CARI Captures Issue 578: Southeast Asia to host three major diplomatic gatherings in November 2022
ASEAN
Southeast Asia to host three major diplomatic gatherings in November 2022
(31 October 2022) Southeast Asia will host three major diplomatic gatherings in November 2022. This includes the ASEAN Summit and related meetings, which will be held in Phnom Penh, Cambodia on 08-13 November 2022. Following this, the Group of 20 (G-20) Summit will be held from 15-16 November in Bali, Indonesia, after which the annual Asia-Pacific Economic Cooperation (APEC) summit will be held between 18-19 November in Bangkok, Thailand. US President Joe Biden will attend the US-ASEAN Summit and the East Asia Summit in Cambodia, as well as the G-20 Summit in Indonesia. During his time in Indonesia, President Biden is also likely to hold a bilateral meeting with Indonesian President Joko Widodo. US Vice President Kamala Harris, for her part, will be attending the APEC conference in Thailand.
MALAYSIA
Malaysia’s central bank raises overnight policy rate by 25 basis points
(03 November 2022) Malaysia’s central bank, Bank Negara Malaysia (BNM), raised its overnight policy rate (OPR) by 25 basis points to 2.75%, its fourth consecutive rate hike since May 2022. In May, the central bank raised the OPR to 2% from 1.75%, reportedly the lowest on record following a 25 basis point cut in July 2020. It raised the OPR by another 25 basis points to 2.25% in July 2022, followed by another 25 basis points to 2.5% in September. BNM stated that the policy adjustment was in response to inflationary pressures being more persistent than expected. BNM attributed this to strong demand, tight labor markets, and elevated commodity prices. BNM also projected that underlying inflation, as measured by core inflation, will average closer to the upper hand of the 2% to 3% forecast range for 2022.
SINGAPORE
New fund inflows to Singapore jump 59% year-on-year in 2021
(02 November 2022) Singapore attracted US$317 billion in new funds in 2021, a 59% increase from the previous year, according to data by the Monetary Authority of Singapore (MAS). Due to concerns that these new money inflows are flowing into the property market, thereby driving up prices, regulators have imposed measures on the real estate sector to prevent overheating. Singapore is marketing itself as an international wealth hub, and is enjoying a post-COVID-19 resurgence as investors are drawn to its stability. Assets managed by local firms soared 16% in 2021 to US$4 trillion, mostly from overseas, exceeding the global growth rate. These new money inflows come on top of gains from higher asset prices in 2021. Singapore hopes to add as many as 20,000 finance jobs over the next five years.
SINGAPORE
Factory activity in Singapore contracts for second straight month, suggesting continued deterioration in outlook
(02 November 2022) Factory activity in Singapore contracted for the second consecutive month in October 2022, while the electronics sector pulled back for the third straight month. This suggested a continued deterioration in momentum, outlook, and confidence in the last quarter of 2022. October became the second consecutive month of contraction in overall activity for the manufacturing sector after having expanded for 26 straight months. This has been attributed to a faster drop in key indexes such as new orders, factory output, and inventory. Singapore’s overall purchasing managers’ index (PMI) fell to 49.7, 0.2 point below September’s PMI reading. Singapore’s electronics sector recorded a decline of 0.3 point from September 2022 to post a further contraction at 49.1. This has strengthened the view that an electronics down cycle is underway.
THAILAND
Thailand posts surprise current-account surplus in September 2022, offering reprieve for Thai baht
(02 November 2022) Thailand posted a surprise current-account surplus in September 2022, offering a reprieve for the Thai baht. This is due to a better than expected rebound in tourism, lower oil prices and falling shipping costs. The current-account surplus may reach as much as US$3 billion during the October-December period, although much will depend on the trajectory of energy prices. The current account posted a deficit of US$17.7 billion in the first nine months of 2022, and Thailand’s finance ministry predicted it might swing back to a surplus of US$5.6 billion in 2023. A return to a current-account surplus may help prop up the Thai baht, which has slumped almost 12% in 2022 to a 2006-low. Thailand’s central bank has lagged behind its peers in terms of hiking rates.
