Asian Equities Crash Amid Fresh Liquidity Injections in China
By Investors Hub
Asian stocks fell sharply on Monday despite emergency rate cuts by the U.S. Federal Reserve and the Reserve Bank of New Zealand and a fresh round of liquidity injections in China. Weak economic data from China added to investor worries about the impact of the coronavirus.
Chinese stocks fell after the release of dismal industrial data. The benchmark Shanghai Composite Index tumbled 98.17 points, or 3.4 percent, to 2,789.25, while Hong Kong’s Hang Seng Index slumped 969.34 points, or 4 percent, to 23,063.57.
China’s central bank added more funds into the banking system today but kept its borrowing cost unchanged after the U.S. Federal Reserve unexpectedly reduced interest rates by a steep 100 basis points.
The central bank last week had reduced the reserve requirement ratio by 50-100 basis points for qualifying banks to shore up the economy hit by the outbreak of covid-19.
In economic news, official data showed that Chinese industrial production and retail sales plunged more than expected at the start of the year amid a widespread shutdown of manufacturing operations.
Industrial production plunged 13.5 percent in the January to February period after rising 6.9 percent in December, the National Bureau of Statistics said. Economists had forecast a moderate 3 percent decrease.
Retail sales logged a sharp fall of 20.5 percent, reversing an 8 percent increase in December. Sales were forecast to drop only 4 percent.
Fixed asset investment was down 24.5 percent versus a 5.4 percent rise in January to December 2019. The jobless rate surged to 6.2 percent.
Home sales decreased 34.7 percent annually in the first two months of 2020, while property investment fell 16.3 percent after rising 9.9 percent in January to December 2019.
Japanese shares fluctuated before finishing lower despite the Bank of Japan announcing emergency monetary policy measures and core machinery orders data, an indicator of capital spending in the coming six to nine months, pointing to a rebound.
The total value of core machine orders in Japan climbed a seasonally adjusted 2.9 percent sequentially in January, the Cabinet Office said, coming in at 839.4 billion yen. That exceeded expectations for a decline of 1.0 percent following the upwardly revised 11.9 percent decline in December (originally -12.5 percent).
On a yearly basis, core machine orders eased 0.3 percent – again beating forecasts for a drop of 1.1 percent following the 3.5 percent decline in the previous month.
The Nikkei 225 Index tumbled 429.01 points, or 2.5 percent, to 17,002.04, while the broader Topix closed 2 percent lower at 1,236.34.
Australian markets extended their sell-off into a fourth week and plunged deep into bear market territory despite the Reserve Bank of Australia pumping extra liquidity into the banking system to ensure businesses and households have access to credit amid the coronavirus outbreak.
The benchmark S&P/ASX 200 Index plummeted 537.30 points, or 9.7 percent, to 5,002.00, marking the biggest loss since the Black Monday crash in 1987. The broader All Ordinaries Index ended down 532.50 points, or 9.5 percent, at 5,058.20.
Energy stocks succumbed to heavy selling pressure, with Woodside Petroleum, Santos, Oil Search and Beach Energy falling 14-20 percent. The big four banks gave up 10-12 percent.
Miners heavyweights BHP, Fortescue Metals Group and Rio Tinto dropped 3-6 percent, while gold miner Evolution Mining plunged 11.4 percent, Newcrest lost 13.2 percent and Regis Resources declined 13 percent.
Hearing implants maker Cochlear plummeted 19 percent after withdrawing its earnings outlook.
South Korea’s Kospi dropped 56.58 points, or 3.2 percent, to 1,714.86 as the mainstay industries such as automobiles and steel faced a crisis for their first quarter performance.
Nigeria’s Debt Profile Jumps 17% to N46.25trn in 2022
By Adedapo Adesanya
Nigeria’s total public debt stock increased by 17 per cent to N46.25 trillion or $103.11 billion as of December 2022 from N39.56 trillion or $95.77 billion in 2021.
This information was revealed by the Debt Management Office (DMO) on Thursday.
This means that the country’s debt profile precisely increased by 16.9 per cent or N6.69 trillion or $7.34 billion within one year, as the government borrow funds from various quarters for its budget deficits.
The agency said the new figures comprise the domestic and external total debt stocks of the federal government and the sub-national governments (36 state governments and the Federal Capital Territory).
The DMO statement partly read, “As of December 31, 2022, the total public debt stock was N46.25 trillion or $103.11 billion.
“In terms of composition, total domestic debt stock was N27.55 trillion ($61.42 billion) while total external debt stock was N18.70 trillion ($41.69 billion).
“Amongst the reasons for the increase in the total public debt stock were new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects. The issuance of promissory notes by the FGN to settle some liabilities also contributed to the growth in the debt stock.
“On-going efforts by the government to increase revenues from oil and non-oil sources through initiatives such as the Finance Acts and the Strategic Revenue Mobilization initiative are expected to support debt sustainability.”
