CARI Captures Issue 641: Southeast Asian markets poised for turnaround in 2024 on back of cheap valuations

ASEAN
Southeast Asian markets poised for turnaround in 2024 on back of cheap valuations
(22 January 2024) Southeast Asian markets are poised for a turnaround in 2024 on the back of cheap valuations and potentially high economic growth. This follows sluggish growth for said markets in 2023. According to research by Maybank Investment Banking Group, improving growth, rising exports, a pick up in manufacturing, and a better-than-expected outlook by Taiwan Semiconductor Manufacturing Company last week all mean that Southeast Asia markets are poised for a better year. The MSCI Southeast Asia Index dropped a little over 3% in 2023, compared with the more than 20% rise in the broader MSCI World Index. It was noted that even a potential US recession will not dampen optimism for Southeast Asian markets, with certain countries such as Indonesia, Malaysia, and Thailand strongly driven by domestic consumption. Meanwhile, other economies in the region are placed to benefit from their growing presence in the chips and electric vehicle industries.

ASEAN
The Philippines, Indonesian and Malaysian currencies reach three-month low
(25 January 2024) The Filipino peso, Indonesian rupiah and Malaysian ringgit were among several Asia-Pacific currencies that reached a three-month low against the US dollar on 24 January, 2024. Meanwhile, the Thai baht was among others which reached its weakest in one or two months. The weakening of many ASEAN currencies is attributed to both a slowdown in the Chinese economy as well as the firmness of the US dollar. Many Asian economies depend heavily on China, meaning any slump in the latter tends to spur selling in their home currencies. The most important industries in these countries for earning foreign currencies depend on the Chinese economy, from electronic devices in the Philippines to tourism in Thailand.

VIET NAM, GERMANY
Germany President visits Viet Nam with business delegation
(23 January 2024) German President Frank-Walter Steinmeier visited Hanoi on 23 January, 2024 alongside a business delegation to explore alternative markets as part of its China de-risking strategy. Steinmeier met with Viet Nam’s President Vo Van Tthuong, where they both signed a memorandum of understanding on facilitating the movement of skilled workers from Vietnam to Germany. According to the German Chamber of Commerce in Viet Nam, German companies have invested more than US$3 billion into Viet Nam. Germany is Viet Nam’s most important trading partner in the European Union, while Viet Nam is one of Germany’s most important partners in ASEAN.

MALAYSIA
Malaysia’s economy to expand by 4.6% in 2024
(20 January 2024) According to RHB Investment Bank (RHB IB), Malaysia’s economy is set to expand by 4.6% in 2024. RHB IB noted that Malaysia’s growth momentum is expected to accelerate in 2024, driven by improvements in external demand. It noted that nominal export growth is projected to rebound by 4.3% year-on-year in 2024, compared to a decline of 8% in 2023. The bank also had a positive outlook on private consumption growth, supported by robust labor market demand conditions. Among the potential upside risks to its 2024 growth forecasts include the continuation of major infrastructure projects, alongside the implementation of business-friendly policies and incentives focusing on priority sectors such as technology, tourism, and agriculture, as well as those with export capacity.

INDONESIA
Troubled state-owned builder PT Wijaya Karya signs US$1.31 billion debt restructuring deal
(24 January 2024) Troubled Indonesian state-owned builder PT Wijaya Karya signed a US$1.31 billion debt restructuring deal with 11 financial institutions, including PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat Indonesia, PT Bank Tabungan Negara, PT Bank Syariah Indonesia, and PT Bank Panin. The deal covers 87.1% of the debt being restructured as of 23 January. Wijaya Karya has seen its liabilities balloon amid an aggressive push to build infrastructure under the presidency of Joko Widodo. The company has switched 93% of its projects to a payment mechanism based on monthly progress, a significant increase from the 40% in 2016.

THAILAND
Thai stock exchange to expedite delistings to improve investor sentiment
(23 January 2024) The Stock Exchange of Thailand (SET) has outlined new rules and procedures to monitor listed companies and prevent fraud, as well as to expedite the delisting of companies. This is to improve investor perceptions of the SET, which finished as Asia’s worse-performing market in 2023. The SET Index fell by 15.2% in 2023 amid halting recoveries for manufacturing and tourism plus decade-high interest rates. Among the changes in the bourse’s three-year operational plan include additional grounds for delisting and oversight of companies reporting weak performance. As well, the window for companies to improve their performance before being delisted will also be narrowed. This is to shorten the delisting process, which can take up to seven years at present.

THE PHILIPPINES
Authorities shelve plans for more taxes amid elevated high inflation
(24 January 2024) Authorities have shelved plans to impose new taxes on junk food and sweetened beverages amid high inflation. The Philippines’ Finance Secretary stated that it is ‘not the time’ to impose additional taxes, but to prioritize enforcement of existing laws instead. He stated that there may be a need to ‘temper’ a proposed hike in taxes on motor vehicle users, but was supportive of measures imposing levies on single-use plastic and digital services. In 2023, the country had listed priority measures that the Filipino Congress needed to pass, including reforming the military’s pension system. Under the proposals for military pensions, soldiers and uniformed personnel would pay to their retirement funds instead of the state.

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CHINA
Chinese gaming stocks rise after regulators seemingly take down draft regulations
(23 January 2024) The stocks of Chinese gaming companies rose in Hong Kong after regulators seemingly took down the draft of regulations aimed at curbing players’ spending. The draft of the gaming rules had been removed from the official website of the National Press and Publication Administration (NPPA), China’s gaming regulator, as of the morning of 23 January, 2024. It is unknown if the draft rules were removed due to the rules being scrapped or because the consultation period for the draft regulations had ended. The issuance of the draft regulations in December 2023 wiped out the equivalent of billions of U.S. dollars of Chinese gaming companies’ market capitalizations just one day after it went online, as investors feared a new tech crackdown.

CHINA
Hong Kong-listed stocks hits 36% discount to mainland peers, deepest in 15 years
(22 January 2024) A rout in Chinese stocks listed in Hong Kong has pushed their discount to mainland peers to 36%, their deepest in 15 years. The steeper losses in Hong Kong, where some of China’s most influential firms are listed and there is less interference from Beijing, suggests global investor sentiments towards the Chinese economy remains gloomy. The seemingly endless selloff in Chinese shares has been attributed to a range of factors, from a deepening housing slump to stubborn deflationary pressures to uncertainty about US interest rates. Chinese stocks listed in Hong Kong are often regarded as a better barometer of the health of China’s economy and a more accurate gauge of broader investor sentiment.

SOUTH KOREA
South Korea’s economy maintains 0.6% growth for fourth quarter of 2023
(25 January 2024) According to the Bank of Korea, the Korean economy maintained quarterly growth of 0.6% in the fourth quarter of 2024. This brought overall growth for 2023 to 1.4%. South Korea had earlier registered 0.6% growth in the second and third quarters of 2023. Exports grew by 2.6%, down from 3.4% the preceding quarter, while private consumption registered 0.2% growth, a slight decline from 0.3% the preceding quarter. The Bank of Korea projects the economy to expand by 2.1% in 2024, down from an initial outlook of 2.4%. The IMF has predicted annual growth of 2.2%.