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[IFX Gertrude]

Malaysian Ringgit Slides To 2-day Low Against U.S. Dollar


The Malaysian ringgit weakened against the U.S. dollar in the Asian session on Friday. Against the greenback, the ringgit fell to a 2-day low of 4.1888. At yesterday's close, the ringgit was trading at 4.1100 against the greenback. If the ringgit extends its downtrend, it is likely to find support around the 4.35 area.

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[IFX Gertrude]

Ease Of Doing Business: India Amends Transfer Pricing Rules



As part of efforts to improve its ranking on 'Ease of Doing Business' and in line with the promise made by Finance Minister Arun Jaitley in his Budget speech, the Indian government on Tuesday notified amendments to the transfer pricing rules to incorporate a "range concept" and use of multi-year data in line with the international best practices. The amended regime will be applicable for computation of arms. The amended rules would provide clarity in determination of price in transfer pricing cases and reduce disputes on transfer pricing (TP) issues. The use of multiple-year data would average out any variations in a particular year and add value to the transfer pricing analysis. The range concept will be applicable in certain cases for determining the price and will begin with the 35th percentile and end with the 65th percentile of the comparable prices. Transaction price shown by the taxpayers falling within the range will be accepted and no adjustment will be made. The amended regime will be applicable for computation of Arm's Length Price (ALP) of international transactions and specified domestic transactions undertaken on or after 1/04/2014. The news rules are designed to provide stability in the direct tax regime. The notification is available on the website of the Department incometaxindia.gov.in.

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[IFX Gertrude]

Taiwan Sep Jobless Rate Rises More Than Expected



Taiwan's unemployment rate climbed more-than-expected in September after remaining stable in the prior month, figures from the Directorate General of Budget Accounting and Statistics, or DGBAS, showed Thursday. The jobless rate rose to a seasonally adjusted 3.79 percent in September from 3.74 percent in August. Economists had expected the unemployment rate to increase slightly to 3.75 percent. The latest unemployment rate was the highest since December 2014, when it marked 3.82 percent. On an unadjusted basis, the unemployment rate edged up to 3.89 percent in September from 3.88 percent in the prior month. The number of unemployed people increased to 442,000 in September from 435,000 in the preceding month. The labor force participation rate came in at 58.69 percent in September, up from 58.65 percent a month ago.

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[IFX Gertrude]

10-year Treasuries most expensive in two years

The 10-year Treasuries are the most expensive compared with other maturities in over two years, as the Federal Reserve lacks clarity over the timing of its first interest rate hike since 2006, pushing investors to the benchmark note. Ahead of the central bank's September 17 rate decision, the yield hovered about 2% this month from as high as 2.3%. Futures traders reduced rate increase bets by December to as low as 27% last week, as October 2 report showed the economy gained less than 150,000 jobs in September. The yield on the Treasury 10-year note was slightly changed at 2.03%. The 2% security expiring in August 2025 ended at 99 ¾.

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[IFX Gertrude]

China Leading Index Jumps 1.6% In September - Conference Board



A leading economic index for China spiked in September, the latest survey from Conference Board revealed on Friday, climbing 1.6 percent. That follows the 1.0 percent increase in August and the 0.9 percent gain in July. The coincident index skidded 1.2 percent after rising 0.7 percent in August and 1.0 percent in July. "China's economic situation, as measured by the coincident index, slowed substantially in September, due to very weak consumer demand and a struggling industrial sector," said Andrew Polk, resident economist at the Conference Board China Center in Beijing.

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[IFX Gertrude]

BOJ to slash price projections for next fiscal year



The Bank of Japan, at a rate review next week, will slash its growth and inflation outlook for the fiscal year, but modestly reduce its projections for the following year. Sources privy to the matter said the central bank, by not straying far from its current projections, can still postulate it remains on course to hit its 2% inflation goal next year without bolstering its massive purchase program. But critics noted the program has been only slightly effective and disrupts the bond market. Also, Finance Minister Taro Aso expressed doubts additional monetary stimulus would help attain the BOJ's target. Sources added the BOJ, contending with inflation, is preparing to reduce its core consumer inflation forecast for this year, which began in April, to below 0.5% in a semi-annual report due October 30. However, they added the central bank will only cut by 0.1-0.2 point its estimates the price hikes will advance to 1.9% in the following fiscal year, keeping it close to its target.

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[IFX Gertrude]

RBS signs up workers for Facebook at Work



As Royal Bank of Scotland became the first bank to take on Facebook at Work, where bankers will soon be using the social network to communicate with colleagues, exchange details, and offer services to the public. The British bank is sending an in-house business version of Facebook for all employees, from Chief Executive Ross McEwan to back office workers and branch staff. The move seeks to boost productivity and connect people throughout the firm more quickly and effectively via a mobile app and desktop site. RBS is also considering ways of interacting with clients through Facebook. The social network company is broadening its corporate version beyond its trial partners, as well as planning to charge for additional features including integrations with other enterprise software like Microsoft's Office 365.

