China’s economy losing some steam as investment growth hits 18-year low

A flurry of disappointing data suggest the world’s second-largest economy is finally starting to lose some momentum. (Reuters)
Updated 14 September 2017
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China’s economy losing some steam as investment growth hits 18-year low

BEIJING: China posted a rare flurry of disappointing data on Thursday – including its slowest growth in investment in nearly 18 years – suggesting the world’s second-largest economy is finally starting to lose some momentum as borrowing costs rise.
Factory output and retail sales also grew less than anticipated, though a rebound in property sales and construction starts is likely to keep China’s overall growth relatively robust and comfortably on target ahead of a key leadership reshuffle next month.
“I think the risk (for China) isn’t in the next couple of months but rather the next couple of years,” said Capital Economics’ Julian Evans-Pritchard.
“Progress on key structural reforms that really matter, such as boosting the performance of state-owned enterprises, has been quite slow and the structural drags on growth remain quite strong and are real risks.”
Analysts had widely expected China’s August data to show industrial output and retail sales growth had accelerated after fading slightly in July, while investment was seen as only marginally softer.
That would have fit into a pattern of stronger-than-expected readings from China in the first half of the year and upbeat surveys on August factory activity.
A year-long, government-led construction boom has lifted demand and prices for everything from cement to steel to glass, helping offset an expected drag from property cooling measures and a regulatory crackdown on riskier types of financing.
But August’s data suggested the strong boost from Beijing’s infrastructure building spree may be starting to fade.
Fixed-asset investment, a key growth driver for the world’s second-largest economy, grew 7.8 percent in January-August from a year earlier, the weakest pace since December 1999 and cooling from 8.3 percent in January-July.
The main drag appeared to be a slowdown in infrastructure investment due to a significant drop-off in government fiscal spending over the past two months, analysts said.
China frontloaded fiscal spending this year to produce rosy growth ahead of the once-in-five-years Communist Party Congress next month, Evans-Pritchard said. But local governments are constrained by annual budgets and have had to pare back spending in the second half of this year, he added.
That likely had a knock-on effect on industrial output, which rose 6.0 percent in August on-year, the weakest pace in nine months, statistics bureau data showed.
Analysts polled by Reuters had predicted output would grow 6.6 percent in August, up from 6.4 percent in July.
The statistics bureau said unusually hot and wet weather weighed on industrial output last month, adding that the economy remained on a steady, improving trend. On a monthly basis, output rose nearly half a percent.
China’s crackdown on pollution may have also dented industrial output, as Beijing looks to close older, smog-belching mines and factories, said Nie Wen, an economist at Hwabao Trust in Shanghai.
Still, economists at Nomura maintained their view that the economy would expand 6.8 percent in the third quarter from a year earlier, easing only slightly from 6.9 percent in the first half.
That would keep China on track to easily beat the government’s full-year growth target of around 6.5 percent, even if there is some further softening late in the year.
Overall investment may have softened further if not for an unexpected rebound in the property market, which directly affects 40 other business sectors in China.
Despite a series of government curbs which have largely succeeded in cooling red-hot housing prices, activity in the property market snapped back in August, possibly as developers turn their focus to smaller cities with fewer restrictions.
New construction starts measured by floor area, a telling indicator of developers’ confidence, were up 5.3 percent after contracting in July for the first time since last September.
Growth of private investment slowed to 6.4 percent in January-August from 6.9 percent in the first seven months of the year, suggesting small- and medium-sized private firms still face challenges in accessing investment-finance.
Private investment accounts for about 60 percent of overall investment in China.
Retail sales also confounded market expectations, rising 10.1 percent in August on-year, the slowest pace in six months and cooling from 10.4 percent in July. Analysts had expected a slight pick-up in demand.
Again, however, sales rose at a decent clip from a month earlier, and shoppers are expected to throng the stores and online sites as usual in October over the long Golden Week holidays.
Other data for August released last week was mixed, with imports beating expectations – pointing to still solid domestic demand, while exports grew less than expected. Producer and consumer inflation quickened more than forecast.
Producer prices, particularly for building materials, have surged this year, giving China’s long-ailing and heavily-indebted industrial sector its best profits in years. But some analysts said higher prices may also be skewing the data and exaggerating the strength of its economic recovery.
Foreign investment in China has remained tepid, though a sharp rebound in the yuan currency may be a game changer if sustained.
Foreign direct investment (FDI) in China fell 0.2 percent in the first eight months of 2017 from a year earlier to 547.94 billion yuan ($83.72 billion), Commerce Ministry data showed. But for August alone, it rose 9.1 percent.
China’s outbound non-financial investment (ODI) slumped 41.8 percent in January-August from a year earlier as authorities continued to crack down on speculative outflows and “irrational” overseas asset purchases which had pressured the yuan.
Some acquisitive and high-profile Chinese firms have had to scrap plans for global acquisitions in recent months.


