Malaysia

Electricity tariff up by 15% from Jan 1. The electricity tariff will be increased by about 15% for Peninsular Malaysia, and by about 17% for Sabah and Labuan from next year, said Energy, Green Technology and Water Minister Datuk Dr Maximus Johnity Ongkili. "The average electricity tariff in Peninsular Malaysia will be up 4.99 sen per kWh or 14.89%, from the current average rate of 33.54 sen/kWh to 38.53 sen/kWh. "For Sabah and Labuan, the average tariff will be up 5.0 sen per kWh or 16.9%, from current average rate of 29.52 sen per kWh to 34.52 sen per kWh," he told reporters at a press conference in Parliament on Monday. Rates in Sarawak will not be affected. The new rates will take effect from Jan 1, 2014, he added. (The Star)

Comments: We are not changing our overall CPI outlook for 2014 as a tariff hike come early 2014 was already taken into consideration. We are more concerned on any increases in petrol prices up ahead as that impact tends to be greater. The last time there was a tariff hike (June 2011 – by around 7.1%), the housing, water, electricity, gas & fuels component of the CPI edged up by a mere 0.1% MoM and the impact of just electricity is negligible at best, and relatively minute. However, we will still see a slight upward nudge in January’s CPI but will normalize in the subsequent months. We are looking at January’s CPI to be around 3.1% (Jan 2012: 1.3%). At the end of the day, the fact that most basic goods are tightly controlled items will keep overall inflation under control. Hence, we are retaining our 2014 CPI to average around 3.0%.

The continued cost push influence on prices and the need to maintain an accommodative monetary policy would mean BNM’s overnight policy rate to remain unchanged at 3.00%, at least in the first half of next year. Further improvement in the economy and possible uptick in consumer demand ahead of the GST implementation April 2015 may see BNM take a less tolerable stance on rising prices. This would mean that after exhausting all possible measures to quell inflation using macroprudential measures and taken into account the impact on trade competitiveness we foresee that BNM may opt to raise the OPR by an initial 25 basis points in 2H14.

Asia

Bank of Japan considers options to expand stimulus. Japan's central bank is planning scenarios for an expansion of its already massive economic stimulus program, looking to go beyond its $70 billion-a-month bond-buying operation, according to officials briefed on the process. Options include major purchases of stock market linked funds or other assets riskier than Japanese government bonds (JGBs), the insiders said. More radical ideas are also being floated within the central bank and among government officials who deal with the BOJ, including even more aggressive buying up of JGBs -a market already dominated by the central bank under its existing policy. (Reuters)

India’s Current-Account Deficit Narrows to Lowest Since 2010. India’s current-account deficit narrowed to the lowest level since 2010 as gold imports cooled, offering a potential boost for the nation’s currency. The deficit was $5.2 billion in July through September, compared with $21.8 billion for the prior quarter, the Reserve Bank of India said in a statement in Mumbai yesterday. The shortfall was equivalent to 1.2 % of gross domestic product. The current account is the broadest measure of trade, tracking goods, services and investment income. (Bloomberg)

Cameron Pushes for EU-China Trade Agreement in Beijing. U.K. Prime Minister David Cameron called for the European Union to open talks with China on a full-scale trade deal, as the bloc seeks to curb Chinese goods that EU officials say are being dumped and subsidized. Cameron arrived in Beijing today for the first time in three years, attempting to boost trade and move on from the diplomatic spats that have characterized his relations with China so far. He met Premier Li Keqiang and told him he wanted more liberal trade rules. At the same time, EU governments approved an agreement to curb imports of Chinese solar panels, ending the bloc’s biggest commercial dispute of its kind. (Bloomberg)

USA

US manufacturing sector expands much more than expected in November. The U.S. manufacturing sector expanded at its fastest pace in 2½ years last month, an industry report showed on Monday, while the pace of hiring in the sector also accelerated. The Institute for Supply Management (ISM) said its index of national factory activity rose to 57.3 in November—its best showing since April 2011—from 56.4 the prior month. November was the sixth-consecutive month of quicker growth in the goods-producing sector since a contraction in May, with growth accelerating after the partial government shutdown that limited activity in October. A reading above 50 indicates expansion. (Reuters)

Europe

Eurozone factory orders up for fifth consecutive month. Eurozone factory orders rose for a fifth consecutive month in November, with activity accelerating at its fastest pace for more than two years, according to a survey. France was the only country out of the 17 that use the euro to report faster declines in both output and new orders. The Markit Manufacturing Purchasing Managers' Index (PMI) stood at 51.6 in November, up from 51.3 in October. Any reading of above 50 suggests expansion. (BBC)

UK manufacturing 'strongest growth for three years'. The UK's manufacturing sector picked up further in November to its strongest level for almost three years, according to a closely watched survey. The Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) also showed employment in the sector grew. The news adds to other recent data showing that the UK economy is putting the economic crisis years behind it. The PMI stood at 58.4 in November, its highest since February 2011. A reading over 50 indicates growth. October's figure was revised up to 56.5, adding to the brighter picture for the sector. (BBC)

Currencies

Ringgit gains on power price rise optimism. The ringgit climbed the most in five weeks on optimism the first electricity price increase in two years will help rein in the Government’s budget deficit. Sovereign bonds retreated. The ringgit strengthened 0.5%, the biggest gain since Oct 28, to close at 3.2090 per US dollar in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.2050 earlier, the highest level since Nov 22. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed three basis points to 8.34%. (Bloomberg)

Dollar jumps above ¥103 for first time since May. The dollar jumped against the yen Monday as Treasury yields rose and a U.S. manufacturing gauge exceeded expectations, in line with a wave of strong manufacturing data around the globe. The dollar rose to ¥103.08 in recent trade versus ¥102.40 late Friday. The dollar last traded above ¥103 on May 22, according to FactSet. The ICE dollar index, a gauge of the greenback’s strength against six other currencies, rose to 80.918 from 80.663 late Friday. The index gained about 0.6% in November. Dollar strength was visible against the euro, which fell to $1.3537 from $1.3586 late Friday. The British pound traded at $1.6351 versus $1.6365 late Friday. The Australian dollar was slightly weaker at 91.01 U.S. cents versus 91.11 U.S. cents late Friday. (Market Watch)

Commodities

Brent climbs above $110 on China data, supply concerns. Brent crude edged above $110 a barrel on Monday after Chinese industrial activity clung to an 18-month high last month and amid continued supply disruptions in Libya. Brent crude for January delivery had risen 53 cents to $110.22 a barrel at 0256 GMT, after finishing down $1.17 in the previous session. U.S. crude was up 47 cents at $93.19 a barrel, after settling up 42 cents on Friday. (Reuters)

Gold drops 2.6 pct as strong US data fuels fund sales. Gold prices tumbled 2.6 % on Monday to their lowest since early July, as better-than-expected U.S. manufacturing data prompted funds and speculators to increase bearish bets on bullion, traders said. Spot gold fell 2.6 % to $1,219.20 by 3:13 p.m. EST (1955 GMT), its biggest one-day drop since Oct. 1. Among other metals, silver fell 4.2 % to $19.12 an ounce, having earlier hit a near five-month low of $19.11. Platinum was down 1.5 % to $1,336.25 an ounce, and palladium fell 1.4 % to $708.72 an ounce. (Reuters)

Source: Kenanga