China’s inflation rate slows in 2012

Updated 12 January 2013
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China’s inflation rate slows in 2012

Beijing: China's inflation rate slowed sharply in 2012, official data showed yesterday, but analysts warned of increasing price risks this year that may limit scope for measures to boost economic growth.
The country's consumer price index (CPI), a main gauge of inflation, rose 2.6 percent in 2012, the National Bureau of Statistics (NBS) said, down from 5.4 percent the year before.
The annual inflation figure was also lower than the government's target of 4.0 percent, signaling that prices remained well under control last year.
Inflation stood at 2.5 percent year-on-year in December, the NBS said, the second straight month that the reading rose and the highest since May, when it hit three percent.
Rising food prices, particularly for vegetables due to unusually cold weather, were the major contributor to the December increase, according to the bureau.
The benign inflation environment came as China's economic expansion slowed during the first nine months of the year, with GDP growth of 7.4 percent in the three months to the end of September — the worst in more than three years.
But data for the final three months of the year, including manufacturing, broader industrial output and retail sales, have spurred optimism among economists that growth accelerated in the fourth quarter.
However, the fact that CPI was surging on food price spikes would limit leeway for policymakers — who are sensitive to the risk of inflation leading to social unrest — to take further easing measures to spur economic growth, analysts said.
"The central bank is concerned about underlining inflationary pressures and it is one reason they have not cut more aggressively," said Ben Simpfendorfer, managing director of Hong Kong-based economic consultancy firm Silk Road Associates.
"So the biggest risk is this is actually a restraint on policy makers' ability to support the economy, either through rate cuts or through more stimulus," he told AFP.
Policymakers cut interest rates twice last year and trimmed the amount of cash banks must place in reserve three times from December 2011 in a bid to encourage lending and pump up economic growth.

Yao Wei, an economist with Societe Generale in Hong Kong, said that the increase in China's sub-index of housing inflation to three percent last month from 2.6 percent in November, may increase policy uncertainties.
The reading — a key barometer of the country's property market — covers leasing and decoration costs, but excludes purchase prices, according to the NBS definition.
"The central government may come under pressure to tighten controls on the property market once the sector shows signs of heating up, which will definitely affect the pace of the overall economic recovery," she said.
The government has sought to curb property speculation for the past two years, with measures including restrictions on second and third home purchases, higher minimum downpayments, and annual taxes in some cities on multiple and non-locally-owned homes.
The moves cooled the once red-hot market, but demand remains pent-up and government monetary policy has eased in recent months.
China releases fourth-quarter GDP figures next Friday.


Saudi insurance stocks soar as female drivers take to the road

Saudi Majdoleen Mohammed Alateeq, a newly licensed Saudi driver, gets out of her car in Riyadh on Sunday. The insurance sector is just one segment of the economy set to benefit from the lifting of restrictions on women drivers in the Kingdom. AFP
Updated 25 June 2018
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Saudi insurance stocks soar as female drivers take to the road

LONDON: Saudi insurance stocks surged on Sunday, with investors expecting the sector to reap significant dividends following the lifting of the ban on female drivers.
Insurance stocks — one of the worst performing sectors on the Saudi bourse for the year to date — outperformed other classifications on Sunday, ending 2.4 percent higher, compared with a 1.8 percent rise for the Kingdom’s headline index.
Amana Insurance and AlRajhi Takaful were the best performers of the day, gaining 9.9 percent each. Tawuniya, the Kingdom’s largest insurer, ended Sunday 1.1 percent higher, with only one of the country’s 33 listed insurance providers closing lower for the day.
The lifting of restrictions on female drivers — which came into effect on Sunday after first being announced in September — is part of a series of wide-ranging reforms introduced as part of Saudi Arabia’s Vision 2030 economic transformation program, designed to diversify the economy away from a reliance on oil revenues.
The advent of women drivers is forecast to benefit the economy by significantly increase female participation in the workforce, and stimulating financial, insurance and retail sectors among others.
The insurance sector is set to draw particular benefit from the move, but may remain under pressure, according to rating agency S&P.
“We anticipate that efforts of the local authorities to tackle the large number of uninsured drivers, combined with the arrival of women drivers … and the introduction of additional benefits under the unified medical policy from July 1, will support further premium growth in the industry in the medium term,” said S&P in a research note in April.
“However, these factors may be offset by the large number of foreign workers that have already left or will be leaving the Kingdom in 2018.”
In spite of yesterday’s price surge, insurance stocks are 8.4 percent lower for the year to date. Tadawul as a whole is up 15.6 percent so far this year, making the bourse one of the world’s best performers for 2018.
Investor sentiment on Sunday was also boosted by investor optimism after index provider MSCI announced last week that it would upgrade Saudi stocks to its Emerging Markets Index from next year.
The widely anticipated upgrade — which puts Saudi equities on an index tracked by around $2 trillion worth of global assets — is expected to attract up to $40 billion of international funds, Tadawul CEO Khalid Al-Hussan told Arab News last week.
MSCI’s upgrade came after a similar move by fellow index provider FTSE Russell in February, which is also scheduled to come into effect from next year.
Banks were among the other bright performers on Tadawul on Sunday. Arab National Bank led gains, closing up 4.2 percent, while blue-chip names NCB and AlRajhi rose 1.6 percent and 2.3 percent respectively.
Some petrochemical companies also added value, Reuters reported, following a rise in oil prices after OPEC decided on only modest increases in crude production last week.
Outside Saudi Arabia, Gulf markets posted minor gains. In Dubai, where the index was flat, Air Arabia was unchanged. Shares in the airline have declined by more than 10 percent since early last week, when the company said it had hired experts to protect its business interests in private equity firm Abraaj, which has filed for provisional liquidation. The airline said its exposure was around $336 million.
Last week, the UAE’s securities regulator asked listed companies to declare their exposure to Abraaj.