Global

Gulf Should Adjust to New Oil Price ‘Reality’ – IMF. Gulf economies need to adjust to the "new reality" of oil prices expected to remain low for some time, the IMF says. But the oil-rich monarchies remain in a strong position to make the necessary adjustments thanks to the large financial reserves they have built up during years of firmer prices, according to IMF. The IMF says oil exporters in the Middle East and North Africa will lose around US$360 billion in oil revenues this year. Oil prices will average US$51.6 a barrel this year, the IMF predicted. IMF Middle East and Central Asia chief Masood Ahmed said most of these countries will need to undertake a process of sizeable and sustained adjustment on the fiscal side, include finding ways to cut public spending and diversify income away from oil. (AFP)

Malaysia

Hard Decisions for Balanced Budget by 2020, Says Najib. The government has had to make some "hard" decisions, such as removal of fuel subsidies and introduction of the GST, to enable the country to achieve a balanced budget. Both, he said, were among the toughest measures the government had undertaken to promote competitiveness and increase the tax base significantly. "There is a need to re-strategise to keep the nation's objectives and ambitions intact and maintain the long-term vision for Malaysia, amid the current global economic headwinds," added Najib. Najib said Malaysia needs to escape the middle-income trap if the country is to have any hope of achieving high income status by 2020. (Bernama)

SOEs Need to Perform Stronger, Better Risk Management to Survive. State-owned enterprises (SOEs) need stronger performance and adopt better risk management in order to survive, says Khazanah Nasional Bhd Deputy Chairman Tan Sri Nor Mohamed Yakcop. He said it would be imperative for SOEs to continuously strive for greater heights whether it was in terms of being best in their class or emerge as regional if not global champions. "To survive, SOEs need to show stronger performance, better risk management, as well as diverse ideas and innovation,” he said. "SOEs also need to avoid grouping and apply diversity in terms of gender, ethnic background and age." (Bernama)

Fitch: Malaysia’s Basel III Capital Rules to Affect FHCs. Malaysia’s extension of Basel III capital adequacy requirements to financial holding companies (FHCs) will affect most of its major banking groups, according to Fitch Ratings. It noted on Wednesday that the measures would strengthen the capital framework for FHCs, and address regulatory arbitrage between parent and subsidiary capital. Under the new rules, additional Tier 1 (AT1) and Tier 2 (T2) instruments issued by fully consolidated subsidiaries can be included as consolidated parent bank/FHC capital. This feature will ensure that capital issued by a subsidiary can be used to help recapitalise the group or parent when it fails. (The Star)

Iskandar Malaysia Drew RM27.22 Billion Investments in 9M15. Iskandar Malaysia attracted committed investments worth RM27.22 billion between January and September this year, said Iskandar Regional Development Authority (IRDA) Chief Executive Datuk Ismail Ibrahim. The economic region drew a total of RM185.34 billion in committed investments from 2006 to September 2015, with local investors accounting for 59% or RM109.78 billion and foreign investors the remaining 41% or RM75.56 billion. (Bernama)

Asia

Japan's Exports Grow at the Slowest Pace in More Than a Year. Japan’s exports grew at the slowest pace in more than a year in September, with a drop in shipments to Asia all but gains in sales to Europe and the U.S. Exports to China, India, Indonesia, Thailand and Malaysia all fell as the slowdown in China’s economy sapped demand across Asia. The value of Japanese shipments rose just 0.6% in September from a year earlier, marking the third straight month of waning growth, the finance ministry reported Wednesday. Economists surveyed had expected a 3.8% increase. The value of imports sank more than 11%, underscoring a lack of demand in Japan’s domestic economy as well as falling oil prices. (Bloomberg)

Saudis Risk Draining Financial Assets in 5 Years. Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies, the IMF said, underscoring the need of measures to shore up public finances amid the drop in oil prices. The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report on Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years. (Bloomberg)

China Bond Defaults Seen Rising After Sinosteel Misses Payment. China bond defaults are forecast to climb after a state-owned steelmaker missed an interest payment, raising questions about the government’s commitment to stand behind such firms. Sinosteel Co. failed to pay interest due Tuesday on 2 billion yuan ($315 million) of 5.3% notes maturing in 2017. Chinese authorities are weeding out weak state firms that Premier Li Keqiang called zombies. The coal mining, steel and shipbuilding industries have the highest default risks and there may be more bond defaults next year, according to Ivan Chung, an associate managing director at Moody’s Investors Service. (Bloomberg)

Indonesia Faces Almost $11 Billion Shortfall in 2015 Tax Revenue. Indonesia will likely have a shortfall of 150 trillion rupiah ($10.92 billion) in tax revenue this year, the tax office said, a development that could mean a ballooning of its budget deficit. When the Indonesian government set its tax targets for this year, many analysts said they were unrealistically high. A slowdown in Southeast Asia's largest economy has increased the difficulties officials face meeting 2015 collection targets. (Reuters)

