China slows, money flows. China downgraded its 2014 growth figure yesterday to 7.3% from the 7.4% first reported (and said it could change as more work is done on the numbers). That’s further away from the official target for last year of “about 7.5%” and closer to this year’s target of “about 7%”. At the same time, China revealed the net outflow of US$93.9 billion in August. It was the sharpest monthly fall in reserves on record, while in percentage terms the drop was the biggest fall in more than three years. China’s reserves fell 2.6% in August to US$3.56 trillion. China’s reserves peaked at more than US$3.9 trillion in June 2014 before starting a long decline. The actual fall was probably closer to US$200 billion.
China is running trade surpluses this year (August trade figures are out today) of US$40 to US$50 billion, which are added to reserves. But the central bank spent tens of billions of dollars defending the currency in the wake of the surprise devaluation mid-month, and companies and individuals have invested or sent tens of billions more offshore. Julian Evans-Pritchard, the China economist at Capital Economics, said in a note overnight that the central bank sold about US$110 billion last month in support of the yuan. He also calculates that around US$130 billion worth of funds were moved out of China in August, up from his estimate of US$75 billion of outflows in July. He also says around US$20 billion was added to the value of reserves from the rise in the value of the euro and the yen (into which the reserves are invested, along with the US dollar and other currencies, such as the Aussie currency). — Glenn Dyer
An Apple a day keeps the ads away? It’s only two days to “A-Day” 2015: the release of the new iPhone 6 models from Apple; perhaps an improved iPad, possibly new versions of the operating systems for the Mac and the iPhone; a new Apple TV; and probably one or two other gizmos and add-ons we haven’t been told we need, yet. It will be one of the defining moments this year for Apple, which has suffered down-rating in the past month or so. Apple shares fell 7% in August, worse than the 6%-plus falls for the major US markets (but better than China’s 12.5% slide for Shanghai). China is of course vital for Apple, and part of the stock’s slide was put down to data showing a rare fall in smartphone sales in the June quarter. So Thursday morning’s (our time) product releases release is aimed at reversing this market weakness, with the new iPhones usually released into the Chinese market in the fourth quarter.
But there is growing nervousness among advertising-supported companies such as Google and Facebook and Twitter, not to mention Yahoo and various major media groups, that the new iOS for the iPhone will allow owners to install ad-blocker software in Safari, as Mac users are already able to do. For advertisers, the release, when it comes, could be the worst news, especially struggling media companies seeking salvation from mobile editions of their papers and magazines. But the stakes for Apple are higher — Apple is essentially a company that has to re-invent itself every two to three years to keep growing. — Glenn Dyer
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Rate cut looms. No, not the US, or Australia, it’s New Zealand. Our Kiwi brethren are expecting a rate-cut trifecta to be established Thursday morning when the country’s central bank cuts its key interest rate for a third month in a row. While global dairy prices have rebounded from their lows a month ago, and the Auckland property market experiences a boom of Sydney proportions, the NZ economy is looking at the continuation of the 0.1% GDP growth seen in the March quarter. In anticipation of the rate cut, two big Kiwi banks, the BNZ (owned by NAB) and ASB (owned by the Commonwealth) cut their one-year fixed home loan rates to record lows in the past few days. — Glenn Dyer
Poll shock looms? Singaporeans head to national elections on Friday in what some analysts say could be the most important election since independence. Opposition parties are fielding candidates in all of the country’s 29 electoral divisions — the first time the People’s Action Party has faced such a broad challenge in its 50 years of unbroken rule. Prime Minister Lee Hsien Loong says he is seeking a mandate to take the Asian financial centre “into its next half-century”. He is going to the polls a year earlier than planned, trying to capitalise on the good cheer from the country’s 50th anniversary celebrations. Emigration from mainland China has emerged as a major concern for many Singaporeans. Jobs, services, infrastructure are all under pressure from the surge in the country’s population to 5.5 million last year, from 4.4 million in 2006. There are an estimated 1.6 million foreigners in Singapore. — Glenn Dyer