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| HKECIC Weekly Market News |
| 25 May 2020 |
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| Market Snapshots |
| Asia and Australasia |
Japan: Economy slips into recession
Japan Cabinet Office reported that Japan’s economy shrank at an annualized rate of 3.4% in Q1, following a 7.3% decline in the previous quarter. The economy has contracted for two consecutive quarters, pushing the country into a technical recession for the first time since 2015. Personal consumption - making up more than half of Japan's GDP, fell by 0.7% on quarterly basis in Q1, reeling from the impacts of sales tax hike imposed in October 2019 and the COVID-19 epidemic. The pandemic has wreaked havoc on this trade-reliant economy, with exports and imports decreasing by 6.0% and 4.9% respectively in Q1 over the last quarter. Last month, Japanese Prime Minister Shinzo Abe approved a stimulus package worth US$1.1 trillion in a bid to counter the economic fallout of the COVID-19 epidemic.
Australia: Fitch cuts Australia’s rating outlook to negative
Fitch Ratings has affirmed Australia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'AAA' and revised the outlook from stable to negative, reflecting the significant impact the global COVID-19 pandemic has on the economy and public finances. It now forecasts the Australian economy to contract by 5% in 2020, driven by a plunge in economic activity in Q2 due to the containment measures, which constrained household consumption and reduced business sentiment and investment. Meanwhile, Fitch warns that Australia’s household debt, at 186.8% of disposable income in 4Q 2019, is among the highest of 'AAA' rated sovereigns and poses an economic and financial stability risk. In an effort to alleviate the economic impact caused by the pandemic, the Australian government has announced three fiscal packages totaling AUD 194 billion to support households and businesses, and the Reserve Bank of Australia has slashed its benchmark interest rate to a record low of 0.25% to boost the devastating economy. |
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| Europe |
UK: Central bank paves the way for negative interest rates
Last week, Bank of England’s Governor Andrew Bailey said the central bank was actively considering all options to help see the economy through a deep recession, including cutting interest rates to below zero. Lower interest rates are seen as tools to stimulate the economy as they encourage businesses and individuals to spend their money rather than saving at banks. Bailey’s comments come as the Office for National Statistics reported that UK annual consumer inflation eased from 1.5% in March to a near-four-year low of 0.8% in April. Lower inflation was mainly contributed by the falling energy and petrol prices, while prices of recreational goods rose as people spent more time at home during COVID-19 lockdown. |
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| North America |
US: Powell predicts economy to shrink as much as 30% in Q2
The US Department of Labor announced that the initial jobless claims came in at 2.44 million in the week ended 16 May. This brings a total of over 38.6 million in the first-time claim since the pandemic began in March. Asked in an interview, US Federal Reserve Chairman Jerome Powell predicted that US unemployment rate could peak around 20% or 25%, and the economy could shrink as much as 30% in Q2. However, he said that the cause of this downturn was not an asset bubble or other fundamental reason but rather a self-induced economic lockdown brought by the government to fight against the COVID-19, adding it is a reasonable expectation that there will be growth in the second half of the year. |
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Centric Brands Inc., a US-based branded-apparel designer and manufacturer under licensed brands including Calvin Klein, Tommy Hilfiger and Nautica, has filed for Chapter 11 bankruptcy protection amid the COVID-19 outbreak. It filed for the protection after reaching a restructuring proposal that would substantially reduce the company’s debt. All stores are temporarily closed. The company has furloughed about 1,350 employees and laid off about 660 employees in April.
Canada-based ladies apparel retailer Reitmans Canada Ltd. (TSX: RET, RET-A) has filed for creditor protection in Canada in order to facilitate its operational, commercial and financial restructuring. It blamed the decision on the spread of COVID-19 which forced the closure of all retail stores and pushed the retail industry into a new and unknown era. The company said in a statement that it will remain fully operational through its brands’ e-commerce websites as the restructuring gets underway, while all physical stores will re-open in conformity with government guidelines. Reitmans employs approximately 6,800 people and operates 576 stores across the country.
Xiaomi Corporation (SEHK: 1810) announced its financial results for the three months ended 31 March 2020. Total revenue for the period amounted to RMB49.7 billion, representing an increase of 13.6% yr/yr. Adjusted net profit for the period was RMB2.3 billion, an increase of 10.6% yr/yr. Revenue from the smartphones segment amounted to RMB30.3 billion, an increase of 12.3% yr/yr. The company shipped 29.2 million units of smartphones in Q1, an increase of 4.7% compared to last year. In the face of the COVID-19 pandemic, Xiaomi said the different levels of lockdown measures adopted in overseas markets are expected to affect its performance in Q2. |
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Copyright © 2020 Hong Kong Export Credit Insurance Corporation |
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Disclaimer
The information contained in the ‘Weekly Market News’ (WMN) is compiled by the Hong Kong Export Credit Insurance Corporation ("HKECIC") for general information only. Whilst HKECIC endeavours to ensure the accuracy of this general information, no statement, representation, warranty or guarantee, express or implied, is given as to its accuracy or appropriateness for use in any particular circumstances.
HKECIC is not responsible for any loss or damage whatsoever arising out of or in connection with any information including data or programmes on the WMN. HKECIC reserves the right to omit, suspend or edit all information compiled by HKECIC on the WMN at any time in its absolute discretion without giving any reason or prior notice. Users are responsible for making their own assessment of all information contained in this WMN and are advised to verify such information and obtain independent advice before acting upon it.
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