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Vietnam must take 'aggressive' action to meet growth goals, says finance minister

This article from the Financial Times may be of interest. Here is a section: 

Vietnam was one of Asia’s fastest-developing economies last year, expanding more than 8 per cent, its highest growth rate since 1997. But growth slowed in the first quarter of 2023 to 3.3 per cent, down from 5.9 per cent in the fourth quarter of last year, as a grim global economic picture and high inflation cut into demand for the country’s exports.

“We rely on the world’s demand for our products, which is facing a lot of difficulties,” Ho Duc Phoc told the Financial Times, adding that the war in Ukraine had raised petroleum and consumer prices, putting pressure on manufacturing input and trade costs and depressing buyers’ appetite. “Our orders from international partners have reduced drastically.”

He said the government was targeting full-year growth of 6 to 6.5 per cent, following anticipated first-half growth of about 4 per cent. “In the next six months, we will probably have [to take] aggressive steps to achieve that target,” he said, citing an extension of deadlines for tax payments, the reduction of value added tax and petrol levies amid proposals to help lower costs and boost demand.

Vietnam’s central bank this month cut interest rates by 50 basis points, its fourth reduction this year.



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World's Empty Office Buildings Become Debt Time Bomb

This article from Bloomberg may be of interest to subscribers. Here is a section: 

Major institutional owners including Blackstone, Brookfield and Pimco have already chosen to stop payments on some buildings because they have better uses for their cash and resources. “There’s significant stress,” says Harold Bordwin, a principal in New York at Keen-Summit Capital Partners LLC, which specializes in renegotiating distressed real estate. “People don’t give up assets so easily unless they just don’t see any hope and they recognize that they’re pretty well underwater.”

The number of transactions is plunging—and when deals do happen, the price declines are stark. In the US, where return-to-office rates have been lower than in Asia and Europe, values for institutional-quality offices are down 27% since March 2022, when interest rates started going up, according to data analytics company Green Street. Apartment building prices have declined 21%, and malls are off 18%. Office prices are expected to fall more than 25% in Europe and almost 13% in the Asia-Pacific region before hitting a trough, PGIM Real Estate, a unit of Prudential Financial Inc., forecasts.



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Zambia Wins Debt Relief, Setting Precedent for Stressed Nations

This article from Bloomberg may be of interest. Here is a section: 

Zambia reached an agreement in principle to restructure $6.3 billion of debt with bilateral lenders and will announce a deal Thursday, according to a French official, setting a precedent for countries struggling to service their liabilities.

The accord marks the first major relief won by a developing country under the Group of 20 nation’s Common Framework that brings the traditional creditor nations of the Paris Club around the same negotiating table with China and India. Details are still unclear, beyond that the creditors led by China and France agreed to extend the maturities on their loans over some 20 years, with a three year grace period. 

The parties will sign the memorandum of understanding in coming weeks, the official said.

This could lead the way for other nations — including Ghana, Sri Lanka and Ethiopia — locked in negotiations with creditors from China, the Paris Club and bondholders. More than 70 low-income nations face a collective $326 billion burden, with more than half of them already in or near debt distress, according to the International Monetary Fund. 



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Airbus Lands Record-Breaking Order From Indigo

This article from Bloomberg may be of interest. Here is a section: 

Airbus secured the biggest aircraft order in aviation history, notching a 500-plane deal with India’s dominant airline, IndiGo. The mammoth accord for Airbus’s top-selling A320 family of single-aisle jets brings IndiGo’s order backlog to close to 1,000 planes as extends its lead in the world’s fastest-growing large market for aviation.

“No one has ever ordered an order of this magnitude,” IndiGo Chief Executive Officer Pieter Elbers said from the podium. “It speaks to the potential of Indian aviation and the ambitions which Indigo is having.”



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Rising UK Mortgages, Yields Pinch Homeowners and Sunak Alike

This article from Bloomberg may be of interest. Here is a section: 

The UK housing market is under particular pressure from a triple whammy of pricey borrowing, economic uncertainty and high inflation. While the average two-year fixed-rate home loan surpassed 6%, the five-year fixed-rate deal climbed to 5.67% after breaching 5.5% for the first time since January last week.



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Mexico's Nearshoring Bonanza Is Not Yet Near

This article from Bloomberg may be of interest. Here is a section: 

But though the nearshoring story remains plausible, the data so far do not quite justify the exuberant optimism that North America can pull Mexico into the developed world.

