BEIJING: China's factory output grew at the weakest pace in nearly six years in August while growth in other key sectors also cooled, raising fears the world's second-largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures.
The output data, combined with weaker readings in retail sales, investment and imports, pointed to a further loss of momentum as the cooling housing market increasingly drags on other sectors from cement to steel and saps consumer confidence.
Industrial output rose 6.9 percent in August from a year earlier — the lowest since 2008 when the economy was buffeted by the global financial crisis — compared with expectations for 8.8 percent and slowing sharply from 9.0 percent in July.
"The August data may point to a hard landing. The extent of the growth slowdown in the third quarter won't be small," said Xu Gao, chief economist at Everbright Securities in Beijing.
"The chances of cutting interest rates and bank reserve requirements have increased. I think they are more likely to cut interest rates."
Some analysts believe annual economic growth may be sliding towards 7 percent in the third quarter, putting the government's full-year target of around 7.5 percent in jeopardy unless it takes more aggressive action. Experts reckon output growth of around 9 percent would be needed to attain such a goal.
"Short of outright policy easing, China will likely miss the 7.5 percent growth target this year, and a sharp economic slowdown will endanger the undergoing structural reforms," Liu Li-Gang and Zhou Hao at ANZ wrote in a note.
"As such, we reckon that Chinese authorities should further relax monetary policy as soon as possible to prevent growth momentum from decelerating further."
Reinforcing the tepid economic activity, China's power generation declined for the first time in four years, falling 2.2 percent in August from a year earlier, and pointing to slackening demand from major industrial users.
Jiang Yuan, a senior statistician with the bureau, said the dip in August factory growth was due to weak global demand, especially from emerging markets, and the slowdown in the property sector that hit demand for steel, cement and vehicles.
China's economy got off to a weak start this year as first-quarter growth cooled to an 18-month low of 7.4 percent. Beijing responded with a flurry of stimulus measures that pushed the pace up slightly to 7.5 percent in the second quarter, but soft July and August data suggest the boost from those steps is rapidly waning.
"The government must take forceful policy measures to stabilize growth," said Li Huiyong, an analyst at Shenyin & Wanguo Securities in Shanghai.
HARD LANDING?
Other activity indicators for August were also mostly weaker than expected.
Retail sales climbed 11.9 percent, lagging forecasts of 12.1 percent and July's 12.2 percent, with growth in car sales in particular off sharply, suggesting consumers are more cautious.
Carmaker BYD Co. Ltd., backed by billionaire Warren Buffett, recently warned profit may fall by as much as a fifth in the first nine months of the year.
Fixed-asset investment, an important driver of economic activity, grew 16.5 percent in the first eight months from the same period last year, lower than forecasts. Economists polled by Reuters had expected 16.9 percent growth, slowing from 17.0 percent in Jan-July.
Much of the broader decline appears linked to the slowdown in the property market, which is intensifying.
Property investment data also released on Saturday showed further declines in sales and new construction, while growth in sales of housing-related goods such as home appliances, furniture and building materials all slowed.
Mortgage issuance in the first eight months fell 4.5 percent from a year earlier, worse than a 3.7 percent drop in January-July. Some would-be buyers have complained of long delays in getting loans as banks grow more cautious, while others may be holding off in anticipation of further price declines.
Data on Friday showed that credit levels in China appeared to improve in August after an alarming drop in July, but remained below average. Bad loans are on the rise and banks expect more to go sour as the economy slows.
That followed trade data that showed China's exports were buoyant but import growth unexpectedly fell for the second consecutive month in August, posting its worst performance in over a year.
STEADY EMPLOYMENT
While most analysts expect Beijing to unveil more steps in coming months in order to meet its 2014 growth target, the room for policy loosening is seen as limited after past stimulus programs left local governments saddled with piles of debt and fueled rampant speculation, especially in the housing market.
Bolder action now, such as an interest rate cut, may only result in more money going into speculative and potentially destabilizing activity rather the real economy, some analysts have noted.
The last time China suffered a "hard landing" was during the height of the global crisis, when economic growth tumbled to 6.6 percent in early 2009. That is far short of the near collapses which loomed over some developed economies, but still threw tens of millions of Chinese out of work, alarming the Communist Party's stability-obsessed leaders into action.
