September 22, 2023

Trade Data From China Suggests More Stability

BEIJING — Surprisingly strong rebounds in China’s exports and imports in July offered some hope that the economy might be stabilizing, government data showed Thursday, after more than two years of slowing growth, although an imminent rebound still looks improbable.

Data from the Customs Administration showed exports had risen 5.1 percent in July from the same month last year. Analysts had expected a 3 percent rise. It was a sharp turnaround from June, when exports had declined for the first time in 17 months.

Exports to the United States rose at an annual rate of 5.3 percent and those to Europe were up 2.8 percent, as China’s two biggest markets posted their strongest gains since February. Shipments to Southeast Asia were also up.

Imports fared even better, with a 10.9 percent jump from a year earlier, more than five times what analysts had forecast. The surprising strength in imports left China with a smaller-than-expected trade surplus of $17.8 billion.

“July seems to reflect a return to a ‘normal,’ relatively uninspiring trend,” analysts from Moody’s said in a note. “In other words, while the worst seems to be over, the upturn will be relatively flat.” Exports in the three months ended July 31 posted the slowest annual increase since October 2009, a Reuters calculation showed.

Imports of crude oil and iron ore rebounded from multimonth lows to record highs last month, as more raw materials were shipped in to rebuild depleted stocks, and soybean purchases hit a record for a second month.

A steadying of the economy would be a relief to China’s leaders, who have scrambled to shore up growth in the past couple of months. There had been concerns that a sharp slowdown could derail their attempts to shift the economy to being driven more by consumption than debt-funded investment and manufacturing.

Asian stocks rebounded on the data on hopes that Chinese demand might have found a floor.

China’s trade performance has whipsawed this year after figures were inflated by companies reporting fake deals to disguise illicit cash transfers, and then subsequently deflated by the government as it quashed the fictitious transactions.

Analysts said the July data probably had minimal distortions, but some cautioned against concluding that the upbeat performance had been driven by an actual improvement in final demand.

Commodity imports rose sharply last month, with iron ore purchases jumping 17 percent from June. Some commodity analysts said July shipments may have been inflated by unprocessed deals from June.

“I would think it has something to do with the fact that the June number was low and there was some catch-up tonnage coming through,” said Graeme Train, analyst with Macquarie in Shanghai.

Soy imports also hit a record high for the second straight month, though again analysts said that was partly due to delayed shipments finally arriving from congested Brazilian ports.

Crude oil imports, on the other hand, were likely lifted by refiners replenishing stocks after a three-month lull and as some new refineries started business.

“The monthly data is very volatile. I wouldn’t read too much into it and say that domestic demand is strong,” said Zhang Zhiwei, an economist at Nomura in Hong Kong.

Exports to the United States rose an annual 5.3 percent and those to Europe were up 2.8 percent, as China’s two biggest markets posted their strongest gains since February. Shipments to southeast Asia were also up on the year.

With the United States economy showing signs of a gradual recovery, Ting Lu, an economist at Bank of America-Merrill Lynch, said Chinese exporters could benefit further in coming months.

The trade figures were seen as a positive sign for industrial output data on Friday, with economists expecting production to show an annual rise of 9 percent in July.

Fixed asset investment is forecast to have risen 20 percent in the first seven months of the year, in line with growth in the first six months, while inflation is forecast to have quickened to a five-month high of 2.8 percent.

Top leaders in Beijing have made clear they will accept a slowdown in growth as they restructure the Chinese economy, but have indicated that annual growth should not be allowed to slip below 7 percent.

The economy has slowed in nine of the past 10 quarters, but the government has stressed it is confident of meeting its 7.5 percent growth target this year — the lowest in 23 years.

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DealBook: CVC-Led Group to Sell $1.4 Billion Stake in Indonesian Retailer

HONG KONG – A group led by the private equity firm CVC Capital Partners began marketing the sale of a 40 percent stake in Indonesia’s largest department store operator on Monday, a move that could raise up to 13.13 trillion rupiah ($1.36 billion).

CVC, which is based in London and owns stakes in businesses including the Formula One racing group, and its partners are seeking to cash in on investor optimism that consumer spending power will continue to grow in Indonesia, Southeast Asia’s biggest economy.

