Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on March 12, 2018 - March 18, 2018

US President Donald Trump’s 25% import tariff on steel and 10% for aluminium on March 8 has provoked an international reaction, stealing some attention from China’s National People’s Congress that began on March 5 in Beijing and continues this week.

China’s Foreign Minister Wang Yi said “China would make a justified and necessary response”, calling trade war “a mistaken prescription” where the outcome “will only be harmful”. China’s commerce ministry had earlier said the tariffs would “seriously impact the normal order of international trade” and “resolutely opposed” it.

South Korea said it may file a complaint with the World Trade Organisation while Japan said the move would have a “big impact” on bilateral ties. Japan had asked to be exempted from the US tariffs, as did the European Union, Brazil and Argentina.

Canada and Mexico, which are renegotiating the North American Free Trade Agreement with the US and are the top and fourth largest exporters of the metal to the US, have been spared the tariffs for now. Softening his initial stance after a revolt within his own party, Trump said he can be “flexible”, depending on the US’ trade balance and military ties with the exporting country.

On Feb 7, Trump tweeted that “China has been asked to develop a plan for the year of a one billion dollar reduction in their massive trade deficit with the United States. “Our relationship with China has been a very good one, and we look forward to seeing what ideas they come back with.”

His declaration coincided with the signing by 11 nations of a new Trans-Pacific Partnership trade pact, which the US withdrew from last year.

Moody’s said March 9 that Malaysia “will be the biggest winner” from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that covers a market of nearly 500 million despite the absence of the US. Citing data from the Peterson Institute for International Economics (PIIE), the rating agency (which admits there is less benefit without the US) says the CPTPP would benefit palm oil, rubber and electronics exporters with export access to new markets, including Canada, Peru and Mexico. Australia, Brunei, Chile, Japan, New Zealand, Singapore and Vietnam are also CPTPP members.

After a stronger-than-expected start from January export numbers (17.9% versus 4.7% in December) last week, the main economic data to be released in Kuala Lumpur on Tuesday are industrial production and manufacturing sales for January.

Other key economic releases this week include India’s February Consumer Price Index (CPI) and industrial production data for January on Monday (March 12). Inflation indicators are also slated to be out in the US (March 13) and the eurozone (March 16). Producer Price Index (PPI) data, which can serve as a leading indicator for the CPI, is slated for release in Japan (March 12) and the US (March 14).

China’s February retail sales data is scheduled for March 14 while the US will release its latest advance retail sales figures later in the day. The same day, China and the eurozone are both slated to release industrial production data, while Japan will do so on March 16. On Thursday (March 15), Indonesia will report its February exports and trade balance while New Zealand will release its 4Q2017 GDP reading.

There are also a number of survey releases this week. In Australia, the Westpac Consumer Confidence Index will be out on March 14, and the NAB Business Confidence Index on March 13. In the US, there is the NFIB Small Business Optimism Index (March 13), Empire State Survey Index (March 15), Philadelphia Fed Survey Index (March 15) and University of Michigan Sentiment Index (March 16).

On the central bank front, the Swiss National Bank (SNB) and Norway’s Norges Bank are slated to announce their monetary policy decisions on March 15. Rates are expected to be kept unchanged.

Market attention will also be on the European Central Bank (ECB), whose president Mario Draghi is slated to speak in Frankfurt this week. The ECB’s governing council on March 8 kept rates unchanged but removed the so-called “easing bias” from its monetary policy message, having dropped an explicit commitment to buy more bonds and expand its quantitative easing fix if necessary.

On the Malaysian corporate front, Pelangi Publishing Group Bhd will hold its annual general meeting on March 16. Companies holding extraordinary general meetings this week include Hartalega Holdings Bhd (March 12), Atta Global Group Bhd (March 13), VSolar Group Bhd (March 14) and Caely Holdings Bhd (March 15).

Hartalega is seeking shareholders’ approval for a proposed 1-for-1 bonus issue that is expected to be completed by end-March. Its executive chairman Kuan Kam Hon was last week named Malaysia’s 10th richest billionaire by Forbes with a net worth of US$2.5 billion.

Caely wants approval for a 1-for-2 bonus issue of free warrants. Penang-based Atta — which now trades, makes and recycles metal-related products and is exposed to steel price movements — wants approval to diversify into property development, construction and property investment.

VSolar is seeking to pass a proposed renounceable 3-for-1 rights issue, sweetened with two free warrants for every three rights shares. At an indicative issue price of 10 sen, the exercise is expected to raise at least RM8.2 million gross proceeds (minimum scenario) being the size of the irrevocable undertaking by major shareholder Asiabio Capital.

Notably, the ongoing parliament session, which began March 5, is scheduled to run through April 5 as the nation awaits an announcement on GE14.

 

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