A group of institutional investors managing over $3.5 trillion in assets has called on Korea's Financial Services Commission (FSC) to establish a clear roadmap for sustainability-related disclosures and to implement a phased approach to climate disclosures by 2026, according to sources, Tuesday.

The significance of such as push stems from the participation of global institutional investors, according to the Asia Investor Group on Climate Alliance (AIGCC), which delivered the letter, Monday. Among these investors is Legal and General Investment Management, managing approximately $1.4 trillion, Schroders with $1.01 trillion and Fidelity International with $862 billion in assets.

"We are deeply concerned that the implementation of mandatory sustainability-related disclosures in Korea has been postponed until after 2026, with pending uncertainty on the exact year of implementation," the letter stated.

"If businesses in other markets are providing sustainability-related disclosure while such reporting is delayed for Korean companies, global investors will struggle with benchmarking corporate performance due to a lack of comparable data and transparency. We believe this will not be conducive to the broader objective of the Korean Corporate Value-up and could even lead to a broader sense of the Korea discount phenomenon."

In April, Korea announced the draft of the guidelines for sustainability-related disclosures. But it did not disclose key details such as the timing of the mandatory disclosures, or whether Scope 3 greenhouse gas emissions (indirect emissions from a company's value chain such as employee's commuting) would need to be disclosed.

The process has been slow due to a lack of public interest and ongoing governmental issues, such as the Corporate Value-up Program, which aims to boost the stock market by improving corporate governance.

Meanwhile, the European Union, the United States, Singapore and Canada have already set timelines for mandatory sustainability disclosures between 2025 and 2027, with many investors already integrating climate risks and opportunities into their portfolio decisions. Companies are also urging the finalization of the guidelines as soon as possible so they can prepare accordingly.

The group of investors specifically called on the FSC to announce a clear roadmap of mandatory sustainability-related disclosures by the end of 2024 and mandate disclosure for listed companies with assets over 2 trillion won ($1.4 billion) by 2026. They also highlighted the importance of publishing an English version of Korea's disclosure standards and requiring companies to provide disclosures in English.

The investors emphasized that expediting the timeline for mandatory sustainability-related disclosures would not overly burden large listed Korean companies, as more than half of them have already committed to voluntary sustainability reporting in 2023.

"We are certain that these will lead to a 'Climate Value-up' for Korean companies, shareholders and the entire Korean market."

The AIGCC said it will continue to work with investors active in Korea through the Korea Working Group, established in July 2024.

"Having Korean reporting standards align with international frameworks will boost investor confidence in investing in Korean companies, fostering greater capital inflows and supporting sustainable economic growth. This would also enhance Korea’s corporate transparency and competitiveness in the global capital market," AIGCC CEO Rebecca Mikula-Wright, said.

Source: Koreatimes

In focus today

From the US, NFIB’s Small Business Optimism index is due for release for September. Markets focus especially on employers’ perception of labour market conditions. Fed’s Bostic will speak this evening.

In Sweden, we receive preliminary inflation figures. We expect CPI, CPIF and CPIF excluding Energy to print 0.2% m/m and 1.6% y/y; 0.3% m/m and 1.1% y/y; and 0.3% m/m and 1.9% y/y, respectively. Our prediction for CPIF is 0.1 percentage points higher than the Riksbank’s forecast and CPIF ex energy is spot on. The flash estimate will include only the monthly and annual changes, reserving the detailed breakdown of components for the regular release.

In Germany, we look out for the industrial production data for August. Industrial production has been on a declining trend for the past year and survey data suggests the weakness persisted in August. The hard data on production in Germany will be important for the growth assessment which continues to look bleak.

On the night of Wednesday, we expect the Reserve Bank of New Zealand (RBNZ) to cut the Official Cash Rate by 50bp. Analyst consensus is divided between 25bp and 50bp moves, but markets have almost fully priced in the larger cut.

Economic and market news

What happened overnight

In China, the chairman for the National Development and reform commission said that the Chinese government is fully confident that it will reach its economic and social development goals for this year and said that some of the 2025-budget will be issued this year to support projects. Since late September the government pushed economic stimulus package to support the economy. The key to turning the Chinese slump is to put a stop to the housing crisis, which we see as the epicentre of current challenges. We now look for a gradual improvement in housing over the next year but not a fast rebound. Last week we revised up our Chinese growth forecast from 4.8% to 5.2% in 2024, see Research China – Lift to GDP forecast after leaders draw line in the sand, 2 October. Investors were disappointed by the lack of detail in the plans and offshore stocks corrected sharply lower by more than 5%. However, it follows a strong rally of close to 40% in two weeks.

