CARI Captures Issue 551: Japan’s Prime Minister Fumio Kishida visiting Indonesia, Viet Nam and Thailand from 29 April onwards

Japan’s Prime Minister Fumio Kishida visiting Indonesia, Viet Nam and Thailand from 29 April onwards

(28 April 2022) Japan’s Prime Minister Fumio Kishida will be visiting Indonesia, Viet Nam and Thailand from 29 April onwards. Kishida intends to discuss cooperation in response to several global issues, including the war in Ukraine, the East and South China seas, North Korea and Myanmar. Kishida will first visit Indonesia, who is hosting 2022’s Group of 20 summit in November. He will proceed to visit Viet Nam, where he will meet Prime Minister Pham Minh Chinh and President Nguyen Xuan Phuc, before heading for Thailand, 2022 host of the APEC forum summit, where Kishida is scheduled to meet with Prime Minister Prayut Chan-o-cha. Japan and Thailand will be marking the 135th anniversary of diplomatic ties this year, and will sign an agreement on the transfer of defense equipment and technology to strengthen cooperation in the security field. Prime Minister Kishida previously visited Cambodia in late March 2022.

Malaysian bond yields rise due to outflows in anticipation of rate hikes

(28 April 2022) Malaysian short-tenor bonds have seen their yields rise due to outflows as investors anticipate rate hikes later in 2022. Malaysia’s three-year bond yields have risen by 79 basis points in April, set for the biggest monthly gains in more than five years. According to Australia & New Zealand Banking Group Ltd (ANZ), yields have moved towards a multi-year resistance zone of around 3.8%. Short-term yields in Southeast Asia have widened above benchmark policy rates in recent weeks, suggesting that traders increasingly believe that long-held-off interest rate increases are inevitable as inflation starts to pick up in the region. Economists expect that Bank Negara Malaysia will start hiking rates in the second half of 2022 from the record low policy rate of 1.75%. Markets are expected to stabilize when portfolio outflows and global inflation expectations start to ease. Inflation in Malaysia in April rose by 2.2%, compared with expectations of 2.3%.

Indonesia to ban export of all derivatives of palm oil starting on 28 April 2022

(27 April 2022) Indonesia has banned the export of all derivatives of palm oil starting on 28 April 2022. While the government had previously announced that the export ban would only cover refined, bleached and deodorized palm olein (RBD olein), on 27 April the coordinating minister for the economy announced that the ban would now also cover crude palm oil (CPO), red palm oil, palm oil mill effluent and used cooking oil. The move to ban exports is intended to ensure the availability of bulk cooking palm oil at low prices for Indonesian consumers, especially at traditional markets and for small-and-medium enterprises. Indonesia is the world’s largest producer and exporter of palm oil, and the export ban is expected to cause the price of global edible oil to rise.

State-owned oil and gas company Pertamina launches commercial flights under brand Pelita Air

(28 April 2022) Indonesian state-owned oil and gas company Pertamina launched commercial flights on 28 April under the brand Pelita Air. Pelita Air’s first commercial flight took off from Jakarta and landed on the resort island of Bali. The airline will also cover the Jakarta-Yogyakarta route. Pelita Air currently operates two Airbus A320s for its commercial flights but is planning to increase the fleet to six aircraft by the end 2022, and to 20 by the end of 2023. Established in 1970, Pelita Air has long offered chartered flights, and will focus exclusively on serving domestic routes. Through Pelita Air, Indonesia’s government has promised affordable domestic air services, while hoping to avoid the mismanagement and debt issues that have plagued state-owned Garuda Indonesia. Garuda is currently reeling from significant pandemic losses, aggravated by debt and corruption problems that have dogged it for years.

Prices of Thai rice exports rise this week due to increased demand from the Middle East

(28 April 2022) Prices of rice exported from Thailand rose this week due to increased demand from the Middle East. Thailand’s 5% broken rice prices were quoted at US$432-US$435 per tonnes, up from US$410-US$414 last week. This rise in prices was caused by an uptick in demand from markets in Iraq and Iran, as well as improved relations with Saudi Arabia. Higher freighter costs have not impacted Thailand’s rice exports in this case, as Middle Eastern buyers have sent their own freights for rice purchases. A weaker Baht against the US Dollar has also contributed to the rise in rice prices. Meanwhile, Viet Nam’s 5% broken rice was offered at US$415 per tonne on 28 April, unchanged from last week. However, Vietnamese rice prices could rise in the coming weeks as supplies were running low with the winter-spring harvest almost over, causing traders to become hesitant to sign new export contracts and instead wait for prices to rise further.