CVC, along with a unit of the Indonesian conglomerate Lippo Group and the Government of Singapore Investment Corporation, is selling 1.17 billion existing shares in PT Matahari Department Store for 10,000 rupiah to 11,250 rupiah, according to a sale document. The price range represents total proceeds of $1.21 billion to $1.36 billion.

At the high end, the deal values Matahari at $3.4 billion, or nearly four times the $892 million valuation, including debt, at which CVC and its fellow investors acquired the department store operator in 2010.

Matahari, which opened its first shop in 1958 and today operates 116 stores in more than 50 Indonesian cities, reported that gross revenue increased 17.7 percent, to 10.88 trillion rupiah, last year. Demand rose among Indonesia’s growing middle class for clothing and cosmetics from brands like Polo, Clinique, Revlon and Levi’s, which Matahari sells on consignment. Revenue at stores open more than a year has increased at a double-digit pace for at least the last three years and rose 11.1 percent in 2012.

The deal is receiving strong support from so-called cornerstone investors — big institutions or wealthy individuals who agree to make a large investment in exchange for a guaranteed allocation of shares.

Two people with direct knowledge of the plan, who were not permitted to speak publicly on the matter, said CVC and G.I.C. had agreed to sell about $435 million worth of shares, representing about 32 percent of the overall deal, to 15 cornerstones. Those investors include: Azentus, BlackRock, Capital Research and Management, Fidelity, the asset management units of Goldman Sachs and Morgan Stanley, Och-Ziff, Schroders and T. Rowe Price.

As part of the deal, Singapore’s state investment company will also purchase a stake of about 1.8 percent in the cornerstone offering, reducing its net ownership of Matahari to less than 10 percent from its current indirect holding of about 14 percent.

The sale does not involve any new shares, but is being managed like an initial public offering because only 2 percent of Matahari’s stock is now freely traded. On completion — and assuming a so-called greenshoe option to sell an additional 175 million existing shares is fully exercised — Matahari will be 48 percent owned by the public, 31 percent by CVC and G.I.C., 20 percent by the Lippo unit and about 1 percent by management.

Final pricing for the share sale is expected to be set on March 22. CIMB, Morgan Stanley and UBS are the coordinators of the deal.

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Singapore Dodges an Expected Recession

SINGAPORE — Singapore’s economy grew in the past three months of 2012, avoiding an expected recession as services put in a strong showing and gross domestic product figures for the first three quarters of the year were revised downwards, data released Wednesday showed.

Singapore, whose trade is equal to about three times its G.D.P., has been badly hit by the weakness in Western economies, which has crimped demand for many of its exports. The city-state’s electronic manufacturers have also failed to tap surging demand for smartphones, unlike rivals in South Korea and Taiwan.

But while manufacturing contracted faster in the fourth quarter than in the third quarter, services rebounded, growing 7 percent in the fourth quarter at a seasonally adjusted and annualized rate. The sector had contracted 3.9 percent in the third quarter.

“The momentum in service sector activity is, of course, not spectacular, but there are at least traces of evidence that conditions are gradually improving,” said Leif Eskesen, HSBC’s chief economist for India and Southeast Asia.

Singapore’s G.D.P. expanded an annualized 1.8 percent in the fourth quarter from the third quarter after seasonal adjustments, advanced estimates from the Ministry of Trade and Industry showed Wednesday, reversing a 6.3 percent contraction in the July-September period.

Compared with a year earlier, Singapore grew 1.1 percent in the fourth quarter, bringing growth for 2012 to 1.2 percent, down from 4.9 percent in 2011. In November, the government had predicted growth of about 1.5 percent.

The surprise growth in G.D.P. during the fourth quarter was primarily the result of downward revisions to data for the first nine months of 2012.

Prime Minister Lee Hsien Loong said in his New Year’s address that the city-state’s economy had been dampened by weakness in the United States, Europe and Japan.

“But some industries have also had difficulty hiring the workers they need to grow,” he added. Singapore has been making it harder for companies to employ low-cost workers from abroad, under pressure from an increasingly assertive electorate that has blamed increasing numbers of foreigners over the past decade for soaring property prices, stagnant wages and increasingly crowded trains and buses.

Most economists had forecast that Singapore’s economy would contract in the fourth quarter, sinking into recession like that of Japan, but their estimates were based on earlier numbers.