THE PHILIPPINES
Shell completes exit from the Malampaya gas field in the Philippines
(01 November 2022) Oil and gas giant Shell has completed the sale of its stake in an operator of the Malampaya gas field in the Philippines, effective 01 November, 2022. The sale will move full control of Shell Philippines Exploration B.V., which owns a 45% operating interest in and operates the Malampaya gas field, to Malampaya Energy XP, a subsidiary of Prime Infrastructure Capital. The other members of the field’s service contract consortium are a subsidiary of Udenna and PNOC Exploration, which own a 45% and 10% interest respectively. Shell had agreed to sell its stake in the gas field in May 2021. The gas field had been discovered in 1991, and currently provides fuel to power plants that deliver about a fifth of the Philippines’ electricity requirements. However, the field’s output is declining and is expected to finish by 2027.
CAMBODIA
Cambodia exports US$1.325 billion worth of footwear in the first nine months of 2022
(02 November 2022) Cambodia exported some US$1.325 billion worth of footwear in the first nine months of 2022, up 32.69% year-on-year from the same period in 2021, which recorded US$998.238 million worth of footwear exports. Footwear-related goods accounted for 7.67% of the total value of Cambodia’s exports in the same period, or US$17.258 billion. In September alone, footwear-related exports were US$141.815 million – up 35.58% from US$104.601 million in the same month of 2021. According to industry insiders, there has been a slowdown in new orders in the third quarter of 2022, and signs of possible weakness in exports in the coming months. There are about 70 footwear factories in Cambodia, most of which are invested by entities from mainland China, Hong Kong, Taiwan, South Korea, and Japan.
RCEP Monitor
CHINA
Authorities impose lockdown measures in areas surrounding world’s largest iPhone factory in Zhengzhou
(02 November 2022) Authorities have imposed lockdown measures in the area surrounding the world’s largest iPhone factory in Zhengzhou Airport Economy Zone, located in a district of Zhengzhou city, located in Henan province. The lockdown measures were imposed on 02 November, 2022, and currently affects some 600,000 people. The district in Zhengzhou city announced that all businesses would be required to work from home, with only “key enterprises” allowed to continue operating. The district’s more than 600,000 residents will also be required to take nucleic acid tests every day. According to one analyst, the Zhengzhou factory accounts for around 80% of iPhone 14 production. With outbreaks in more than 50 cities across China, the number of people in quarantine in China is at its highest level since the Shanghai lockdown in the spring.
SOUTH KOREA
South Korea’s foreign exchange reserves fall for third consecutive month in October 2022
(03 November 2022) South Korea’s foreign exchange reserves fell for the third consecutive month in October 2022, albeit by a relatively small amount. This was attributed to efforts by South Korea’s central bank to stem the won’s fall against the US Dollar. The country’s foreign exchange reserves fell by US$2.76 billion in October to US$414.01 billion. In September 2022, it had dropped by US$19.67 billion, which was the second-biggest monthly drop on record. The Bank of Korea stated that its efforts to prop up the weakening won was a factor for the decline, which it said more than offset gains of reserves in dollar value coming from the U.S. Dollar’s drop in value against major currencies. October would mark the 10th out of the past 12 months that South Korea’s foreign exchange reserves shrank.
JAPAN
Japan’s Finance Minister warns of downside risks to yen due to monetary tightening in the US
(04 November 2022) Japan’s Finance Minister Shunichi Suzuki warned authorities to be vigilant about any downside risks to the Japanese yen arising from the US Federal Reserve’s current course of monetary tightening. The widening spread between US and Japanese interest rates have seen the yen tumble to historic lows, with the Fed’s aggressive interest rates hikes contrasting sharply with the Bank of Japan’s massive monetary stimulus. The US Federal Reserve raised interest rates by three-quarters of a percentage point this week. Japan has spent a record US$43 billion supporting the yen in October after it slumped to a 32-year low. In September, it conducted its first yen-buying intervention since 1998.