Despite slower growth, the economy still created 9.7 million new jobs in the first eight months of 2014, a rise of over 100,000 from the same period last year, said Guo Tongxin, another statistician at the bureau, trying to play down the significance of the dismal August indicators.
Ailing property sector drags Chinese economy down
Ailing property sector drags Chinese economy down
Oil Updates – crude rises on upbeat China data, shaky Israel-Lebanon ceasefire
SINGAPORE: Oil prices rose on Monday, supported by strong factory activity in China, the world’s second-largest oil consumer, and heightened tensions in the Middle East as Israel resumed attacks on Lebanon despite a ceasefire agreement.
Brent crude futures climbed 57 cents, or 0.79 percent, to $72.41 a barrel by 10:00 a.m. Saudi time while US West Texas Intermediate crude was at $68.58 a barrel, up 58 cents, or 0.85 percent.
“Oil prices have managed to stabilize into the new week, with the continued expansion in China’s manufacturing activities reflecting some degree of policy success from recent stimulus efforts,” said Yeap Jun Rong, market strategist at IG.
This offered slight relief that oil demand from China may hold for now, he added.
A private-sector survey showed China’s factory activity expanded at the fastest pace in five months in November, boosting Chinese firms’ optimism just as US President-elect Donald Trump ramps up his trade threats.
Still, traders are eyeing developments in Syria, weighing if they could widen tension across the Middle East, Yeap said.
A truce between Israel and Lebanon took effect on Wednesday, but each side accused the other of breaching the ceasefire.
In a statement, the Lebanese health ministry said several people were wounded in two Israeli strikes in south Lebanon. Air strikes also intensified in Syria, as President Bashar Assad vowed to crush insurgents who had swept into the city of Aleppo.
Last week, both benchmarks suffered a weekly decline of more than 3 percent, on easing concerns over supply risks from the Israel-Hezbollah conflict and forecasts of surplus supply in 2025, even as OPEC+ is expected to extend output cuts.
The Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, postponed its meeting to Dec. 5 and is discussing delaying its oil output hike due to start in January, OPEC+ sources told Reuters last week.
This week’s meeting will decide policy for the early months of 2025.
“The extension of output cuts would allow OPEC+ more time to assess the impact of Trump’s policy announcements with regards to tariffs and energy and also to see what China’s response will be,” said Tony Sycamore, IG’s Sydney-based market analyst.
Since the group’s production hike had been widely expected, the market’s focus may be on the extent of delay to sway crude prices, said IG’s Yeap, adding: “An indefinite delay may be the best case for oil prices, given that earlier rounds of delays by a month or so have failed to drive higher oil prices in line with what OPEC+ intended.”
Brent is expected to average $74.53 per barrel in 2025 as economic weakness in China clouds the demand picture and ample global supplies outweigh support from an expected delay to a planned OPEC+ output hike, a Reuters monthly oil price poll showed on Friday.
That is the seventh straight downward revision in the 2025 consensus for the global benchmark, which has averaged $80 per barrel so far in 2024.
COP16: Largest-ever UN meeting on desertification starts in Riyadh
RIYADH: The largest-ever meeting of the UN Convention to Combat Desertification has kicked off in Riyadh, with bolstering global drought resilience one of the key goals.
Running from Dec. 2 to 13, the first few days of COP16 are set to see a number of high-profile summits, ministerial dialogues, and announcements to address the pressing challenges associated with land degradation, degradation and drought.
French President Emmanuel Macron is expected to be among the attendees, as is the President of the World Bank Ajay Banga.
The opening day of the event will see Saudi Arabia use its presidency of the event to launch the Riyadh Global Drought Resilience Initiative, in a bid to accelerate international action in this area.
In tandem, the Saudi Green Initiative Forum, running from Dec. 2 to 3, will include hundreds of policymakers, business leaders and subject matter experts from across the world in a dedicated pavilion in the COP16 Green Zone.
The Second International Forum on Greening Technologies is also set to take place in the Green Zone between Dec 6-8, including dozens of tailored sessions to explore solutions, innovations, and lessons learned from global greening projects, alongside showcasing the scientific research associated with restoration projects around the world.
10.43 a.m. - Private sector funding crucial to tackling degradation, UN executive says
Restoring the world’s degraded land and holding back its deserts will require at least $2.6 trillion in investment by the end of the decade, the UN executive overseeing global talks on the issue told Reuters, quantifying the cost for the first time.
