China data shows ris­ing de­fla­tion­ary pres­sure

IndiGo shares surge on air­line’s trad­ing de­but

Kuwait Times - - BUSINESS -

BEI­JING/SHANG­HAI: China’s Oc­to­ber in­fla­tion data showed per­sist­ing if not in­ten­si­fy­ing de­fla­tion­ary pres­sure, spurring an­a­lysts to ex­pect more moves to stim­u­late the slow­ing econ­omy by year-end. The Oc­to­ber con­sumer price in­dex (CPI) cooled more than ex­pected, ris­ing 1.3 per­cent from a year ear­lier. com­pared with 1.6 per­cent in Septem­ber, National Bureau of Statis­tics (NBS) data showed yes­ter­day. A Reuters poll ex­pected a 1.5 per­cent rise.

The pro­ducer price in­dex (PPI) fell 5.9 per­cent in Oc­to­ber from a year ear­lier, equal to the Septem­ber de­cline and slightly worse than econ­o­mists’ fore­casts of a 5.8 per­cent drop.

On a monthly ba­sis, con­sumer prices fell 0.3 per­cent, com­pared with a 0.1 per­cent in­crease in Septem­ber. An­a­lysts agreed the weak in­fla­tion read­ings raised the odds of fur­ther stim­u­lus soon, but were di­vided on whether that meant fur­ther rate cuts, greater fis­cal out­lays or both.

“While it is ra­tio­nal to ar­gue China should ease mone­tary pol­icy fur­ther, China ap­pears to in­tend to stim­u­late de­mand via more proac­tive fis­cal pol­icy,” wrote Zhou Hao, se­nior emerg­ing mar­kets econ­o­mist at Com­merzbank in Sin­ga­pore. “Fur­ther cut in pol­icy rates be­fore the end of this year might be dif­fi­cult es­pe­cially as Fed is about to hike. The re­cent state­ment by deputy min­is­ter also in­di­cates that China will do more on fis­cal side in the com­ing year.”

On Fri­day, Caixin Mag­a­zine quoted China’s vice min­is­ter of finance in­di­cat­ing a fis­cal deficit of 3 per­cent, well above the cur­rent planned 2.3 per­cent for 2015, might still be con­sid­ered within a safe range. China is al­ready in its big­gest MUMBAI: Shares in In­dia’s largest car­rier IndiGo soared al­most 18 per­cent above their list­ing price on the air­line’s trad­ing de­but yes­ter­day, as in­vestors bet on the coun­try’s grow­ing ap­petite for air travel.

In early morn­ing trade, shares of In­terGlobe Avi­a­tion, IndiGo’s par­ent com­pany, touched 898.00 ru­pees ($13.54) — up 17.38 per­cent from their 765 ru­pee list­ing price on the Bom­bay Stock Ex­change. The stock later ta­pered to close at 878.45 ru­pees, a rise of 14.83 per­cent on the start­ing price.

IndiGo’s ini­tial pub­lic of­fer­ing last month was In­dia’s big­gest in three years and raised eas­ing cy­cle since the height of the fi­nan­cial cri­sis, but low in­fla­tion means that real in­ter­est rates re­main high for many firms, es­pe­cially man­u­fac­tur­ers who have en­dured years of fall­ing fac­tory gate prices.

The cen­tral bank has cut bench­mark in­ter­est six times since Novem­ber 2014 and re­peat­edly re­duced banks’ re­serve re­quire­ment ra­tio. Yes­ter­day’s weak in­fla­tion print con­tin­ues a well-es­tab­lished trend of fall­ing pro­ducer prices and tepid con­sumer price rises, in part a re­sult of sharply lower com­mod­ity prices in 2015 but also re­flect­ing slow­ing de­mand growth for many goods.

PROB­LEM OF OVER­CA­PAC­ITY “The PPI data con­tin­ued to point out weak do­mes­tic de­mand and the over­ca­pac­ity prob­lem in the real econ­omy,” said Li Huiy­ong, an econ­o­mist at Shenyin & Wan­guo Se­cu­ri­ties in Shang­hai. “We think the gov­ern­ment needs to step in to in­ter­vene with more sup­port as the out­look of the econ­omy is not so op­ti­mistic. We ex­pect more in­ter­est rates and RRR cuts in com­ing months.”

Heavy in­dus­trial firms and min­ers, hit by an ex­tended slump in the real es­tate sec­tor which drives fi­nal de­mand for many of their prod­ucts, have fared par­tic­u­larly poorly. The Luan Group, a state coal miner, said last month it had no choice but to cut out­put and put work­ers on ex­tended un­paid leave. Although con­sumer price in­fla­tion in China is highly sea­sonal due to the out­size in­dex weight of food prices , econ­o­mists also high­lighted weak­en­ing se­quen­tial mo­men­tum as a con­cern. —Reuters al­most $460 mil­lion for the bud­get car­rier. Shares were sold at be­tween 700 ru­pees and 765 ru­pees each, with the money raised to be used for trim­ming the air­line’s debt and pay­ing for 250 Air­bus planes it or­dered ear­lier this year. IndiGo also plans to use the IPO warch­est to fund an ex­pan­sion in ser­vices as in­creas­ingly wealthy In­di­ans shun the coun­try’s creak­ing rail net­work in favour of cheap air travel.

In Oc­to­ber, In­dia’s gov­ern­ment un­veiled a plan to make air travel af­ford­able for mil­lions of its ci­ti­zens, with schemes to re­vive ail­ing air­ports and con­nect ru­ral ar­eas that it said would “take fly­ing to the masses”. — AFP

NEW DELHI: An air­craft of In­dian air­line IndiGo lands at Indira Gandhi In­ter­na­tional Air­port in New Delhi. Shares in In­dia’s largest car­rier IndiGo soared al­most 18 per­cent above their list­ing price on the air­line’s trad­ing de­but yes­ter­day as in­vestors bet on the coun­try’s grow­ing ap­petite for air travel. — AFP

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