a very resilient performance compared with many other
Asian industrial economies which have faced sharp contraction in
industrial output due to the pandemic and related lockdowns.
According to Vietnam's General Statistics Office, exports in
October are estimated to have risen by 9.9% y/y to USD 26.7
billion, while imports likely increased 10.1% y/y to USD 24.5
billion, resulting in a trade surplus of USD 2.2 billion for the
month of October. Exports are estimated to have risen by 4.7% y/y
for the first ten months of this year, while imports rose by 0.4%,
resulting in a strong trade surplus for the first ten months of USD
18.7 billion.
The US has been Vietnam's largest export market during 2020
year-to-date, with Vietnam's exports to the US up 24% y/y.
Vietnam's trade surplus with the US during the first ten months of
2020 reached USD 50.7 billion, compared with a trade surplus of USD
55.8 billion for the full 2019 calendar year. Exports to China have
also shown strong growth of 14% y/y during the same period.
However, exports to the EU were down 3% y/y during the first ten
months of 2020.
A key factor that has driven the sustained strong growth of
Vietnam since 2010 has been the rapid growth of electronics
manufacturing. The importance of Vietnam's electronics industry has
risen dramatically over the past decade, with the electronic
industry's share of total GDP rising from around 5% in 2010 to
around one- quarter of GDP by 2019, a key factor helping to drive
rapid growth of both exports and GDP.
With electronics now being Vietnam's most important export
sector, the impact of global lockdowns due to the pandemic on the
global electronics industry had been a major shock to the sector
during the first half of 2020. Amid widespread global lockdown
measures aimed at containing the spread of the pandemic, world
demand for electronic goods slumped sharply in April and May.
The Vietnamese economy is expected to rebound in 2021, with GDP
growth expected to strengthen to a pace of 6.1% y/y. Over the
medium-term economic outlook, a large number of positive growth
drivers are creating favorable tailwinds, continuing to underpin
the rapid growth of Vietnam's economy. This is expected to drive
strong growth in Vietnam's total GDP as well as per capita
GDP.
Grab has announced that it has deployed more than 5,000
electric vehicles (EVs) in Indonesia this year. The EVs are in in
the form of two-wheelers, e-scooters, and four-wheelers, reports
Kompas.com. Ridzki Kramadibrata, president of Grab Indonesia, said,
"We support the government's vision of reducing carbon emissions by
29 percent by 2030 through the initiative to launch and operate
more than 5,000 electric-based vehicles. We have also worked with
PLN to develop initiatives to build a motorized vehicle ecosystem."
As the purchase prices of EVs are high, Grab employs a rental
system and has partnered with companies Kymco, Selis, and others to
procure leased vehicles. This year, Grab deployed Hyundai Ioniq EVs
in Jakarta, as part of its pilot EV ride-hailing service, GrabCar
Electric (see Indonesia: 29 January 2020: Grab pilots EV
ride-hailing service in Jakarta). This pilot follows SoftBank's
USD2-billion investment in Grab to establish a transport network
based on EVs in Indonesia. This initiative is in line with the
government's initiative to put 2 million electric cars on the road
by 2025. Last year, Grab partnered with Hyundai, Astra Honda Motor
(AHM), and Gesits to launch pilot EV ride-hailing services in
Jakarta. Grab owns one of the largest fleets of EVs in Southeast
Asia and launched a pilot in January 2019 involving 200 Hyundai
Kona vehicles being operated on Singapore's roads. In 2018, Grab
teamed up with energy utilities provider SP Group to power EVs with
SP's fast-charging network. (IHS Markit Automotive Mobility's
Surabhi Rajpal)
Posted 05 November 2020 by Chris Fenske, Head of Fixed Income Research, Americas, IHS Markit
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