Americas

Treasuries Volatility Drops Toward '15 Low as Fed Seen Sidelined. Treasuries investors are paring bets for price swings toward the lowest level this year as the odds recede for the Federal Reserve’s interest-rate increase to come by December. A gauge of U.S. sovereign bond market volatility dropped to 71 basis points this week, from 95 basis points as recently as August, as futures traders predict the Fed will be sidelined until March. The lowest level this year was 70 basis points in late July. Yields on benchmark 10-year notes have hovered near 2% since the start of this month. (Bloomberg)

Brazil Keeps Interest Rates Steady to Avoid Deepening Recession. Brazil's central bank kept interest rates on hold on Wednesday despite a jump in inflation expectations to avoid doing more harm to an economy mired in its worst recession in decades. In a unanimous vote, the central bank's monetary policy committee, known as Copom, kept its benchmark Selic rate at 14.25%, a nine-year high and still the highest among the world's top 10 economies. The decision not to raise rates will give a breather to President Dilma Rousseff, who is fighting for her political survival amid the country's worst economic and political crisis in 25 years. (Reuters)

Bank of Canada Holds Rates, but Cuts 2016, 2017 Growth Forecasts. Canada's central bank held interest rates steady on Wednesday after two cuts earlier this year, judging that the economy was rebounding from an oil price shock. The central bank held its benchmark rate at 0.5% following the reductions it had made in January and July because of the effects of lower oil prices. It said these cuts were helping the economy to recover as expected. The bank said prices for oil and other commodities were dampening business investment and exports in the natural resources sector. This prompted a growth forecast cut to 2.0% from 2.3% for 2016, and to 2.5% from 2.6% for 2017. (Reuters)

Venezuela Sees 85% Inflation This Year, 60% Next. President Nicolas Maduro's government predicted on Tuesday that Venezuela's inflation, already the world's highest, would be 85% in 2015 and 60% next year. Though high, those figures are conservative compared to estimates by international economic organizations who believe the South American OPEC member's inflation is already well into a three-digit annual rate. Critics say Venezuela's runaway price rises are evidence of a failed socialist model of price and currency controls combined with hostility towards the private sector. (Reuters)

Europe

U.K. Has Smallest Budget Deficit Since 2007 as Income Climbs. Britain posted its smallest budget deficit for a September in eight years. Net borrowing excluding public-sector banks was 9.4 billion pounds ($14.5 billion) in September, down 1.6 billion pounds from a year earlier, the Office for National Statistics said on Wednesday. Economists in a survey forecast 10.1 billion pounds. The tax takes from businesses and individuals rose to records for a September. The report demonstrated the benefits to the public purse from 10 quarters of economic growth, with government receipts jumping 3.9% from a year earlier to 47.5 billion pounds. (Bloomberg)

Greece, Lenders Start Talks on Reform Compliance. Greece and its international lenders started talks on Wednesday to assess its compliance with an 86 billion euro ($98 billion) bailout deal, as dissent stirred over tax hikes and pension reforms. Team leaders from three European institutions and the IMF are reviewing reforms Athens adopted on October 16, and future 'milestones' Greece must pass soon to be eligible for a payment of 3 billion euros. Fiscal and pension reforms and recapitalizing Greece's banks were on the agenda, a Greek government official said. (Reuters)

Currencies

Dollar Rises vs. Emerging Market Currencies. Investors on Wednesday clamored for the safety of the U.S. dollar against emerging market currencies and commodity-linked units such as Australian dollar following a slide in the Chinese stock market. The yen, meanwhile, hit a more than one week low against the greenback after Japanese trade data raised concerns about another recession in the world's third-largest economy. That helped the dollar rise to 120 yen at multiple points during the day and was last up 0.1% at 119.94 yen. The U.S. dollar rose sharply against the Canadian dollar, gaining 1.1% on the day to C$1.3125. The euro was last flat on the day at $1.1340. (Reuters)

Commodities

Oil Slides 2% to Three-Week Low on U.S. Crude Build. Oil prices fell about 2% to three-week lows on Wednesday as the U.S. government reported a bigger build than expected in crude stockpiles. U.S. crude oil inventories rose 8 million barrels last week, the government-run Energy Information Administration (EIA) said. U.S. crude settled down $1.09, or 2.4%, at $45.20 a barrel. It hit a three-week low of $44.86 earlier. Brent finished down $0.86, or 1.8%, at $47.85 a barrel, after hitting an early October low of $47.50. (Reuters)

Gold Falls on Long Liquidation, Technical Selling. Gold fell almost 1% on Wednesday for its biggest one-day loss in three weeks on technical selling and long liquidation as the dollar recovered ground versus the euro amid uncertainty over the timing of a Federal Reserve interest rate hike. Spot gold was down 0.8% at $1,167.6 an ounce at 1934 GMT, off a session high of $1,179.20. U.S. gold futures for December delivery settled down $10.0 an ounce, or 0.9%, at $1,167.1. Silver was down 1.3% at $15.77 an ounce, platinum was down 1.3% at $1,006 an ounce and palladium was down 2.7% at $679 per ounce. (Reuters)