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Wednesday, June 29, 2005

Asian Manufacturing

This news could add weight to the China slowdon thesis:

Japan's industrial production fell in May and South Korea's manufacturing grew less than expected as exports cooled and electronics companies trimmed stockpiles of digital cameras and cell phones.

Japan's production dropped a seasonally adjusted 2.3 percent from April, the Ministry of Economy, Trade and Industry said in a report today in Tokyo. South Korean output rose 0.5 percent, a statistics office report showed, lagging the 1.2 percent median gain predicted in a Bloomberg survey of 11 economists.

Manufacturers including Olympus Corp. and Samsung Electronics Co. say a glut of consumer electronics and falling prices are reducing profits. Economic expansion in Asia may slow to 5.25 percent this year from 6.25 percent last year as exports cool and record oil prices curb global demand, the International Monetary Fund said last month.

``We see exports in both Japan and Korea falling for the rest of this year and next,'' said Graeme Maxton, director at the Economist Intelligence Unit in Hong Kong, forcing both nations to rely more on domestic demand for growth.

Production is stalling elsewhere in Asia. Singapore's manufacturing fell 4.8 percent in May, the fourth drop in five months, according to a June 27 government report. In Taiwan, output fell 1.4 percent in May from a year earlier, the biggest drop in two years, a government report showed on June 23.

I wouldn't bank on any 'heavy lifting' from internal consumption in Japan though.

Tuesday, June 28, 2005

CNOOC Unocal Rumbles On

But don't miss this bit, Bloomberg today:

"CNOOC Ltd., China's third-biggest oil company, will borrow $7 billion from its state-owned parent at below-market interest rates to finance an $18.5 billion bid for Unocal Corp. that topped an offer by Chevron Corp.

The parent company, China National Offshore Oil Corp., will give CNOOC a 30-year loan of $4.5 billion at a rate of 3.5 percent, Chief Financial Officer Yang Hua said. The parent also provided a $2.5 billion, no-interest bridge loan, Yang said. The yield on a 30-year U.S. Treasury bond is 4.2 percent.

Obviously something important is changing.

Monday, June 27, 2005

Oil Pushes Through $60 a Barrel

The price of crude leaped to a new high this morning (Monday), breaking through the psychologically important US$60 a barrel threshold as concerns mounted that supply would not meet demand, especially in the United States. This is leading some (including the FT) to ask whether push is coming to shove on the cost side (equally it won't exactly be good news for consumption).

Shares in energy-intensive companies such as manufacturing and transport were hardest hit. FedEx, for example, the US delivery group that has been a leading beneficiary of booming global trade, broke its winning streak by warning that this quarter's earnings would be hit by jet fuel costs despite an automatic surcharge for customers.

And the metals industry, which had been enjoying its best growth for years, is now squeezed between the high cost of energy-related inputs such as electricity and coal and slowing demand from leading customers.

Wen Gives Market Guidance On Renminbi

China's premier - Wen Jiabao - put the world on warning yesterday that there will be no "undue haste" in the introduction of a more flexible exchange rate for China. Whether this is the result of the incompetent way this issue has been handled at the political level, or whether this was always going to be this way, China is now making clear that *she* will decide.

"Before representatives of more than 40 countries, Mr Wen reaffirmed China's longstanding commitment to move to a more flexible system, without disclosing when and how the change would be made. "By 'gradual progress', we mean to push forward the reform in a step- by-step manner. . . .and guard against undue haste," Mr Wen said.

"However, since this reform involves a wide range of areas and will have a far-reaching impact, it still requires a great deal of preparation to help create an enabling environment for all sides to sustain the possible impacts."

Mr Wen listed a lengthy set of considerations guiding policy on the renminbi, including its impact on domestic economic growth, job creation, financial stability, foreign trade and the ability of local companies to manage currency risk.

At the end of this list, Mr Wen said China would also "keep an eye on the economic and financial performance of neighbouring countries and regions, and of the world as a whole".