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The Edge Singapore
The Edge Singapore11/27/2020 07:00 AM GMT+08  • 6 min read
This week: See analysts' Singapore GDP estimates and news on the Stock Connect linking Hong Kong's and the mainland's markets.
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Quoteworthy: "This is a high-quality asset, it is a scarce asset, and we knew that other publishers would look at it, and they did." –— Thomas Rabe, CEO of book publisher Penguin Random’s parent company Bertelsmann, announcing the acquisition of rival Simon & Schuster for almost US$2.2 billion ($2.9 billion).

Singapore GDP rebound but growth likely to slow

As Singapore’s economy shows signs of a strong turnaround in 3Q2020, economists from CGS-CIMB Research and DBS Group Research say the Republic is on track to recover and to meet its full-year GDP forecasts.

On Nov 23, the Ministry of Trade and Industry (MTI) announced that GDP for 3Q2020 contracted by 5.8% y-o-y, compared to the 7% contraction predicted in advance estimates. This is also a marked improvement from the 13.2% y-o-y plunge registered for the 2Q2020.

However, growth for the current 4Q2020 is likely to slow, warns DBS economist Irvin Seah. “While output growth in the manufacturing sector is likely to remain positive, the pace of expansion is expected to slow, given the flattening in trajectory in the PMIs and the manufacturing output growth in some key markets,” he notes.

“Moreover, sectors that have been the worst impacted by the pandemic, the hospitality and the aviation sectors, have also continued to struggle as the borders have generally remained shut to tourists.”

Nevertheless, the economy is on the mend, albeit on a tepid and uneven path, says Seah, who is keeping his full year forecast of a 6% contraction.

Similarly, Oxford Economics economist Sung Eun Jung expects growth momentum to slow in 4Q2020 due to a resurgence in the number of Covid-19 cases in some of Singapore’s key trading partners.

“Barring a flare-up of local coronavirus cases, we also expect further easing of restrictions to support a growth rebound in 2021. Overall, we forecast real GDP to contract 6% this year before growing by 5.7% in 2021,” says Sung.

“That said, given that Singapore has been able to contain the local Covid-19 situation, it remains on track to enter Phase Three of its reopening by end-2020, which will provide a boost to domestic demand going into 2021,” she adds.

CGS-CIMB economists Michelle Chia and Lim Yee Ping have also estimated a 5.7% contraction for the FY2020.

“We continue to project sustained improvement next year at 5.3% growth in 2021 (versus MTI’s forecast of 4% to 6% growth). With the economy advancing largely within the expected range, policymakers are likely to keep to their respective policy paths with monetary policy expected to remain on hold until end-2021 and the expansionary fiscal stance to persist when Budget 2021 is tabled in February 2021,” they say. — Felicia Tan

Hong Kong’s Lam says Beijing supports expanding Stock Connect

Beijing supports deepening access between Hong Kong and mainland financial markets and expanding the Stock Connect linking the two sides, Hong Kong chief executive Carrie Lam said in her annual policy address on Nov 25.

Stock Connect allows mainland investors to buy shares listed in Hong Kong via the Shenzhen and Shanghai bourses. It is also one of the most popular and efficient ways for international investors to trade mainland stocks, via Hong Kong.

Lam said Hong Kong-listed biotech companies that have yet to make a profit would be included in Stock Connect, as would some stocks listed on the mainland’s Sci-Tech Innovation Board.

She did not, however, announce the inclusion of firms with secondary listings in Hong Kong or which have two classes of shares carrying different voting rights, such as Alibaba Group Holding and JD.com — a key point market participants were watching out for.

As of October, mainland investors purchased HK$541.6 billion ($93.54 billion) worth of Hong Kong stocks via the Stock Connect, showed Reuters calculations based on HKEX data.

“One reason for the strong southbound flows is that mainland investors need to go through the Connect if they want to buy shares of leading Chinese companies that are only listed in Hong Kong,” said chief strategist Linus Yip at First Shanghai Securities in Hong Kong, citing Tencent Holdings, Haidilao International Holding, Xiaomi Corp and Meituan as examples.

Another reason is the AH share premium that makes Hong Kong shares more attractive to long-term investors, who could expect stock prices of dual-listed companies to unify in the long run.”

As of last market close, the Hang Seng China AH premium index stood at 143, indicating China’s A-shares were trading at a premium of 43% over their Hong Kong-listed counterparts. — Reuters

Tech giants face fines or even breakup if they breach new rules

Tech giants that break new EU rules aimed at curbing their powers could face fines, be ordered to change their practices or even be forced to break up their European businesses, the bloc’s digital chief Thierry Breton said on Nov 25.

Breton’s comments come two weeks before he is due to present draft rules known as the Digital Services Act (DSA) and Digital Markets Act (DMA), which are likely to affect big US players Google, Apple, Amazon, Facebook and Microsoft.

The DSA will force tech companies to explain how their algorithms work, open up their advertising archives to regulators and researchers, and do more to tackle hate speech, harmful content and counterfeit products on their platforms.

The DMA takes aim at online gatekeepers with a list of requirements, such as sharing certain kinds of data with rivals and regulators and outlawed practices, such as favouring their own services. It will also include a range of sanctions.

“We start with a fine, then you have a bigger fine, then you may have a temporary remedy, specific remedies, then you may have at the end of the day, what we have also in the competition rules, structural separation,” Breton said.

“So from fines to separations, but of course only on the European market,” he said.

Forcing companies to break up would be a last resort, said Breton, the EU’s internal market commissioner

“Structural separation is not an objective, not my objective, it is just again to make sure we have also means to act if necessary,” he added.

Big technology companies seeking acquisitions may also be required to inform the European Commission — the EU executive body — of their intentions, Breton said.

They may have an obligation to just inform us what they want to do, and then we will see if it fulfils all their obligations,” he said.

The planned laws are still some way from taking effect, though. The European Commission will have to negotiate with EU countries and the European Parliament to agree on the final legislation, a process which could take a year or two. — Reuters

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