Oil Updates – prices fall as Hurricane Rafael expected to start weakening

Updated 4 sec ago
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Oil Updates – prices fall as Hurricane Rafael expected to start weakening

SINGAPORE: Oil prices fell slightly on Friday as the risk that a hurricane in the Gulf of Mexico will significantly affect US oil and gas output declined, while the market weighs how President-elect Donald Trump’s policies might affect supplies.

Brent crude oil futures fell 47 cents, or 0.6 percent, to $75.16 per barrel by 7:46 a.m. Saudi time. US West Texas Intermediate crude fell 55 cents or 0.8 percent to $71.81. The benchmarks fell after rising nearly 1 percent on Thursday.

For the week, Brent is set to gain 3.1 percent while WTI is set to rise 4.1 percent

Hurricane Rafael, which has caused 391,214 barrels per day of US crude oil production to be shut, is expected to move slowly westward over the Gulf of Mexico and away from US fields while forecast to weaken from Friday and through the weekend, the US National Hurricane Center said.

Prices gained support on Thursday on expected actions by the incoming Trump administration such as tighter sanctions on Iran and Venezuela, which could limit their supply to global markets.

“Our core view sees Trump adopt a relatively pragmatic approach to policy, in which he either chooses not to pursue more radical policy shifts, or is held back by institutional constraints or the influence of more moderate policy advisers,” BMI, a unit of Fitch Solutions, said in a note on Friday.

Downward pressure came from data showing crude imports in China, the world’s biggest oil importer, fell 9 percent in October, the sixth consecutive month showing a year-on-year decline, as well as from a rise in US crude inventories.

“The impact (of the Trump administration) on oil market fundamentals in 2025 will likely be somewhat limited,” BMI said. 


Closing Bell: GCC stock markets up in wake of Trump’s election win

Updated 07 November 2024
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Closing Bell: GCC stock markets up in wake of Trump’s election win

RIYADH: Following Donald Trump’s victory in the US presidential election, stock markets across the Gulf Cooperation Council saw a strong rally.

Markets posted gains, with Saudi Arabia’s Tadawul All Share Index finishing 0.31 percent up to close at 12,130.80 points on Thursday. This came after Crown Prince Mohammed bin Salman congratulated Trump on winning the election in a phone call on Wednesday, according to the Saudi News Agency.

Dubai’s Financial Market mirrored the upward momentum, climbing 0.60 percent. Abu Dhabi’s Securities Exchange also saw a lift, finishing the day up 0.44 percent.

Bahrain’s Bourse recorded a rise of 0.52 percent, while Kuwait’s main market similarly rose, closing with a 0.10 percent gain.

However, the Muscat Securities Market in Oman saw a 0.17 percent decrease, while the Qatar Stock Exchange was closed for a public holiday. 

The total trading turnover of the benchmark index on TASI was SR7.53 billion ($2 billion) as 113 of the listed stocks advanced, while 111 retreated.   

Similarly, the MSCI Tadawul Index increased by 2.03 points, or 0.13 percent, to close at 1,521.79.

The Kingdom’s parallel market Nomu also climbed by 415.36 points, or 1.44 percent, to close at 29,269.00. This comes as 49 of the listed stocks advanced while as many as 22 retreated.

The best-performing stock of the day was Rasan Information Technology Co., whose share price surged by 7.13 percent to SR78.10.

Other top performers include Miahona Co., and Theeb Rent a Car Co., with Miahona’s share price climbing 6.75 percent to SR29.25 and Theeb’s rising 6.59 percent to SR79.30.

Naseej International Trading Co. and Al Moammar Information Systems Co. also posted rises.

The worst performer was Saudi Arabian Mining Co., whose share price dropped by 4.09 percent to SR53.90.

