KUALA LUMPUR: Headline inflation will be higher in October, led by the hike in fuel prices, said economists.

The consumer price index is expected to rise by an average 2.72 per cent year-on-year.

The Statistics Department will be releasing the data today.

HSBC Bank said base year effects, arising from the 10-11 per cent hike in subsidised fuel prices in September, will likely keep the reading on October CPI at 2.6 per cent, which will still place it within Bank Negara Malaysia's comfort range.


Excluding food and fuel prices, core inflation is also set to remain stable at 1.3 per cent year-on-year.Irvin Seah of DBS Bank said the recent spike in inflation is largely policy-driven.

The government cut both RON 95 petrol and diesel subsidies by RM0.20 per litre. This raised the pump prices for RON95 petrol to RM2.10/litre and diesel to RM2/litre, up from RM1.90 and RM1.80, respectively.

"While that will save about RM3.3 billion per year for the government, the inflationary effect has been manifested in the headline inflation number."

Seah said the days of strong growth and low inflation are coming to an end.

He said there is also little justification for Bank Negara to start tightening monetary policy as the growth momentum is already slowing on easing domestic demand, while the inflationary impact of policy changes will be transient.(Business Times)

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Gold edged higher on Tuesday as the US government shut down some of its operations after Congress failed to agree on a spending bill, but gains were limited as investors believe the stand-off will likely soon be resolved.

After missing a midnight deadline (0400 GMT), US federal agencies were directed to cut back services because of partisan deadlock in Congress over Republican efforts to halt President Barack Obama's healthcare reforms by using a temporary spending bill.

The impasse also raised concerns over whether Congress can meet a more important deadline in mid-October to raise the debt-ceiling limit.

Gold gained early on Monday on safe-haven bids surrounding the shutdown, but pulled back as buying slowed despite a weaker dollar. Spot gold was up 0.13% at US$1,328.70 an ounce by 0606 GMT on Tuesday.

"Should the political wrangling continue over the debt-ceiling negotiations mid-month, this could provide the impetus for gold to break out of its US$1,300 to US$1,350 range," said Victor Thianpiriya, an analyst at ANZ in Singapore.

"The market is not putting on a big net position, which makes me think that when we get a breakout, it is likely to be sizeable."

A Sydney-based trader said gold was not seeing much safe-haven buying as the issue was likely to be resolved soon and there was not much upside to gold beyond that.

The last time the U.S. government shut down in 1995/96, gold – then trading at less than US$400 an ounce – gained about 3%.

However, failure to raise the US$16.7 trillion debt ceiling by mid-October would have a much bigger impact as it would force the US to default on some payments – an event that could cripple its economy and send shockwaves round the globe.

When the debt ceiling issue came up in 2011, an agreement was reached only in the last minute and gold hit an all-time high of US$1,920 an ounce, in part because of the uncertainties surrounding a deal.

   

SLOW PHYSICAL DEMAND       

The Perth Mint's sales of gold coins and bars in September more than doubled from the previous month but they were still 17% lower than the same period last year.

Demand for US gold coins fell 81% in September on an annual basis, as political turmoil in Syria failed to rekindle retail buying that has slowed after months of

exceptional bargain hunting, data on the US Mint website showed on Monday.

Markets in China, the world's second biggest gold consumer after India, were closed for the National Day holiday.(Reuters)

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Asian stocks rose in September, with the benchmark index heading for its biggest gain in three years, as the Federal Reserve unexpectedly maintained stimulus and data signaled China’s economy is strengthening.

Tencent Holdings Ltd., Asia’s biggest Internet company, gained 11 percent in Hong Kong this month to touch a record high. Tokyo Electron Ltd. surged 31 percent after Applied Materials Inc. announced a plan to take over the Tokyo-based company. Acom Co. soared 49 percent, spurring the consumer lender to the biggest gain on the Asian equities index, after a report Japan’s non-bank loans to individuals are picking up.  

Profits at China’s industrial companies rose 24 percent in August, data yesterday showed. A preliminary HSBC Holdings Plc and Markit Economics’ purchasing managers index for China released on Sept. 23 rose to 51.2, a six-month high.