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[IFX Gertrude]

Australian Dollar Rises Against Majors



The Australian dollar strengthened against the other major currencies in the Asian session on Monday. The Australian dollar rose to nearly a 2-week high of 0.9544 against the Canadian dollar, from Friday's closing value of 0.9492. The aussie advanced to 87.79 against the yen and 1.5212 against the euro, from last week's closing quotes of 87.63 and 1.5258, respectively. Against the U.S. and the New Zealand dollars, the aussie edged up to 0.7247 and 1.0715 from last week's closing quotes of 0.7211 and 1.0674, respectively. If the aussie extends its uptrend, it is likely to find resistance around 0.97 against the loonie, 91.00 against the yen, 1.49 against the euro, 0.74 against the greenback and 1.09 against the kiwi.

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[IFX Gertrude]

Fitch: Some Malaysia 2016 Budget Details Look Optimistic



Some of the detailed assumptions in Malaysia's 2016 federal budget look optimistic, posing some downside risk to the projections, Fitch Ratings says. Fitch expects Malaysia's fiscal and broader economic outlook to remain under pressure from weaker commodity prices into2016. Malaysia's 2016 federal budget projects a reduction in the deficit to 3.1% from 3.2% expected for 2015. The budget also estimates the share of revenues in GDP to drop by 1.1pp relative to 2015, dominated by a 0.9pp decline in the dividend expected from the state oil firm Petronas (to MYR16bn from MYR26bn in 2015). The authorities expect 2016 revenues to be buoyed by a 44% rise in receipts from the new Goods and Services Tax (GST) introduced in April 2015, or by 12.5%, consolidating the taxes it replaced. This is considerably faster than Fitch's expectation for nominal GDP growth of about 7% or nominal consumption growth of about 8%, despite a longer list of zero-rated items from next year. Slower growth in GST receipts in line with consumption would add about 0.1% of GDP onto the deficit, in Fitch's estimate. Overall, GST appears to have been much more significantly revenue-positive than the government originally expected. This could be partly because more businesses have signed up for the scheme than originally expected. The government estimates the deficit would be 4.8% in 2016 under the previous system of sales taxes. The government also projects spending to form a smaller share of GDP. The burden of adjustment falls on current expenditures (which the government terms "operating expenditures"). Government wages are expected to grow by just 2%, below Fitch's expectation for annual average inflation (2.5%). Recent experience gives grounds for caution that this tight settlement can be achieved. The government originally aimed to shave wages by 1.9% in 2015, but the revised budget expects wages will rise by 3.2%. Spending on supplies and services is also expected to contract. Delivering on these projections could be challenging, particularly as they would affect the livelihoods of some of the government's core supporters. Set against these issues, the budget's conservative oil price estimate of USD48/barrel is below Fitch's projection of USD60. This could point to some upside for oil-based revenues. This would partly be offset by higher subsidy payments, although the 2015 budget reduced fuel subsidies substantially. Fitch thinks the net effect of higher oil prices than the budget expects in 2016 is unlikely to be larger than 0.1% of GDP. Development expenditure (that is, capital spending) is projected at 4% of GDP in 2016, not much changed from 2015 (4.1%). However the government has typically found it difficult to execute the full development budget. Capital spending could provide a buffer in the event that there is slippage elsewhere in the budget, whether through "normal" under-execution or deliberate restraint. However, this would in turn weigh on broader GDP growth both in 2016 and in the future. It would also be difficult to square with the authorities' broader emphasis on infrastructure development. Fitch cited the authorities' success in insulating economic policy from intensifying political pressures when the agency revised the Outlook on Malaysia's 'A-' rating to Stable in June 2015. The proposed further reduction in the deficit is in line with this conclusion, although the budget also acknowledges political realities. The introduction of two new tax brackets for higher earners is redistributive, although the intention may have been more political than fiscal - the government estimates just 17,000 taxpayers will be affected, generating minimal expected additional revenue of MYR0.4bn. This does not quite cover a budgeted MYR0.7bn rise in transfers to lower-income households. The government also announced rises in minimum wages by between 11% and 15% in different parts of the country. Although Fitch thinks the federal budget deficit could exceed the 3.1% projection, the agency currently believes it is unlikely that the slippage would be enough to put Malaysia's debt ratio on an upward trajectory. Fitch expects Malaysia's federal debt to stay at about 52% of GDP until 2017. The evolution of non-budget contingent liabilities, including government guarantees, will bear monitoring. More broadly, the economy and sovereign credit continue to face challenges associated with shifting investor risk appetite, reflected in pressure on the currency and foreign reserves.

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[IFX Gertrude]

Fed under pressure to better manage rate expectations



As 2016 draws near, Federal Reserve officials and Chair Janet Yellen are under pressure to better manage market expectations for interest rates and the US economy. Policymakers are widely anticipated to announce short-term rates will remain near zero, leaving mid-December as their last chance to increase rates this year. That timetable poses two challenges for Fed chief to decide whether the US economy is ready for a rate hike, as well as signal their intentions without further confusing the market. Several investors criticized the mixed signals transmitted by central bank officials before and after the decision. In September, the Fed decided not to increase rates due to shaky economic conditions.

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