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    Next Week in Asia – 9 September 21

    Published On: 9 September 2021

    Next Week in Asia is the Asia House weekly briefing on key trade, investment, and policy issues to watch across Asia in the week ahead, with analysis and views from our Research and Advisory team.

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    Reports to shed light on Asia’s lending growth

    Asia’s lending data will take on new importance in light of the regional economic scarring caused by the COVID-19 Delta variant. Upcoming reports for China and Indonesia’s domestic lending data will provide an update. Globally, South East Asia’s cross-border lending growth stood out at the start of 2021. According to the Bank for International Settlements, banks’ cross-border lending into emerging market and developing economies rose in the first quarter of 2021 – with the Asia-Pacific region showing the strongest increase and registering the largest rise since the start of 2017. China was the strongest beneficiary: reporting banks in France, Japan and Korea contributed approximately 75 per cent of the increase, with funds primarily distributed to banks and non-financial institutions in China. Both domestic and cross-border lending data are crucial to watch as a lead for investment growth – Asian economies’ investment shares as a proportion of GDP have largely stalled.

    Asia’s cost-push inflation is likely to re-accelerate

    Global transport costs remain elevated. The Baltic Exchange Dry Index, which provides a global benchmark for the price of moving major raw materials by sea, has shown signs of having peaked for now, though it tends to be volatile. Despite this, there are continued reports of soaring transport costs linked to mainland China, with one UK logistics company citing annual cost increases from China of up to 800 per cent. Looking ahead, with intermittent regional lockdowns amid repeated waves of COVID-19 infections, shipping container costs could stay elevated; this would have knock-on effects on cross border trade. Upcoming producer and consumer price reports from India, Japan and Korea will shed further light on recent price pressures. The continuation of regional lockdown measures is likely to have exacerbated supply bottlenecks and to have continued to contribute to economic slowdown.

    India’s economy shows signs of strength ahead of Modi-Biden meeting

    As India recovers from its second wave of COVID-19 infections, its economy is showing signs of strength. Its recently released GDP report indicated that the economy rebounded at a record rate in the three months to the end of June. And yet, looking ahead, some weakness is likely to materialise in India’s growth numbers given the economic scarring from the crisis. Upcoming trade and inflation reports are unlikely to strike a positive tone – particularly the former report, as India’s total trade share continues to trend lower. Alongside economic developments, diplomatic activity and the politics around India’s trade negotiations arelikely to take centre stage. Prime Minister Modi is due to meet US President Biden for the first time and is reportedly scheduled to speak at the United Nations General Assembly (UNGA). The 76th UNGA session is scheduled to open on September 14. Any discussions pertaining to US-India trade are likely to focus on market access (for example through lower non-tariff barriers) rather than on a full free trade agreement.

    GCC looks to increase stock market listings as ADNOC advances IPO

    Abu Dhabi National Oil Company (ADNOC) is expected to announce the offering and price range for the region’s largest drilling company, ADNOC Drilling, on 13 September. A minimum 7.5 per cent stake in ADNOC drilling is expected to be floated on the Abu Dhabi Stock Exchange (ADX) in October. Gulf energy firms have been increasingly looking to raise revenue by selling assets to outside investors. Saudi energy firm, ACWA Power, is reportedly close to announcing details around its own IPO on Saudi Arabia’s Tadawul to raise US$1 billion. Details of this forthcoming IPO could also be announced soon. ADNOC Drilling’s upcoming IPO also reinforces a broader trend in the UAE and the wider Gulf region of encouraging increased inward investment and liquidity into its capital markets by encouraging listings on its stock exchanges. Last week, ADX halved trading fees from 0.05 per cent to 0.025 per cent and extended trading by one hour to help achieve this.

    On September 15, Janet Rogan, COP26 Regional Ambassador for the Middle East and Africa, will brief Asia House Corporate Members on her work liaising with the Middle East’s economies. Find out more. 

    Gulf inflation data to show a mixed picture

    Saudi Arabia, the UAE, Bahrain, Qatar, and Kuwait are due to release inflation data next week. July and August saw an easing of COVID-19 restrictions in these countries. This could have exerted upward pressure on some of the components in the inflation reports. However, country divergences are likely to have persisted in August. Inflation in Oman, Qatar, and Kuwait has accelerated over the course of 2021, with July 2021 seeing Qatar record its highest rate of inflation since 2016. Saudi Arabia has seen the GCC’s highest inflation rate throughout 2021, partly owing to the impact of its VAT hike from 5 per cent to 15 per cent in July 2020. More recently, July saw Saudi Arabia’s annual inflation drop significantly to 0.4 per cent, driven in part by base effects. A similarly low figure for August could indicate a more stable outlook for inflation in the Kingdom for the remainder of 2021. Finally, upcoming data could show a UAE inflation rate in positive territory: UAE deflation has steadily reversed from an annual -2.01 per cent in February 2021 to a -0.4 per cent annual rate in May 2021.

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