More frequent and severe droughts as a result of climate change combined with the food needs of a rising population meant societies were at greater risk of upheaval unless action was taken, Ibrahim Thiaw said.
A large chunk of the around $1 billion a day that is required will need to come from the private sector, said Thiaw, who is executive secretary of the UN Convention to Combat Desertification.
“The bulk of the investments on land restoration in the world is coming from public money. And that is not right. Because essentially the main driver of land degradation in the world is food production... which is in the hands of the private sector,” Thiaw said, adding that as of now it provides only 6 percent of the money needed to rehabilitate damaged land.
“How come that one hand is degrading the land and the other hand has the charge of restoring it and repairing it?,” said Thiaw, whilst acknowledging the responsibility of governments to set and enforce good land-use policies and regulations.
With a growing population meaning that the world needs to produce twice as much food on the same amount of land, private sector investment would be critical, he said.
To hit $2.6 trillion — approaching the annual economic output of France — the world needs to close an annual gap of $278 billion, after just $66 billion was invested in 2022, the UN said.
10:36 a.m. - Abdulrahman Abdulmohsen Al-Fadley elected as COP16 president
Tripartite deal signed to strengthen Saudi Arabia’s real estate sector
JEDDAH: Saudi Arabia’s real estate sector is poised for significant growth following a new tripartite partnership designed to enhance housing finance and establish a secondary mortgage market.
Under the patronage of Minister of Municipal and Rural Affairs Majid Al-Hogail a memorandum of understanding was signed on Sunday by the Real Estate Development Fund, Saudi Real Estate Refinance Co., and Al-Ahli Bank. The agreement aims to support the Kingdom’s housing sector and accelerate the development of a secondary mortgage market.
The MoU, which involves the Public Investment Fund’s fully owned SRC and Al-Ahli Bank, marks an important step in fostering closer collaboration between financial institutions. As part of the agreement, Al-Ahli Bank will continue to create mortgage portfolios, which will be refinanced through the SRC, according to the Saudi Press Agency.
This partnership is expected to fast-track the creation of mortgage-backed securities (MBS), both domestically and internationally. By doing so, it will help realize the goals of the Kingdom's housing program, promoting the development of a sustainable and integrated real estate financing system. The initiative will also contribute to expanding housing options for Saudi citizens.
Recent data from the Saudi Central Bank shows that banks in Saudi Arabia disbursed SR60.92 billion ($16.24 billion) in residential mortgages during the first nine months of 2024, marking a 4.88 percent increase compared to the same period in 2023. Of this amount, SR38.85 billion was allocated for home purchases, accounting for 64 percent of the total mortgage loans. However, the share of loans for house purchases declined slightly by 3.38 percent year on year, dropping from 69 percent in 2023.
Demand for apartments has surged in response to urbanization and demographic shifts. Apartments now account for 31 percent of all mortgages, up from 25 percent last year, with lending for apartment purchases reaching SR18.6 billion — an increase of 26.8 percent. Loans for land purchases also grew by 8.26 percent to reach SR3.5 billion, underscoring continued interest in land investment across the Kingdom.
The new partnership aims to provide liquidity in the market, ensuring a continuous flow of mortgage financing and supporting the development of the secondary mortgage market in Saudi Arabia.
At the signing ceremony, Al-Hogail also launched a new financing offer from Al-Ahli Bank, with rates starting as low as 2.59% for those interested in purchasing units under construction.
Mansour bin Madi, CEO of the Real Estate Development Fund, emphasized that the strategic partnership with SRC and financial institutions aims to improve the residential mortgage market and reduce financing costs for Saudi families. He highlighted that the initiative aligns with the objectives of the “Sakani” program and the broader real estate goals of Saudi Vision 2030.
Majeed Al-Abduljabbar, CEO of SRC, noted: “This partnership with Al-Ahli Bank is a crucial step in advancing the mortgage financing market in the Kingdom. Through this collaboration, we aim to offer innovative solutions that enhance liquidity, allowing financial institutions to provide mortgage financing tailored to market needs, while expanding property options for citizens.”
Tareq Al-Sadhan, CEO of Al-Ahli Bank, affirmed that the partnership with SRC demonstrates the bank’s commitment to fostering growth in the housing sector and contributing to the development of a dynamic secondary mortgage market. This, he added, will support Saudi Arabia’s broader economic diversification efforts.