Regional Benchmarks

Japan’s Topix index gained 10 percent in September, rising for the first month in five, as Tokyo won a bid to host the 2020 Olympic Games. The measure fell 0.1 percent this week.

Australia’s S&P/ASX 200 Index (AS51) gained 3.4 percent this month and climbed 0.6 percent since Sept 20. New Zealand’s NZX 50 Index advanced 5.3 percent in September.

Hong Kong’s Hang Seng Index jumped 6.8 percent this month and China’s Shanghai Composite Index gained 2.9 percent. Singapore’s Straits Times Index rose 6 percent.(Bloomberg)

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Japan’s industrial production rose less than economists forecast, suggesting that a recovery in the nation’s manufacturing sector is lagging a weakening yen.

Output rose 2.5 percent from November, when it declined 1.4 percent, the Trade Ministry said in Tokyo today. The median estimate of 25 economists was for a 4.1 percent gain. Production fell 7.8 percent from the previous year.

The yen has weakened more than 12 percent against the dollar in the past three months, the most among 16 major currencies tracked by Bloomberg. It was at 91.06 per dollar as of 8:52 a.m. in Tokyo. The Nikkei 225 Stock Average (NKY) has gained more than 16 percent since the beginning of December.

Japan’s three largest automakers -- Toyota Motor Corp. (7203), Honda Motor Co. and Nissan Motor Co. -- all reported falling domestic production in December from the previous month.

Manufacturing in China, Japan’s biggest export market, is expanding at the fastest rate in two years, bolstering prospects that economic growth there will accelerate for a second straight quarter.

Weaker Yen

A weaker yen makes products relatively cheaper in export markets and boosts overseas earnings for Japanese companies such as Toyota and Canon Inc. (7751) when repatriated.

Twelve analysts covering Toyota, Japan’s biggest car manufacturer, have raised their earnings estimates for the next fiscal year.
The nation’s gross domestic product shrank at an annualized 3.5 percent pace in the third quarter of last year, the second straight contraction and meeting the textbook definition of a recession.
 (Bloomberg)

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Asian stocks fell, with the regional benchmark index retreating from the highest since August 2011 on the busiest day of Japan’s earnings season, after the country’s industrial production missed estimates and U.S. growth unexpectedly stalled.

Nintendo Co., the world’s largest maker of game consoles, sank 4.7 percent in Osaka after forecasting an operating loss on lower-than-expected sales of its Wii U. Whitehaven Coal Ltd. fell 6.6 percent after saying first-half earnings will drop on lower prices. China Unicom Hong Kong Ltd. gained 1.8 percent in Hong Kong after the mobile-phone carrier said 2012 profit probably rose more than 50 percent.

Japan’s Nikkei 225 Stock Average (NKY) slid 0.5 percent after yesterday closing above 11,000 for the first time since April 2010. The nation’s industrial production rose 2.5 percent in December from the previous month, missing the 4.1 percent median economists’ estimate. More than 250 companies listed on Japan’s broader Topix Index are scheduled to report earnings today.

Kospi Index

Australia’s S&P/ASX 200 Index (AS51) declined 0.5 percent, while South Korea’s Kospi Index (KOSPI) retreated 0.3 percent. Taiwan’s Taiex Index slumped 0.3 percent even after its economy expanded more than estimated in the fourth quarter.

Hong Kong’s Hang Seng Index retreated 0.5 percent. The Shanghai Composite Index slid 0.2 percent, with trading volume 35 percent above its 30-day average at the time of day.

China Unicom

Among stocks that rose, China Unicom advanced 1.8 percent to HK$12.48 in Hong Kong. The nation’s second-largest mobile- phone company said 2012 net income probably increased more than 50 percent from a year earlier as it expanded its 3G and broadband user base. The carrier didn’t provide numbers.

Genting Singapore Plc gained 5.8 percent to S$1.55 after an executive at rival Las Vegas Sands Corp. said a Sands resort in the city had a “damned good quarter.” Genting and Las Vegas Sands operate Singapore’s two casinos.
(Bloomberg)

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