What happened yesterday

In the Middle East, fighting between Hezbollah and Israel intensified yesterday, one year after Hamas attacked Israel on 7 October last year. Hezbollah said it targeted a military base south of the Israeli city Haifa with missiles. Israel confirmed the attack. We are yet to see Israel’s counter-attack to Iran’s missile barrage a week ago. Israeli response is likely to determine the course forward in the conflict.

In the euro area, the investor morale measured by the Sentix index increased in October, after a decline the previous three months. Despite the increase investor morale is still at relatively low levels.

In Germany, factory orders fell more than expected, hinting that German manufacturing sector is not set to recover in the coming months. Orders fell 5.8% (consensus: -2%, prior: 2.9%). Later today, it will be interesting to see how industrial production performed in August in the light of the disappointing order flow.

Equities: Global equities, or to be more precisely, US equities were lower yesterday, dragging down global indices. Conversely, European, Far Eastern, and Japanese markets were all higher. Examining the sector returns from yesterday provides a clear insight into the prevailing market dynamics. During a sell-off session, with utilities performing the worst, one typically needs to consider the bond market, where the hawkish repricing of the Fed continued. Additionally, a soaring oil price and the US election now less than a month away contributed to the rising uncertainty, pushing the VIX towards the 23 level. Thus, the US election might well be a “sell the rumours, buy the fact” event. The main US indices yesterday were as follows: Dow -0.9%, S&P 500 -1.0%, Nasdaq -1.2%, and Russell 2000 -0.9%. This morning, a stock price bonanza is continuing in China. With the conclusion of the Golden Week trading holiday, mainland shares are soaring (up around 5% at the time of writing). The flipside is that H-shares in Hong Kong are down 5%, as the Chinese authorities have not yet followed up with stimulus measures post the Golden Week holiday. European futures are down significantly this morning, catching up to the US’s late cash action yesterday. US futures are close to flat.

FI: The repricing of monetary policy expectations continued Monday as global bond yields continued to rise on the back of the stronger-than-expected US labour market data last week and rising oil prices. Hence, the US curve flattened from the short end with 2Y Treasuries rising some 8bp, while 10Y and 30Y Treasuries rose 5-6bp. We saw the same picture in the Europe with rising bond yields, but where the periphery underperformed modestly the core-EU especially in the front end of the curve as the Schatz ASW-spread widened some 2bp.

FX: EUR/USD has been consolidating just below the 1.10 mark in a quiet start to the week, with the broad USD index showing little change after its best week in two years. EUR/GBP moved higher with the KPMG/REC report showing further signs of wage growth cooling and softness in the labour market. Yesterday’s slightly more expansionary than expected fiscal budget in Norway, the global rates-environment and higher oil prices contributed to a substantial rise in short-end NOK rates which in turn lifted NOK FX. NZD/USD continued to edge lower yesterday ahead of Reserve Bank of New Zealand’s (RBNZ) rate decision early tomorrow morning.

Source: AP

US Stocks Crash as Rate Cut Expectations Pull Back – Nasdaq Down 1.2%

Dollar Gains Momentum at Highs

Quiet Trading Day Ahead

India’s new monetary policy committee may lay the groundwork for an interest rate cut on Wednesday as a wave of global easing kicks off and growth in the world’s fastest-expanding major economy moderates.

While most of the 35 economists in a Bloomberg survey expect the Reserve Bank of India’s six-member MPC to keep the repurchase rate unchanged at 6.5%, several predict a switch to a "neutral" stance for the first time since June 2019 from its current hawkish view.

The meeting is the first under a new policy committee following the appointment last week of three external members, well-known economists with academic and financial backgrounds.

Governor Shaktikanta Das has so far dismissed calls for rate cuts, concerned that high food prices will prevent inflation from staying at the 4% target level on a sustainable basis. However, with the US Federal Reserve now pivoting and other central banks following with rate cuts, pressure is building on the RBI to do the same, especially after good rainfall and predictions of a bumper harvest.

A change in the RBI’s policy stance language would pave the way for a quarter-point rate cut in December, according to economists at HSBC plc.

“We believe the RBI doesn’t gain from waiting any longer,” Pranjul Bhandari and Aayushi Chaudhary wrote in a note. They expect another quarter-point reduction at the February meeting, taking the repurchase rate to 6%.

New MPC makes its debut

Three new external members joined the MPC, although only one of them — Saugata Bhattacharya, a former chief economist at Axis Bank Ltd — has publicly voiced his views on inflation and growth recently, advocating for the RBI to cut rates.

