22 theSun | THURSDAY NOVEMBER 27 2008

business news

Shares fall as stimulus is

weighed, China cuts rates
LONDON: World stocks struggled
yesterday, with European and Japanese
markets falling, while the low-yielding
Japanese yen rose as investors counted
the cost of global fiscal stimulus
packages to boost flagging economies.
Europe was considering a more
than €130 billion (RM611 billion) plan
following the US Federal Reserve’s
US$800 billion (RM2.88 trillion) effort to
bolster credit and mortgage markets on
Tuesday.
China also cut interest rates by 108
basis points, aiming to ensure liquidity
in the banking system and to help to
boost slowing economic growth.
Positive reaction to the financial
resuscitation efforts was starting to give
way to concern about the bottom-line
impact on government balance sheets.
“The Fed’s measures were supposed
to be good for risk,” said Geoffrey Yu,
currency strategist at UBS in London.
“It’s obviously positive for some
aspects of the economy, but people are
starting to worry about balance sheet
risks ... In general, problems on the US
economic front haven’t changed at all.”
Real economy malaise also continued
to sap sentiment towards risk. Toyota
Motor Corp had its top-notch credit
rating cut for the first time in a decade.
World stocks as measured by the
MSCI index were slightly lower, while
European stocks were down 0.4%, off
their lows. Tokyo’s Nikkei 225 index
earlier fell 1.3%.
Falling crude prices weighed on oil shares
in Europe, adding to a general air of deflating
sentiment as the stimulus packages were
digested, leaving investors to wonder what
it would take to get interbank markets
working properly again.
“You can’t force banks to lend
if they don’t want to. Earnings
worries are still there,” said Bernard
McAlinden, investment strategist at NCB
Stockbrokers in Dublin.
Interbank lending rate ranges for
three-month dollar, euro and sterling
funds held relatively steady yesterday
versus a day ago, while spreads between
interbank and expected policy rates
stayed at high levels.
Scepticism about the Fed and other
stimulative packages kept investors’
preference for the yen intact.
The low-yielding Japanese unit, a
bellwether of attitudes towards risk,
stayed firm versus the euro at 123.50,
but gains were trimmed after the
China rate cut. Deleveraging flows
also kept the dollar well-supported
against a basket of currencies and the
euro.
“There have been so many steps
taken by the US authorities, leaving
the impression they are doing
anything in their capacity, but not
necessarily with consistency,” said
Mitsuru Sahara, a senior manager at
Bank of Tokyo-Mitsubishi UFJ.
“The market reaction has become
increasingly cool, as it has become
accustomed to new measures coming
one after the other without feeling that
the market has hit a bottom,” he said.
– Reuters

S’pore’s economic woes worsen as factory output tumbles

SINGAPORE: Economic woes in reces-
sion-hit Singapore worsened yesterday
as government data showed manufac-
turing output shrank an annual 12.6% in
October.
Analysts said the plunge in output
signalled the worst possible start for
Singapore in the fourth quarter. The city-
state is already reeling from slumping
exports in the face of a US-led global
downturn.
On a seasonally adjusted month-on-
month basis, industrial output plunged
12.7% from September, the Economic
Development Board (EDB) said in its
monthly report.
The fall was worse than the average
8.1% decline forecast by eight economists
in a Dow Jones Newswires poll.
Sharp contractions in the key
biomedical and electronics industries led
the declines but other sectors also fell.
Only transport engineering and general
manufacturing industries, which include
food and printing, expanded last month,
the EDB said.
Biomedical output tumbled 30.6% in
October from last year, pulled down by
double-digit falls in pharmaceutical and
medical technology-related output, it
said.
Electronics fell 14%, affected partly by
the relocation of mobile device produc-
tion to foreign factories, while chemicals
eased 5.8% and precision engineering
shrank 13.1%.
Transport engineering increased
10.9% and general manufacturing rose
2.9%, the EDB said.
Singapore’s economy is heavily
dependent on trade, with the US and Eu-
rope key markets for its electronic and
biomedical goods.
“Although the fall in October was
largely exaggerated by the sharp drop in
biomedicals production ... the underly-
ing trend of a manufacturing recession
remains intact,” said Kit Wei Zheng, a Sin-
gapore-based economist with Citigroup.
The October data showed manu-
facturing – and the Singapore economy
– “could continue contracting” in the
fourth quarter, he said.
Singapore’s manufacturing sector ac-
counts for nearly a quarter of economic
output with virtually all of its production
headed for foreign markets, an indicator
of its dependence on the health of the
global economy, analysts said.
“The manufacturing sector is very
reliant on exports ... with exports growth
weak, manufacturing will remain weak,”
said Alvin Liew, economist with Standard
Chartered Bank.
“That is the predicament of a country
that is very dependent on external de-
mand,” he said.
Liew is maintaining his 2008 growth
forecast of 3% for Singapore, with down-
side risk because of the weak manufac-
turing sector.
“The poor October manufacturing
data marks a bad start for the fourth
quarter for Singapore, and manufacturing
is likely to continue reprising its role as
the main drag on growth in that quarter,”
said Liew.
Last Friday, the government further
cut its 2008 growth target to 2.5%, from
3% previously, after data showed the
economy shrank by a worse-than-ex-
pected 6.8% in the third quarter.
For 2009, the government says the
economy could contract by 1% or grow
as much as 2%. – AFP