In this week’s macro-wrap up, we’ll look at the course of U.S. sealing the deal to raise the debt ceiling and re-open the government at the last moment, and then look at the growth in China GDP and its related positive developments. U.S. Ends Government Shutdown, Avoid Default 16 days into the government shutdown, the Senate and House finally voted on Wednesday to end the fiscal stalemate, hours before the Oct. 17 deadline set by the Treasury Department for raising the borrowing limit. President Obama signed into law a bipartisan deal approved by Congress to re-open the government and…
In this week’s macro-wrap up, we’ll look at the course of U.S. sealing the deal to raise the debt ceiling and re-open the government at the last moment, and then look at the growth in China GDP and its related positive developments.
U.S. Ends Government Shutdown, Avoid Default
16 days into the government shutdown, the Senate and House finally voted on Wednesday to end the fiscal stalemate, hours before the Oct. 17 deadline set by the Treasury Department for raising the borrowing limit.
President Obama signed into law a bipartisan deal approved by Congress to re-open the government and prevent a possible default, the White House said early Thursday morning. The House voted in favour of the bill by a wide margin of 285-144, which would fund the government until Jan. 15 and raise the debt ceiling until Feb. 7. The national parks and memorials were reopened, and hundreds of thousands of federal workers returned to their jobs on Thursday.
The positive news rallied Asian stocks as they rose for a second week, with the Singapore’s Straits Times Index (SGX: ^STI) adding 0.4%. Australia’s S&P/ASX 200 Index rose 1.7% after the nation’s central bank said it retains the option to loosen policy further to spur growth.
BlackRock Inc. and Pacific Investment Management Co. say the Federal Reserve will postpone tapering as a result of the debt-ceiling stand-off. Policy makers in September said bond purchases this year will be cut from a record $85 billion a month. The central bank next meets Oct. 29-30.
The delayed tapering bodes well for companies with significant business in the U.S. James Hardie Industries SE, an Australian maker of building materials with 70% of sales from the U.S., saw its shares rise 2.5% to A$10.76. Nissan Motor Co., a Japanese carmaker with 34% of its car sales from North America, also saw its shares rise, gaining 1.8% to 1,027 yen.
China’s GDP First Increase in Three Quarters
China’s gross domestic product (GDP) accelerated 7.8% year-on-year in the 3rd quarter, up from 7.5% in the preceding quarter, according to the National Bureau of Statistics. The quarterly growth rate was the fastest in the current fiscal year and was in line with analysts’ projections.
The recovery was partly by virtue of the “mini” stimulus package, including tax cuts, to ensure increased investment and industrial output. The measures seem to have worked its charm by fuelling domestic demand and boosting industrial production, though analysts warned that it may be a one-off thing.
Nevertheless, the Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong rose 0.7% and the Shanghai Composite Index added 0.2%. The yuan also climbed to a 20-year high after the People’s Bank of China boosted its fixing, advancing 0.4% this week, the most since the five days ended September 2012.
“China’s economic growth is stabilizing and that added more confidence into markets going into next year,” said Caroline Maurer, a Singapore-based fund manager at Henderson Global Investors, which oversees $110 billion of assets.
China-focused companies like Hankore (SGX: B22) and Midas Holdings (SGX: 5EN) will benefit from the positive developments in China, especially when it may equate to greater grants for important projects like water treatment and railway contracts.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo owns shares in Hankore.