PPP Classifications, Framework Revision Under Pikas 2030 ‘timely And Necessary’ — UOB

The yen carry trade has largely been unwound

July was dominated by the, at times, disorderly unwind of the yen carry trade. At the heart of the story was extreme, one-way positioning in the yen, a hawkish Bank of Japan and some softer US data. The surge in volatility on the back of this undoubtedly added to the broad risk reduction seen into early August, which included a sharp correction in US tech stocks. The 12% peak-to-trough adjustment in USD/JPY now leaves speculative positioning in the yen near flat.

The US jobs market isn't looking too healthy

A particularly weak July jobs report was enough to spark widespread fears about an imminent US recession. The unemployment rate has risen from 3.4% to 4.3% in little over a year, which is above the 4% rate the Fed predicted for the end of the year. This has in turn triggered the Sahm rule, a momentum measure of changes in the unemployment rate that has historically been consistent with recession.

On top of that, the Bureau of Labor Statistics has adjusted its figures, removing a third of the jobs previously believed to have been added in the 12 months leading up to March 2024. This revision, stemming from incorrect assumptions about job creation in small businesses, raises serious questions about whether the slowdown in job creation since April has been worse than reported. We think the unemployment rate will be closer to 5% than 4% at the end of this year.

The Fed has opened the door to big rate cuts

Fed chair Jerome Powell used his speech at the Jackson Hole symposium to tell us that the “time has come” to cut interest rates. He also said he didn’t welcome further weakness in the jobs market and did little to dispel lingering expectations of a 50 basis point cut at the September meeting.

A 25bp move on 18 September is slightly favoured by markets right now, but if we get a sub-100k on payrolls and the unemployment rate ticks up to 4.4% or even 4.5%, then 50bp looks likely.

An Olympics boost is masking sluggish economic growth in the eurozone

The combined impact of the Paris Olympics, and a strong tourist season in Spain/Italy, has helped lift service-sector sentiment in the eurozone. But it would be premature to label this as the start of an acceleration of growth. Manufacturing remains weak and is likely to stay that way while US growth is slowing and domestic demand in China remains under pressure.

Consumers are enjoying positive real wage growth, but increasing wariness about job security might simply push up the savings ratio rather than spending. We expect the eurozone economy to continue to grow, but at a slower pace.

The ECB is treading more cautiously than the Fed

The ECB is finally rallying around a September rate cut but appears more cautious than the Federal Reserve in endorsing further easing. Headline wage growth is slowing, but partly due to base effects from last year’s inflation compensation schemes.

Big union demands in Germany are also a reminder that the direction for pay remains an uncertainty for the ECB. We therefore expect gradual cuts in September and December, but a weaker growth outlook suggests the ECB can step up the pace there after.

The Bank of England is moving slowly – for now

Not for the first time in recent years, investors are thinking that the Bank of England will take a more hawkish path than the Federal Reserve. That follows very strong growth in the first half of the year, ongoing stickiness in services inflation, and a more hawkish tone from BoE officials. That means August’s BoE rate cut is unlikely to be followed by another later this month. We expect the next cut in November, but like the ECB we think the pace of cuts will accelerate as it becomes clearer that inflation “persistence” is reducing.

Momentum in China’s economy has continued to slow

After a surprisingly strong performance in the first half of the year, China’s manufacturing sector seems to be slowing down. This is partly due to a significant decline in auto production, which risks turning this sector from a supportive tailwind into a challenging headwind for the broader economy in the near future.

Meanwhile, a negative wealth effect and low wage growth continue to suppress consumption. This will make it challenging for China to hit its 5% growth target this year. We will need to see continued policy rollout to reverse the momentum, particularly as base effects turn less supportive for growth in the second half of the year.

However, such a significant fall is not our base-case expectation, and we think weakness will be limited to approximately 1.1818. We suspect those looking to sell the Pound more aggressively will be disappointed by signs of stubborn inflation pressures, which will encourage ongoing caution from the Bank of England.

Source: Poundsterlinglive

Private healthcare group IHH Healthcare, which operates four hospitals locally under the Gleneagles, Mount Elizabeth and Parkway brands, is eyeing growth in Singapore and Hong Kong.

The group, which has a portfolio of over 80 hospitals worldwide, is still expanding, announcing its latest deal to acquire Island Hospital in Penang on Sept 4.

Its group chief corporate officer Ashok Pandit told on Sept 11 that the firm’s plans to open 15 new clinics and two Ambulatory Care Centres (ACCs) in Singapore by 2028, and six new clinics or ACCs in Hong Kong within the same timeframe, are on track. ACCs are facilities providing medical procedures that can be done within a day.