Viet Nam experiences ‘moderate’ recovery of inbound travel demand in March 2022 after travel restrictions eased

(27 April 2022) Viet Nam experienced a ‘moderate’ recovery of inbound travel demand in March 2022 after travel restrictions were eased, according to search volumes from Google. Data from Google searches showed inbound travel demand into Viet Nam in March stood at 55% of pre-pandemic levels, lower than that of the Philippines (104%), Indonesia (94%) and Singapore (64%). Search volumes for inbound tourism into Viet Nam between 27 March and 02 April grew by 84% compared to the same period in 2019. Google’s internal data further revealed a 40% share of inbound tourism from the U.S. and Canada went to the Philippines and Viet Nam. According to Google, staycations and traveling to meet loved ones have driven travel growth in Southeast Asia. Hanoi and Ho Chi Minh City were the most searched tourist destinations in Viet Nam. Viet Nam had initially reopened to international tourism in November 2021, but only allowed quarantine-free entry and resumed its visa exemption policy from 15 March.

Philippines central bank may consider raising interest rates in June 2022  
(26 April 2022) The Philippines central bank, the Bangko Sentral ng Pilipinas, may consider raising its key interest rate in June 2022. Policymakers may wait for another cycle after a meeting on 19 May if the country’s economy expands by 6-7% in the first quarter of 2022. The bank’s governor, Benjamin Diokno, previously stated that the central bank may begin rate hikes in the second half of 2022, and that an increase to 2.5%-2.75% as part of a normalization process would be “reasonable.” The Philippines’ central bank has continued to remain fairly dovish, in contrast to the global rate hike cycle led by the US Federal Reserve. While the central bank has begun withdrawing some pandemic-era accommodation, it has maintained that raising the benchmark rate isn’t the appropriate tool to address what it considers supply-driven price pressures. Consumer prices in March 2022 rose 4% — the upper end of the central bank’s 2%-4% target band. The bank has kept interest rates at a record-low 2% since November 2020 in order to support the economy.

RCEP Monitor

Core inflation in Australia accelerates to 3.7%, fastest pace since 2009

(27 April 2022) Core inflation in Australia accelerated to 3.7%, according to government data released on 27 April 2022. This is the fastest pace since 2009, and has prompted traders to price in a 15-basis-point hike at the Reserve Bank of Australia’s (RBA) 03 May meeting, with a 25% chance of a 40-basis-point move. The central bank, which targets consumer prices of 2-3%, signaled earlier in April 2022 that a hike would likely come soon, while suggesting it wanted to see the report released on 27 April and wages data on 18 May. The RBA is under pressure to initiate rate hikes ahead of a general election to be held on 21 May, with costs of living and concerns that mortgage repayments will soon rise hitting consumer sentiment. Inflationary pressures worldwide have been impacted by Russia’s invasion of Ukraine and its impact on global energy and commodity prices.


South Korea’s economic recovery slows in first quarter of 2022 due to worries of lockdowns in China

(26 April 2022) South Korea’s economy slowed in the first quarter of 2022 due to worries of persistent inflation and weakening demand in China due to lockdown measures implemented in the latter. GDP expanded by 3.1% on an annualized basis in the first quarter, down from 4.2% in the last quarter of 2021. South Korea is the world’s seventh largest export market, and serves as a bellwether for demand in China, South Korea’s biggest market for outbound trade. Exports increased by 4.1% compared to the previous quarter thanks to strong demand from the US, Europe and Vietnam, although exports fell in early April because of weak Chinese demand. The COVID-19 pandemic and the war in Ukraine has impacted Korean domestic consumption and investment, although exports remained strong, driving growth in the first quarter. Inflation in South Korea hit 4.1% in March, more than double the Bank of Korea’s target range and up from 3.7% in February.

Hainan’s transformation into a free trade port will open new opportunities with trade with ASEAN

(27 April 2022) The Chinese government plans to transform Hainan island into the world’s largest free trade port by 2035, using lower taxes to attract investors, businesses and individuals, as well as looser visa requirements to lure foreign tourists and talent. It is believed that Hainan’s transformation into a free trade port will open new opportunities for trade with ASEAN, as ASEAN companies will be incentivised to invest in Hainan, especially in the service sector. Hainan also plans to insert itself into the traditional travel route between Singapore, Malaysia and Thailand for Chinese tourists. Tourists from Southeast Asia may also be inclined to visit Hainan before touring mainland China. In 2019, tourist trips between China and Asean topped 65 million, with nearly 4,500 flights, up from 57 million trips and 4,000 flights in 2018. Chinese investors will also be encouraged to register in Hainan, as their overseas spending will receive an income tax exemption.

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