China signals more effective fiscal policy

Its monetary settings remain “prudent”
Chief Investment Office13 Dec 2019
Photo credit: AFP Photo


The Chinese government said it would improve the effectiveness of fiscal policy in 2020, while monetary settings remain “prudent”, signalling a fine-tuning of support measures as the world’s second-largest economy slows.

The Communist Party’s annual economic planning meeting declared that the government would maintain economic growth next year within a “reasonable range”, according to a summary of decisions carried by state media. The government and central bank will ensure reasonably ample liquidity, and the report also called for a continued lowering of the overall level of import tariffs.

“The meeting pointed out that the basic trend of China’s economic stability and long-term improvement has not changed,” according to the statement. “Fiscal and monetary policies should work together with policies on consumption, investment, employment, industry, and the regions to channel investment to areas such as advanced manufacturing, improving people’s livelihoods, and gaps in infrastructure.”

As China pursues a trade deal with the US to end the bruising tariff conflict, domestic policymakers are focusing on stability rather than artificially boosting the economy as it transitions to a more modest level of growth. Officials remain wary of boosting monetary stimulus, and are hinting that greater impact from fiscal efforts than was achieved by 2019’s CNY2t (USD284b) round of tax cuts is desired. There was no mention of new tax or fee cuts this year.

A slim majority of economists surveyed by Bloomberg this week (ending 13 December) expect that the fiscal deficit ratio, which is used as the main yardstick for the amount of support to the economy, would be set slightly higher in 2020 at 3% of gross domestic product (GDP) compared with 2019’s 2.8%.

The statement was released after the three-day Central Economic Work Conference finished Thursday (12 December), and did not mention the overall target for GDP growth. That is likely only to be released at a legislative meeting in March, but economists see the target being set at “about 6%”, a formulation that implies continuation of the current growth slowdown. A target at that level will also keep the government’s goal of doubling the size of the economy and income over this decade within reach. – Bloomberg News.

Meanwhile, the Shanghai Composite Index ended 0.30% lower at 2,915.70 and the Hang Seng Index advanced 1.31% to 26,994.14 on Thursday.



Bangkok Bank Pcl snapped up a controlling stake in Indonesia’s PT Bank Permata for about USD2.7b in the first major purchase of an overseas lender by a Thai bank.

The purchase of a near 90% holding from Standard Chartered Plc and a local partner fits with Bangkok Bank’s strategy of transforming into a regional lender with a larger presence in Southeast Asian markets, according to a filing. Indonesia is a “highly attractive and fast growing market”, it said.

Standard Chartered’s disposal of its stake, which will net about USD500m, comes as no surprise after the bank signalled in February that Permata is no longer core. The funds may be used to extend the Emerging Markets lender’s share repurchase programme, which has already returned USD1b. Its shares climbed more than 2% in London.

The deal for Bangkok Bank is a shift in tactics for Thailand’s second-largest bank by assets, which has been viewed as conservative. The prospect of the purchase rattled investors, sparking a 4.4% slide in Bangkok Bank’s stock by the close Thursday (12 December) to the lowest level since 2016.

The acquisition at IDR1,498 per share implies a valuation of 1.77 times book value, and will be financed via a combination of internal resources and routine funding, Bangkok Bank said, adding it does not expect to raise equity for the transaction.

It expects to complete the deal in 2020 subject to approvals and anticipates conducting a tender offer for the remaining stake in the Indonesian lender. – Bloomberg News.

Shares in Sydney ticked up on Friday (13 December) morning with the S&P/ASX 200 Index up 0.37% to 6,733.90. The benchmark slid 0.65% to 6,708.53 on Thursday.

South Korea’s Kospi Index advanced 1.09% to 2,160.60 in early Friday trading after finishing 1.51% higher at 2,137.35 the previous session.

The Taiwan Stock Exchange Weighted Index (Taiex) gained 1.16% to 11,836.42 on Thursday.

The information published by DBS Bank Ltd. (company registration no.: 196800306E) (“DBS”) is for information only. It is based on information or opinions obtained from sources believed to be reliable (but which have not been independently verified by DBS, its related companies and affiliates (“DBS Group”)) and to the maximum extent permitted by law, DBS Group does not make any representation or warranty (express or implied) as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions and estimates are subject to change without notice. The publication and distribution of the information does not constitute nor does it imply any form of endorsement by DBS Group of any person, entity, services or products described or appearing in the information. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment or securities. Foreign exchange transactions involve risks. You should note that fluctuations in foreign exchange rates may result in losses. You may wish to seek your own independent financial, tax, or legal advice or make such independent investigations as you consider necessary or appropriate.

The information published is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into any transaction in any jurisdiction or country in which such offer, recommendation, invitation or solicitation is not authorised or to any person to whom it is unlawful to make such offer, recommendation, invitation or solicitation or where such offer, recommendation, invitation or solicitation would be contrary to law or regulation or which would subject DBS Group to any registration requirement within such jurisdiction or country, and should not be viewed as such. Without prejudice to the generality of the foregoing, the information, services or products described or appearing in the information are not specifically intended for or specifically targeted at the public in any specific jurisdiction.

The information is the property of DBS and is protected by applicable intellectual property laws. No reproduction, transmission, sale, distribution, publication, broadcast, circulation, modification, dissemination, or commercial exploitation such information in any manner (including electronic, print or other media now known or hereafter developed) is permitted.

DBS Group and its respective directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned and may also perform or seek to perform broking, investment banking and other banking or financial services to any persons or entities mentioned.

To the maximum extent permitted by law, DBS Group accepts no liability for any losses or damages (including direct, special, indirect, consequential, incidental or loss of profits) of any kind arising from or in connection with any reliance and/or use of the information (including any error, omission or misstatement, negligent or otherwise) or further communication, even if DBS Group has been advised of the possibility thereof.

The information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. The information is distributed (a) in Singapore, by DBS Bank Ltd.; (b) in China, by DBS Bank (China) Ltd; (c) in Hong Kong, by DBS Bank (Hong Kong) Limited; (d) in Taiwan, by DBS Bank (Taiwan) Ltd; (e) in Indonesia, by PT DBS Indonesia; and (f) in India, by DBS Bank Ltd, Mumbai Branch.