The company also intends to increase the capacities of some of its hospitals by almost 4,000 beds by 2028, and is also exploring the possibility of entering new markets such as Indonesia and Vietnam.

“But there are various considerations such as alignment with our overall strategy, market opportunity and regulatory framework to be assessed, before any further decisions can be taken,” Mr Pandit said.

IHH, which is dual-listed in Singapore and Malaysia, recently announced its entry into a sale and purchase agreement to acquire a 100 per cent stake in Island Hospital, a private hospital catering to medical tourists.

The RM4.2 billion (S$1.26 billion) deal includes a 78 per cent stake previously held by private equity firm Affinity Equity Partners, as well as the remaining shares owned by Island Hospital’s senior doctors and its founder and chief executive Mark Wee. The deal is expected to be completed by the end of 2024.

Mr Pandit said IHH chose to expand its operations in Penang because it already has an established presence there with Gleneagles Penang and Pantai Hospital Penang.

“Penang is integral to our strategy for Malaysia with its strong local patient base and appeal to foreign patients, especially from Indonesia, due to its competitive pricing and reputation for clinical and care excellence,” he said.

“What drew us to this asset was that it has robust operations supported by a deep specialist pool - it allows us to extend our leading position in Penang and increase our participation in Malaysia’s medical tourism sector.”

IHH’s last acquisition was also in Malaysia, where its indirect wholly-owned subsidiary Pantai Holdings acquired Timberland Medical Centre in Sarawak for RM245 million.

IHH reported a net profit of RM623 million for the second quarter of its 2024 fiscal year, more than doubling from RM301 million in the previous year, driven by strong operational performance and deferred tax credits, according to its Aug 29 financial statement. Revenue grew by more than 30 per cent to reach RM6.1 billion.

Analysts told ST that there is potential upside to IHH’s share price, even as the acquisition of Island Hospital could dilute the firm’s earnings in the short term.

Mr Isaac Lim, chief market strategist at digital brokerage firm Moomoo, said any short-term dilution in earnings will not materially impact IHH’s profitability, which has seen strong growth over the past three years due to its post-pandemic recovery and strategic expansions.

He said: “From a technical perspective, IHH Healthcare price is now approaching its historical highs of $2.11 last seen in December 2021.

“Should price see a strong convincing bullish breakout above this key resistance and psychological level, IHH share price could very well see further upside and push towards $2.33 price level.”

A research analyst at RHB Bank said the bank maintains its “buy” call for IHH, adding: “We see positive synergies from the acquisition considering Island Hospital Penang’s superior margin profile, promising growth prospect, and synergistic value creation in fortifying IHH Penang’s operation.”

Mr Tay Wee Kuang,  associate director of research at CGS International Securities, noted that the acquisition of Island Hospital poses limited risk due to IHH’s current exposure, with over 80 hospitals worldwide.

“We continue to like the stock for its diversified geographical exposure that have different catalysts across various countries – a mature market in Singapore, and fast-growing markets across Malaysia, India, Turkey and Eastern Europe,” he said.

Source: Straitstimes

The average household debt in Thailand is seen rising to the highest in at least 16 years as an uneven post-pandemic economic recovery hurts family incomes, according to a survey.

The debt pile per household is set to jump 8.4% to 606,378 baht (RM77,907.02) this year, according to a survey by the University of Thai Chamber of Commerce. That’s the highest family debt obligation since the university began the survey in 2009. The findings are based on a survey of 1,300 respondents during Sept. 1 and 7.

Newly-appointed Prime Minister Paetongtarn Shinawatra is set to prioritise tackling the nation’s household liability, estimated at more than 16 trillion baht — equivalent to around 91% of gross domestic product. She is due to announce a sweeping debt restructuring as an urgent priority in her government’s policy statement due on Sept 12.

“The high level of household debt is hurting the nation’s attractiveness for investors as it limits consumption and growth in the future,” Thanavath Phonvichai, the university’s president, said at a briefing Tuesday. “The government is right on target to address this issue as well as boost economic growth.”

The household debt-to-GDP ratio is expected to stabilise around the current level before declining to 89% next year as new stimulus measures, especially the cash handout scheme, will help boost economic growth, Thanavath said.

Almost 70% of household liabilities are formal debt, while the rest of the borrowings are from informal sources. Thanavath estimated that the informal debt could be 10%-20% of GDP.

Source: Theedgemarkets