However, economists said it’s unlikely the new members will vote against the three other RBI officials on the MPC so early on.

They “may agree with RBI’s house view for some time,” said Rahul Bajoria, an economist at Bank of America Corp. “Still, incoming near-term data is much more mixed, and growth risks appear tilted to the downside,” he said, predicting a shift in policy stance.

In the past two MPC meetings, external members Ashima Goyal and Jayanth Varma voted for rate cuts, stating and arguing that the RBI’s insistence on keeping rates high was damaging growth.

Inflation rhetoric may be toned down

The RBI will likely stick to its fiscal year growth and inflation forecasts of 7.2% and 4.5%, respectively, although there’s a chance the quarterly CPI forecasts could be adjusted, particularly for the July-September period, said Kaushik Das, an economist at Deutsche Bank AG.

The central bank had projected 4.4% inflation for the period, but the actual reading could turn out to be lower, in the range of 4-4.1%, he said.

India had its best monsoon rains, which irrigate about half of the country’s farmland, since 2020, setting the stage for a bumper harvest of crops such as rice and boosting economic prospects for rural areas.

Since the last rate decision, official data showed economic growth moderated to 6.7% in the April-June quarter, below the central bank’s projection of 7.1%, while signs are growing of a softening in urban consumption.

“The Indian economy is showing few incipient signs of fatigue in growth,” wrote Upasna Bhardwaj, chief economist of Kotak Mahindra Bank Ltd in a note on Monday. “The upcoming festive and post-festive periods will be important to evaluate whether these signs turn to red flags or just a blip,” she wrote.

Several economists have started moderating their growth projections for India — for example, Kotak’s Bhardwaj now expects 6.7% expansion in the year through March 2025, down from 6.9% earlier.

Bond markets could rally

Any signs of dovishness from the central bank, such as a tweak in the policy stance language, could propel a bond rally. Traders are also watching any possible changes that could indicate easier liquidity conditions in the banking system. Yields have eased around 40 basis points from the year’s peak of 7.25% on hopes of RBI easing.

“The next move from the RBI will be a rate cut,” said Nathan Sribalasundaram, a rates strategist at Nomura Holdings Inc in Singapore. “Favourable demand-supply, banks’ investment requirements and foreign investor demand will push yields lower.”

Source: The edge markets

The Thai government’s attempts to influence the appointment of a new central bank chairman could lead to “disastrous consequences” for Southeast Asia’s second-largest economy, according to a former Bank of Thailand (BOT) governor.

Tarisa Watanagase, the nation’s first female central bank governor, said the push to appoint a government nominee as the BOT chairman will affect the independence of the monetary authority.

Her comments come as local media reported that a panel of retired bureaucrats and regulators will meet on Tuesday to select the chairman and two board members from a roster put forward by the Finance Ministry and the central bank. Both have been at loggerheads over monetary and fiscal policies for almost a year.

“In the past, the selection committees for important positions of the Bank of Thailand have performed their duties independently and have not accepted interference,” Tarisa wrote in an open letter published Monday. “No one wants to be recorded in history as people responsible for bringing the Thai economy to the first step of disaster.”

The selection panel should ensure the BOT new chairman and board members can “perform their duties appropriately” and are acceptable to society, said Tarisa who was appointed governor by an interim government following the 2006 military coup.

Prime Minister Paetongtarn Shinawatra’s administration is backing Kittiratt Na-Ranong, a critic of the central bank’s hawkish monetary policy and a loyalist of the ruling party, for the chairman’s job. BOT hasn’t disclosed its nominees for the post.

While the BOT chairman doesn’t have powers to dictate monetary policy, the official can evaluate the central bank governor’s performance. The chairman also has a say in which outside experts join the seven-member rate panel headed by Governor Sethaput Suthiwartnarueput, who is due to retire in September next year.

Sethaput, who was appointed by a military-backed government in 2020, has ignored calls for a rate cut from the Pheu Thai-led coalition government for almost a year. While former leader Srettha Thavisin openly called for easing borrowing costs, Paetongtarn has left it to her cabinet colleagues to keep up the pressure on BOT.

The Finance Ministry is pushing for a higher inflation target for next year to create room for BOT to cut the interest rate from a decade-high 2.5%. Sethaput has argued that the current settings are neutral for Thailand’s economic and financial conditions and called for central bank decisions to be free from interference.

Tarisa said government interference can damage the Thai economy by focusing on policies stimulating the economy in the short term. A decision to hand out 10,000 baht each to most adults is already set to create a huge financial burden which can lead to credit rating downgrades, she said.

Source: The edge markets