According to the advance G.D.P. numbers, Singapore’s manufacturing sector shrank 10.8 percent sequentially in the fourth quarter on an annualized and seasonally adjusted basis, worsening from the 9.9 percent contraction in the third quarter.

The ministry said the recovery in services was helped by a rebound in wholesale and retail trade and finance and insurance.

Manufacturing contributes to a quarter of Singapore’s G.D.P. while services account for about two-thirds of economic activity.

“In the near term, it’s hard to see any improvement in manufacturing,” said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp. “Hopefully, services can continue to provide a lift going forward.”

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Balenciaga Taps Alexander Wang

PARIS — Alexander Wang on Monday became the first designer of Asian descent to enter the highest ranks of Parisian high fashion when he was named creative director of the storied house of Balenciaga.

Mr. Wang, born of Taiwanese-American parents, brought up in California and a successful designer of hip, streetwise sportswear for his own label in New York, will follow in the footsteps of the Spanish haute couture master Cristóbal Balenciaga, who died in 1972.

The appointment was announced by PPR, the French luxury conglomerate which bought Balenciaga in 2001. The group includes Gucci, Saint Laurent, Alexander McQueen and Stella McCartney.

Mr. Wang, 28, who will continue with his own U.S.-based company, said in a statement that he was “deeply honored to embark on this new role for a brand and house that I have such great admiration and respect for.”

Isabelle Guichot, president and chief executive of Balenciaga, lauded Mr. Wang’s “modernity and his individual and cosmopolitan vision of design.”

Mr. Wang will succeed Nicolas Ghesquière, who was at the helm for 15 years and created a futuristic high-fashion elegance. He left last month with a plan to open his own fashion house.

Mr. Wang, who won the prestigious CFDA Swarovski Women’s Wear Designer of the year in 2009, is considered to have a sharp business mind; his company already ships worldwide to more than 50 countries.

Why would PPR choose a young designer of street-smart clothing? The signs are that the increasing reach of Balenciaga demands a younger and easier-to-wear style. But the real secret behind Mr. Wang’s appointment may lie in his ties to China. He speaks Mandarin, and Balenciaga has expanded rapidly in China in recent years.

Mr. Wang will be in a unique position to push forward the Balenciaga image throughout greater China and Southeast Asia, industry experts said.

The Balenciaga brand already has 10 stores in China.

With a demographic that suggests that 40 percent of Asians will be under age 30 by 2020, the French company may feel that it is time to take high fashion down from its lofty pedestal.

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As Indonesia Prospers, Discontent Sets In Among Workers

JAKARTA — As a flare-red sun set, a group of laborers in their 20s and 30s gathered on the bare floor of a battered house wedged beneath power lines in an industrial part of Jakarta. They were members of a confederation of multisector workers, one of the largest trade unions in Indonesia, whose slogan is “Young, brave, militant.”

The men — all employees of the biggest hypermarket chain in the nation, run by the French retail giant Carrefour — said the company was violating their rights by paying them as contract workers, unprotected by strict Indonesian labor laws.

“Cheap wages and outsourcing, these are the main issues in Indonesia,” said Abdul Rahman, a Carrefour employee and the secretary general of the union, known as Kasbi, which represents about 130,000 workers.

He and others have been negotiating with the company for improved contracts since a strike by 1,000 workers in late August, but talks have gone nowhere. The same cycle has played out repeatedly since Carrefour entered Indonesia in 1998, said Mr. Rahman, 33, who has worked at the company for 11 years.

United by discontent, Mr. Rahman and his fellow activists are far from alone. Indonesia, the largest economy in Southeast Asia, is among the top 20 economies in the world, with growth this year of around 6 percent.

More than half of its 240 million inhabitants have entered the middle class, according to the World Bank, which defines middle class as those who spend $2 to $20 a day. Still, many of them toil for barely a living wage, offering some of the cheapest labor in Asia.

In recent years, though, this labor force has watched certain sectors grow wealthy on rising commodity prices and booming domestic demand, and increasingly, it is pushing for a greater share of company profits.

The greatest pressure has come from workers employed by Freeport-McMoRan, which is based in Arizona and controls the world’s largest recoverable gold and copper reserves in Timika, in Papua Province. This month, its workers’ union agreed to a 37 percent increase in wages after a three-month strike.