Other worst performers were Abdulmohsen Alhokair Group for Tourism and Development, whose share price fell by 3.18 percent to SR2.74, and ACWA Power Co., which saw a 2.95 percent drop to SR441.20.

On an announcement front, ACWA Power Co. announced its results for interim financial results for the first nine months of 2024, ending on Sept. 30, with revenues surging by 13.3 percent to reach SR1.74 billion, compared to SR1.542 billion in 2023.

The increase was primarily driven by higher revenue from electricity sales, operation and maintenance services, and additional income from development projects and construction management, the company said on Tadawul. 

BinDawood Holding Co. also disclosed its financial results for the third quarter, with revenues slightly increasing by 0.189 percent to reach SR1.361 compared to the same quarter last year.

The company closed Thursday’s trading session at SR7.02, a 0.29 percent increase.

Saudi Steel Pipe Co. also released its financial results for the nine months of the year, recording SR381 million in revenues, a 20.18 percent increase compared to the same period last year.

The company closed today’s trading session at SR71.40, decreasing by 1.27 percent.

The United International Transportation Co. disclosed a 37.052 percent increase in revenues for the first nine months to reach SR505.8 million, compared to SR369.07 million during the same period last year.

This was primarily driven by the expansion of a long-term lease fleet and the resulting higher lease revenues.

The company closed at SR84, with its stock valie declining by 1.55 percent.


ACWA Power reports 16% profit increase amid record project launches

Updated 07 November 2024
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ACWA Power reports 16% profit increase amid record project launches

RIYADH: ACWA Power, the Saudi-listed energy and water desalination company, has announced a 16 percent increase in its profits for the first nine months of 2024, underpinned by significant progress in its power and water production projects.

For the period, ACWA Power’s net profit attributable to equity holders reached SR1.25 billion ($334 million), a rise fueled by a 12.5 percent increase in operating income, which reached SR2.36 billion.

This marks a strong improvement from the same period in 2023. According to a company press release, the growth was primarily driven by an investment gain from the restructuring of a project, alongside a capital recycling gain.

ACWA Power’s CEO, Marco Arcelli, highlighted the company’s commitment to growth, noting that its portfolio now includes 26 projects — the largest in its 20-year history.

“These projects reflect both the speed at which we are realizing our growth, through swift financial closes, and the scale of future cash flows from a diverse and young portfolio,” Arcelli said.

He reiterated the company’s focus on providing reliable, cost-effective energy and water, aiming to create positive impacts across all its operations.

Over the past nine months, ACWA Power successfully achieved financial closure on seven major projects worth SR31 billion. These include Saudi Arabia’s Taiba and Qassim Combined Cycle Gas Turbine projects, the Tashkent Solar PV project in Uzbekistan, and the Hassyan Seawater Reverse Osmosis plant in the UAE.

The company’s expansion in power generation is also evident, having added 2.4 GW of capacity during the same period, including the Ar Rass Solar PV project, a 700 MW solar plant that was completed in just 18 months.

On the renewable energy front, ACWA Power secured a 5 GW Power Purchase Agreement for the Aral Wind project in Uzbekistan, as well as 5.5 GW of solar photovoltaic capacity as part of Saudi Arabia’s fourth round of Public Investment Fund projects.

In water desalination, the company signed a Water Purchase Agreement for the 410,000 cubic meters per day Hamriyah Independent Water Project in the UAE.

Abdulhameed Al-Muhaidib, ACWA Power’s Chief Financial Officer, expressed confidence in the company’s future, stating, “In the first nine months of 2024, we saw strong project mobilization, achieving financial closure on seven projects worth SR31 billion. We also began generating revenue from 2.2 GW of projects that reached partial or full commercial operation.”

He added: “Our diversified asset base, visible growth pipeline, and resilient business model, combined with our focus on operational excellence, give us confidence in achieving sustainable, long-term financial performance.”


UAE banking sector’s net international reserves grow 11% by July 2024

Updated 07 November 2024
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UAE banking sector’s net international reserves grow 11% by July 2024

RIYADH: The UAE’s banking sector saw a significant increase in its net international reserves, which rose by 11.1 percent— or 127.5 billion dirhams ($34.3 billion) — during the first seven months of 2024.

By the end of July, the reserves totaled 1.273 trillion dirhams, up from 1.145 trillion dirhams at the close of 2023.