Closing Bell: Saudi main index rises to close at 11,741
RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Sunday, gaining 100.43 points, or 0.86 percent, to close at 11,741.74.
The total trading turnover of the benchmark index was SR4.63 billion ($1.23 billion), as 159 of the stocks advanced and 64 retreated.
On the other hand, the Kingdom’s parallel market Nomu lost 221.58 points, or 0.73 percent, to close at 30,173.12. This comes as 34 of the listed stocks advanced while 48 retreated.
The MSCI Tadawul Index gained 11.24 points, or 0.77 percent, to close at 1,471.59.
The best-performing stock of the day was Gulf Insurance Group, whose share price surged 8.35 percent to SR31.80.
Other top performers included Saudi Arabian Cooperative Insurance Co., whose share price rose 4.61 percent to SR15.44, and Lazurde Co. for Jewelry, whose share price increased 4.26 percent to SR13.70.
Tamkeen Human Resource Co. recorded the biggest drop, falling 11.34 percent to SR68.
Etihad Etisalat Co. also saw its stock prices fall 3.08 percent to SR53.50.
Meanwhile, Northern Region Cement Co. also saw its stock prices dropping 1.86 percent to SR8.98.
On the announcements front, Nice One Beauty Digital Marketing Co. has announced plans to raise up to SR1.2 billion by offering 30 percent of its shares on the Saudi Stock Exchange.
SNB Capital Co. will act as the offering’s lead manager, financial advisor, book-runner, and underwriter.
EFG Hermes Saudi Arabia will join as joint financial advisors, book-runners, and underwriters. The institutional book-building period will run from Dec. 1 to 8.
According to a Tadawul statement, the price range for the offering has been set between SR32 and SR35 per share. The offering is comprised of 34.650 million ordinary shares, representing 30 percent of the company’s capital after the issuance of new shares and capital increase.
The minimum number of offer shares to be applied for participating parties is 100,000, while the maximum is 5.7 million. The participation in the book-building process is confined to the participating parties in accordance with the Instructions for Book Building Process and Allocation Method in the initial public offering issued by the Capital Market Authority.
The final price per offer share will be determined after the completion of the book-building process, to be followed by the individual subscriber’s subscription process. The final allocation of the offer shares will be made after the end of the subscription period for individual investors.
Saudi Arabia’s Economic Council reviews outlook, approves key growth strategies
RIYADH: Saudi Arabia’s Council of Economic and Development Affairs reviewed the Kingdom’s economic outlook and strategies to address global challenges, offering recommendations to support growth and resilience.
In a video conference meeting, the council began by reviewing the quarterly economic report from the Ministry of Economy and Planning, which highlighted key developments in both global and national economies, the Saudi Press Agency reported.
This follows Saudi Arabia’s 2.8 percent economic growth in the third quarter of 2024, driven by strong performance in non-oil sectors, official data showed.
The country’s non-oil sector expanded by 4.2 percent year-on-year, in line with Vision 2030’s goal to reduce dependence on oil, according to a recent report from the General Authority for Statistics.
During the meeting, the council reviewed the Ministry of Finance’s third-quarter report on the performance of the state’s general budget for fiscal year 2024. The report provided a breakdown of financial performance through the third quarter, including indicators for revenues, expenditures, and public debt.
The findings confirm the Kingdom’s ongoing support for development projects, its strengthening of social care and protection systems, and its commitment to implementing major initiatives under Vision 2030.
The Ministry of Commerce also presented a report from the Permanent Committee for Price Monitoring during the third quarter of 2024, outlining the roles and tasks of the committee's participants.
The report highlighted key developments, including global price trends, consumption patterns, and inflation indicators in the Kingdom. It also detailed consumer goods prices for the third quarter and the measures taken to ensure the availability of goods and maintain price stability.
The meeting also covered several other topics and reports, including the National Export Strategy Project, the National Savings Strategy, and initiatives related to financial inclusion and education.
Additionally, the council reviewed the third-quarter 2024 Real Estate Price Index, the executive summary of foreign trade for August 2024, the September 2024 Consumer Price Index report, and the Wholesale Price Index report for the same period.
The meeting concluded with the council making necessary decisions and recommendations on all discussed matters. The council’s recommendations and decisions are set to guide the country’s economic trajectory in the coming months.
