China manufacturing purchasing managers’ index; Japan’s Tokyo inflation

The International Monetary Fund and Pakistan have reached a staff-level agreement on a $3 billion loan, averting the risk of sovereign default.

The new financing engagement, referred to as a Stand by Arrangement (SBA), provides short-term financial assistance to countries facing balance of payments problems.

The agreement is subject to approval by the IMF’s Executive Board, which is expected to consider the request by mid-July.

“The new SBA will support the authorities’ immediate efforts to stabilize the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners,” the IMF said in a release.

IMF Mission Chief Nathan Porter said Pakistan’s economy has “faced several external shocks such as the catastrophic floods in 2022 that impacted the lives of millions of Pakistanis and an international commodity price spike in the wake of Russia’s war in Ukraine.”

The latest agreement comes as the 2019 extended fund facility-supported program is slated to expire at the end of this month.

— Jihye Lee

China’s monetary stimulus last year did little to boost loan demand in the second quarter — despite lower borrowing costs for businesses compared to a year ago, an independent survey by China Beige Book showed.

Data from the quarterly survey suggests rate cuts in August by China’s central bank may have had limited effect in spurring growth. It brings to question if the latest round of rate cuts in mid-June will be effective.

Read more here.

— Clement Tan

Bank of America Securities’ Aditya Bhave also discussed the tight labor market and its “chicken and egg” dynamic with the consumer.

James Hong of Macquarie Capital said South Korea’s Hyundai and Kia, as well as China’s BYD, have strong supply chains and the scale to win the competition with late-comers and other incumbents.

Large Asia-Pacific banks with $300 billion in assets or more hold strong capital buffers amid a slowing global economy, S&P Global Market Intelligence said.

China Merchants Bank, Oversea-Chinese Banking Corp., DBS Group Holdings, HSBC and KB Financial Group were among the banks with common equity tier 1 ratios above regulatory requirement levels for the past three fiscal years.

The CET1 ratio compares a bank’s capital against its assets, covering liquid bank holdings such as cash and stock.

The Basel III accord stipulates the minimum total capital ratio that a bank must maintain is 8% of its risk-weighted assets, with a minimum tier 1 capital ratio of 6%. It is set by the Basel Committee on Banking Supervision, a consortium of central banks from 28 countries.

— Jihye Lee

Industrial production in South Korea rose 3.2% month-on-month in May, government data showed on Friday.

Production in autos and semiconductors led gains for the period, while financials, insurance and hospitality industries saw declines.

A Reuters poll of economists predicted the reading to fall by 0.8% after seeing a 0.6% drop in the previous period.

The Korean won strengthened 0.23% to 1,319.2 against the U.S. dollar.

China’s factory activity data stayed in contraction territory for the month of June, according to the National Bureau of Statistics’ latest purchasing managers’ index reading.

The NBS manufacturing PMI came in at 49, below the 50-mark that separates contraction and growth for the third consecutive month.

The PMI reading in May stood at 48.8, the lowest since December. The Chinese yuan weakened to 7.26 against the U.S. dollar.

The overall consumer price index for Japan’s capital city rose 3.1% in June year-on-year, maintaining levels above the Bank of Japan’s target.

Excluding fresh food, Tokyo’s CPI rose 3.2% compared with a year ago, below the 3.3% predicted in a Reuters poll of economists and above the central bank’s target for 13 straight months.

Consumer prices minus food and energy rose 2.3% year-on-year and fell 0.2%…