According to the Central Bank of the UAE’s June statistical bulletin, the central bank’s share of these reserves stood at 771.6 billion dirhams at the end of July, reflecting a 14.6 percent increase compared to 673.42 billion dirhams at the end of 2023. Meanwhile, the net international reserves of banks operating in the UAE amounted to 501.6 billion dirhams, marking a 6.22 percent rise from 472.2 billion dirhams at the end of last year.

The bulletin also highlighted a notable increase in the central bank’s gold reserves, which grew by 23.5 percent year on year to 21.28 billion dirhams by July’s end, up from 17.226 billion dirhams in July 2023. Over the first seven months of 2024, gold reserves increased by 17.3 percent, from 18.147 billion dirhams at the close of 2023.

In terms of banking operations, the value of transfers processed through the UAE Financial Transfer System exceeded 11.13 trillion dirhams during the first seven months of 2024, reflecting a 17 percent year-on-year growth from 9.5 trillion dirhams in the same period in 2023.

Monthly remittance values were as follows: 1.512 trillion dirhams in January, 1.449 trillion dirhams in February, 1.565 trillion dirhams in March, 1.592 trillion dirhams in April, 1.78 trillion dirhams in May, 1.42 trillion dirhams in June, and 1.81 trillion dirhams in July.

Additionally, the central bank’s data revealed that the value of cheques cleared via image technology totaled 765.08 billion dirhams across more than 13 million cheques during the first seven months of 2024.

The bulletin also showed that cash deposits at the central bank reached 111.4 billion dirhams during the period, while cash withdrawals totaled 120.3 billion dirhams.


MODON signs contracts worth over $533m to establish industrial complexes in Makkah, Al-Kharj

Updated 07 November 2024
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MODON signs contracts worth over $533m to establish industrial complexes in Makkah, Al-Kharj

JEDDAH: Agreements to invest over SR2 billion ($533 million) in new industrial complexes will bring growth and job opportunities to Saudi Arabia’s cities of Makkah and Al-Kharj, advancing Vision 2030.

The Saudi Authority for Industrial Cities and Technology Zones, or MODON, signed two contracts with Albaddad Holding to establish complexes within the second industrial cities in both boroughs. 

The inking ceremony took place under the patronage of the Saudi Minister of Industry and Mineral Resources, Bandar Alkhorayef.

Under the contracts, the company is responsible for developing the infrastructure and constructing ready-made and prefabricated buildings to create a fully integrated complex that supports industrial objectives. 

It will also improve production efficiency and enhance added value and sustainable growth opportunities, according to the Saudi Press Agency.

The agreements were signed by MODON’s CEO, Majed Rafed Al-Argoubi, and Zayed bin Hussein Al-Baddad, CEO of Albaddad Holding, in the presence of the company’s chairman, Al-Fateen bin Hussein Al-Baddad.

The initiative aligns with MODON’s vision to be the preferred destination for investment growth and the leading partner for industrial and technology ecosystems, fostering an enabling environment that enhances business sustainability and contributes to national economic development.

These efforts support the goals of Saudi Arabia’s National Industrial Strategy and the Vision 2030 objective of transforming the Kingdom into a leading industrial powerhouse.

The Makkah project is MODON’s first privately developed complex, spanning over 1.3 million sq. meters with an investment of SR1.75 billion. 

It aims to localize promising industries through advanced production technology, create 5,000 jobs, and boost national exports, with up to 60 percent of its output targeting markets in Africa, Europe, the Americas, and countries including Syria, Lebanon, and Jordan, as well as Iraq.

MODON has also launched several development projects in the second industrial city of Makkah, which is over 4.3 million sq. meters in size, including integrated infrastructure enhanced with essential services and innovative products.

This includes a new 200 megavolt-amperes substation to foster a competitive industrial environment promoting growth and sustainability.

The Al-Kharj industrial complex, spanning over 307,000 sq. meters with an investment of SR375 million, is expected to create approximately 1,000 jobs, supporting industries such as construction, exhibitions, and sports as well as cultural and entertainment events.

It will also enhance the iron, aluminum, glass, and PVC textile industries, with plans to export 60 percent of its production to neighboring Gulf countries.

Through these efforts, MODON is driving industrial growth in the Kingdom by developing and managing distinguished industrial cities and technology zones in collaboration with the public and private sectors.

Currently, the developed land area across 37 industrial cities in Saudi Arabia exceeds 215 million sq. meters, housing approximately 6,882 industrial facilities.