Recent government trade data confirm that the US is moving away from China. Last year Chinese exports accounted for only 17% of US imports, down from 22% during President Trump’s first year in office. In 2023 they have cratered, accounting for only 13% of what the US bought from abroad in the first four months of the year.

But Mexico is not taking over. Its 15% share of US imports this year is only 1.3 percentage points higher than it was in 2017. Indeed, other Asian exporters are taking a larger chunk.

Moreover, the nearshoring boom is hard to detect in the investment numbers. Foreign direct investment into Mexico has been stronger in the last ten years than in the prior decade, but the data show no recent upsurge. Indeed, new investment — excluding reinvested earnings — seems somewhat lower.



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China Shifts to Stimulus Mode With Xi's Options Dwindling

This article from Bloomberg may be of interest to subscribers. Here is a section: 

The new stimulus package under consideration has been drafted by multiple government agencies and includes at least a dozen measures designed to support areas such as real estate and domestic demand, according to people familiar with the matter. 

A key component is support for the real estate market. Regulators are seeking to lower costs on outstanding residential mortgages and boosting relending through the nation’s policy banks to ensure homes are delivered, one of the people said.

The State Council may discuss the policies as soon as this Friday but it’s unclear when they will be announced or implemented, the people said.

“The aim of stimulus this time is to keep growth ticking over, consistent with the relatively conservative ‘about 5%’ gross domestic product growth goal, rather than to spur a round of robust growth,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics. “Policymakers are still wary of repeating the kind of debt hangover that the Global Financial Crisis stimulus produced and they spent the decade up to the pandemic trying to sort out.”

Property Woes
The weak property market remains a major drag on China’s economy, although policymakers appear reluctant to use its old playbook of driving up investment in real estate as a way to boost growth. Goldman analysts said in a recent report they don’t expect a repeat of the 2015-2018 shantytown renovation program that pumped central bank money into the property sector and sent home price surging.

Beijing is seeking to reduce the economic and fiscal reliance on the housing market, Goldman said, which suggests an L-shaped recovery in coming years.



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BOE Beat Fed to Interest-Rate Hikes, Still Set to Finish Last

This article from Bloomberg may be of interest to subscribers. Here is a section: 

The data on Tuesday showed faster-than-anticipated wage growth and lower unemployment. Hours later, new BOE rate setter Megan Greene joined policymaker Catherine Mann in warning of the risks of persistent inflation and the difficulty of getting back to the 2% target. 

The surprise April wage figures were partly driven by an increase in the national minimum wage, which won’t be repeated in later months. Still, according to Goldman Sachs analysts including Isabella Rosenberg, “we don’t think they can be ignored.”

“The BOE has much further to go than other central banks,” they said.



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Brazil Inflation Slows Past All Forecasts as Rate Cuts Loom

This article from Bloomberg may be of interest to subscribers. Here is a section: 

Brazil’s annual inflation slowed much more than expected in May, hitting the lowest level in two and a half years and piling pressure on the central bank to ease monetary policy in coming months.

Official data released Wednesday showed consumer prices rose 3.94% from a year earlier, less than all forecasts in a Bloomberg survey of analysts that had a 4.04% median estimate. Monthly inflation stood at 0.23%.



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Lira Plunges as Turkey's New Economy Team Pulls Back Defense

This article from Bloomberg may be of interest. Here is a section: 

President Recep Tayyip Erdogan, who won reelection to a five-year term, has long championed an unorthodox economic policy based on ultra-low interest rates. The costs of that policy piled up in the form of depleted foreign-currency reserves, an inflationary spike, and an exodus of foreign capital, leading markets to price in a large depreciation after the vote as investors bet that it was unsustainable. 

Minister Simsek
Erdogan’s appointment of Simsek, a former Merrill Lynch strategist, has intensified expectations of a return to orthodoxy and abandonment of state intervention in favor of allowing the market to determine fair value for Turkish assets. Since the election on May 28, the lira has weakened more than 13% against the dollar.

Investors are betting that more weakness is coming. The options market is currently pricing about an 80% chance that the lira will hit 25 per dollar within the next three months, and a more than 60% chance that it could hit 27 per dollar, according to data compiled by Bloomberg.

Turkey’s state banks don’t comment on their interventions in the foreign-exchange market. A former governor of the central bank said in 2020 that state-owned lenders carry out transactions in line with regulatory limits and could continue to be active in the currency market.



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