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The Week Ahead: Eyes on US-China talks, Black Friday and final spate of 3Q earnings

TheEdge Mon, Nov 25, 2019 03:00pm - 10 months ago

US-China trade developments will take centre stage this week even as the final spate of third-quarter financial results by Malaysian public-listed companies come flooding in.

Among the large companies slated to announce earnings for the July to October quarter are Telekom Malaysia Bhd, IOI Corp Bhd, IJM Corp Bhd (all on Nov 26), Axiata Group Bhd (Nov 27) and Malayan Banking Bhd (Nov 28).

There will also be plenty of interest in the 1Malaysia Development Bhd (1MDB) audit report tampering trial of former prime minister Datuk Seri Najib Razak and former 1MDB CEO Arul Kanda Kandasamy. Former Auditor-General Tan Sri Ambrin Buang, who is the prosecution’s sixth witness in the case, will resume reading his witness statement before Justice Mohamed Zaini Mazlan on Wednesday.

Meanwhile, all eyes are watching whether the US and China manage to hold trade negotiations ahead of the American Thanksgiving holiday on Nov 28. China had reportedly invited US trade negotiators over for more talks. It remains to be seen if the US will delay its planned Dec 15 tariffs on US$156 billion of Chinese goods if an agreement is not reached by then.

As things stand, it is possible that the completion of a much-anticipated phase one trade deal between the world’s largest and second-largest economies may only happen next year. Beijing has been asking for more extensive tariff rollbacks while Washington is countering with increased demands of its own, Reuters reported last Friday, citing trade experts and people close to the White House.

Economists have warned that a prolonged US-China trade spat — it has already run for 16 months — heightens risks to the global economy.

Former US Secretary of State Henry Kissinger made a sobering comment late last week about how the US and China were in the “foothills of a Cold War” and that the conflict could be worse than World War I if left to run unconstrained.

“That makes it, in my view, especially important that a period of relative tension be followed by an explicit effort to understand what the political causes are and a commitment by both sides to try to overcome those,” Kissinger said, sharing his views at Bloomberg’s New Economy Forum in Beijing.

Meanwhile, Black Friday sales, an annual event on the day after Thanksgiving, will be watched as a gauge of global consumer spending amid a bleaker economic outlook.

Over in the US, the government will on Nov 27 announce its latest reading of third-quarter economic growth. A Bloomberg poll suggests that there will be no change to the Commerce Department’s Oct 30 preliminary reading of a 1.9% annualised growth rate in 3Q. The economy had grown at a 2% pace in 2Q.

On Nov 28, the US Federal Reserve will release its latest Beige Book on economic conditions across the 12 Fed districts, which will offer further insights into how the world’s largest economy is doing.

Despite the holiday-shortened week in the US — markets will close Nov 28 for Thanksgiving and operate on shorter hours the following day — it will have a busy data calendar. Key data that will released include October retail inventories and advance goods trade balance, the third-quarter house price purchase index and new home sales (all on Nov 26) as well as October personal income and spending data (Nov 27).

There will continue to be interest in the impeachment proceedings against US President Donald Trump but the main focus will be on whether he will sign the Hong Kong Human Rights and Democracy Act. The US Congress last week overwhelmingly passed the bill supporting protests in Hong Kong, but observers worry that this could strain US-China tensions further.

On Wednesday, China will release October industrial profits data and this will be followed by official manufacturing and non-manufacturing Purchasing Managers Index (PMI) data on Saturday. A Bloomberg poll indicates that manufacturing PMI will likely improve slightly to 49.5 in November (October: 49.3), while non-manufacturing PMI is likely to climb higher to 53.1 (October: 52.8).

The Bank of Korea will announce a monetary policy decision on Friday, and market expectations are that the central bank will keep interest rates unchanged at a record low of 1.25% at its final such meeting for the year. It has already cut rates twice since July.

Thailand will release October trade data on Friday, while on the same day, Vietnam will release November trade data.

Friday will also see India announcing its 3Q gross domestic product data.

Japan will release a flood of data including unemployment, industrial production, housing starts and consumer confidence (all on Nov 29) but the most important is likely October retail sales on Nov 28.

Back home, the October Producer Price Index (PPI) reading is slated for release on Nov 28.

Companies with annual general meetings include Yong Tai Bhd, Latitude Tree Holdings Bhd, Globaltec Formation Bhd (all on Nov 25) as well as Handal Energy Bhd, Coastal Contracts Bhd and Lion Forest Industries Bhd (Nov 26).

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