“The total public debt to gross domestic product (GDP) ratio for December 31, 2022, was 23.20 per cent and indicates a slight increase from the figure for December 31, 2022, at 22.47 per cent.
“The ratio of 23.20 per cent is within the 40 per cent limit self-imposed by Nigeria, the 55 per cent limit recommended by the World Bank/International Monetary Fund, and the 70 per cent limit recommended by the Economic Community of West African States,” the debt office said.
12-Month Treasury Bills Now 14.74% as Appetite Falls
By Dipo Olowookere
The 364-day treasury bills stop rate was raised by the Central Bank of Nigeria (CBN) at the primary market auction (PMA) on Wednesday by 5.25 per cent as appetite for the asset class waned.
The central bank, which conducted the exercise, did not record the usual hunger for the debt instrument by investors yesterday, ostensibly because of how the bank had tinkered with the rates in the previous exercises.
But the apex bank surprised subscribers at the PMA on Wednesday when it jerked the rate higher to 14.74 per cent from the 9.49 per cent it cleared in the previous PMA.
According to details of the exercise, the CBN auctioned the one-year bill worth N139.96 billion and received subscriptions valued at N165.28 billion, allotting N142.16 billion.
Business Post reports that it was not only the 12-month dated instrument that enjoyed the rate hike yesterday as the two others benefitted.
The central auctioned N3.34 billion worth of the 182-day bill during the session but had investors stake N1.56 billion on it, with N1.56 billion allotted to successful bidders at 8.00 per cent compared with the previous session’s 5.00 per cent, indicating an increase of 3.00 per cent.
As for the 91-day bill, the rate cleared at 6.00 per cent after it was moved higher by 3.45 per cent from 2.55 per cent. This was after the apex bank allotted N1.75 billion to subscribers, the same amount of bids it received from the N2.16 billion taken to the market on Wednesday.
Recall that some days ago, the Monetary Policy Committee (MPC) of Nigeria’s central bank increased the Monetary Policy Rate (MPR), which is the benchmark interest rate in the country, by 0.50 per cent to 18.00 per cent.
The team explained that the rate hike was mainly to tame rising inflation in Nigeria, which the National Bureau of Statistics (NBS) said stood at 21.91 per cent in February.
China’s Investment in Africa Has Cut Need for Loans from World Bank, IMF—Osinbajo
By Adedapo Adesanya
The Vice President of Nigeria, Mr Yemi Osinbajo, has lauded China’s investment in Africa, saying it has reduced dependency on loans from Bretton Woods, which consists of the World Bank and the International Monetary Fund (IMF).
In a statement seen by Business Post, the VP, at an event at King’s College London on March 27, 2023, stated that “China shows up where and when the West will not and or are reluctant.”
He said this was evident in the investment of the Asian giant in Africa, which he said stood at $254 billion in 2021, about four times the volume of US-Africa trade.
He also noted that, “China is the largest provider of foreign direct investment, supporting hundreds of thousands of African jobs. This is roughly double the level of U.S. foreign direct investment, adding that, “China remains by far the largest lender to African countries.”
He also noted that Chinese companies had taken the lead in exploiting minerals in Africa, many now in lithium mining in Mali, Ghana, Nigeria DRC, Zimbabwe and Namibia.
The Nigerian second-in-command said that China has always shown up for African countries while outrightly condemning Western countries in that regard.
He said, “Most African countries are rightly unapologetic about their close ties with China. China shows up where and when the west will not or are reluctant.”
He added, “And many African countries are of the view that the beware of the Chinese Trojan loans advise forming the west is wise but probably self-serving,” explaining that, “Africa needs the loans and the infrastructure. And China offers them. In any case, the history of loans from Western institutions is not great.”
Taking a step further, Mr Osinbajo sent a salvo to the World Bank and the IMF over the conditions attached to their loan facilities.
“The memory of the destructive conditionalities of the Bretton Woods loans is still fresh, and the debris is everywhere.
“And the preoccupation of western governments and media with the so-called China debt trap might well be an overreaction,” he added.
“I recommend an eye-opening lecture by Professor Deborah Brautigam about two weeks ago at Jesus College Cambridge.
“The truth, as she points out, is that all of the Chinese lendings to Africa is only 5 per cent of all outstanding public and publicly guaranteed debt in low and middle-income countries, compared to 23% held by the World Bank and other multilaterals.”
He alluded that Chinese lenders account for 12 per cent of Africa’s private and public external debt.
“And the Chinese have also been there when the debts cannot be paid. In early 2020 as COVID battered African economies, China came together with other G20 members to launch the Debt Service Suspension Initiative (DSSI).
“About 73 low-income economies benefited from the suspension of principal and interest payments. Chinese banks provided 63 per cent of the total debt relief while being only owed 30 per cent of the debt service payments due,” he quipped.
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