Affordable labor is a main reason investors are attracted to Indonesia, in part to offset wage increases in China, said Gita Wirjawan, currently the country’s trade minister and formerly the head of its investment coordinating board.

But recent strikes for higher wages by mine workers and supermarket clerks, not to mention pilots of the state-owned airline, Garuda, have disrupted business operations — and could potentially deter foreign investments.

According to the Manpower Ministry, Indonesia had 53 strikes in the first seven months of 2010, the last period for which figures are available. By comparison, in 2008 the International Labor Organization recorded five apiece in the nearby countries of Thailand and the Philippines.

Muhammad Chatib Basri, an economist at the University of Indonesia and the director of the Institute for Economic and Social Research, said that frequent and prolonged strikes reduced profit margins and competitiveness. Sluggish Indonesian industries like garment manufacturing are starting to pick up as wages rise elsewhere, he said. But if the costs of dealing with unrest and lengthy union negotiations increase, that could stem growth in a country that will depend on labor-intensive industries for productive employment for the foreseeable future.

Mr. Basri said that legally mandated high severance payments were another deterrent to investment. “The labor law acts like a hiring tax, so many companies don’t want to absorb permanent workers because if there is downsizing, they have to pay out a lot of money,” he said.

Many companies get around that regulation by hiring contract workers, like the men of Kasbi demanding better benefits from Carrefour. But typically, big foreign concerns have a more difficult time evading the law in that way, and others, too, are facing worker unrest.

Union representatives at Freeport’s large mine in Papua said they had agreed to the latest deal amid concerns about the living conditions of workers who had gone three months without pay.

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4 in Philippines Accused of Hacking U.S. Phones to Aid Terrorists

A statement from the Philippines Criminal Investigation and Detection Group, a law enforcement agency, said three men and one woman had been arrested in raids across the capital, Manila, last week.

According to the agency, the men were working with a group called Jemaah Islamiyah, a terrorist group linked to Al Qaeda and responsible for the 2002 bombings in Bali, which killed 202 people.

The group has been held responsible for several other terrorist attacks in Southeast Asia, mostly in Indonesia but including the Philippines.

If the new accusation holds up, it would point to a troubling connection between hackers and terrorist cells.

The Federal Bureau of Investigation said on Saturday that it was working with the police in the Philippines on the investigation into the telephone hacking effort, which apparently began as early as 2009.

The suspects remotely gained access to the telephone operating systems of an unspecified number of ATT clients and used them to call telephone numbers that passed on revenues to the suspects.

ATT said it reimbursed its customers for the charges. It said in a statement that “its network were neither targeted nor breached by the hackers.”

The company declined to say how many business customers were affected, nor how much it cost ATT. The Philippines police agency’s statement said the scheme cost $2 million. It is known as a “remote toll fraud” and singles out telephone accounts that are protected by weak passwords.

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DealBook: Seagate to Buy Samsung Disk Drive Unit

Seagate Technology, the hard disk drive maker, said on Tuesday that it would enter a strategic partnership with Samsung Electronics, purchasing the South Korean company’s hard disk drive unit for $1.375 billion in cash and shares.

The deal is another major consolidation in the sector, after Western Digital’s announcement last month that it would buy Hitachi Global Storage Technologies for $4.3 billion.

That acquisition gave Western Digital almost half the market in hard disk drives, double Seagate’s share, according to iSuppli.

Now Seagate is trying to catch up, by adding Samsung’s 10 percent share of the market to the nearly 30 percent it already holds.

Under the terms of the deal, Seagate and Samsung will deepen their cross-licensing and research and development collaboration, and Samsung will place an executive on Seagate’s board.

Samsung will supply Seagate with its semiconductor products, and Seagate will in turn supply Samsung with hard disk drives for the personal computers, notebooks and other devices made by the South Korean company.

“The transactions and agreements significantly expand Seagate’s customer access in China and Southeast Asia,” the companies said in a joint statement.

Seagate will give Samsung $687.5 million worth of its own shares, amounting to a 9.6 percent stake in the company, and pay the rest in cash.

The deal is expected to close by the end of the year, pending regulatory approval, and Seagate predicts it will be accretive to cash flow within a year.

Seagate hired Morgan Stanley as financial adviser and Wilson Sonsini Goodrich Rosati as legal counsel, while Samsung hired Allen Company as its adviser and the law firm Paul, Hastings, Janofsky Walker.

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