CARI Captures Issue 642: Future of planned Indonesian capital Nusantara faces uncertainties due to election

INDONESIA
Future of planned capital city Nusantara faces uncertainties due to coming election
(31 January 2024) The future of Indonesia’s planned capital city Nusantara faces uncertainties due to the country’s coming elections on 14 February, 2024. The Indonesian government plans to finance 20% of the total funding for the project, while private investors will finance the remaining 80%. However, private funding for the new capital has recently halted, with investors awaiting the election results and what Jokowi’s successor’s views on the project are. Of the three candidates to replace Jokowi, two of them, Prabowo Subianto and Ganjar Pranowo, have declared their support for Nusantara and intend to continue it. The remaining candidate, Anies Baswedan, has expressed skepticism about the project, arguing Indonesia has more urgent problems to fix. As of now, foreign investors have remained hesitant to pledge funding for the project. As of 16 January, the government has received about 345 letters of interest, of which about 207 were from domestic companies.

INDONESIA
Inflation eases to 2.57% in January 2024, midpoint of central bank target
(01 February 2024) According to data by Bank Indonesia, Indonesia’s inflation rate eased to 2.57% in January 2024. This is a slight decrease from the 2.61% measured in December 2023. The inflation rate in January 2024 is near the midpoint of Bank Indonesia’s target range of 1.5% to 3.5% for 2024. The core inflation rate, which excludes government-controlled prices and volatile food prices, also cooled to 1.68% in January, from 1.80% in December. Inflation in Indonesia has stayed within the central bank’s target range since the middle of 2023, helped by Bank Indonesia’s interest rate hiking cycle of 250 basis points between August 2022 and October 2023.

MALAYSIA
Malaysia’s PMI rises to 49.0 in January 2024, a sixteen-month high
(01 February 2024) According to S&P Global, the seasonally-adjusted S&P Global Malaysia Manufacturing purchasing managers’ index (PMI) rose to 49.0 in January 2024, from 47.9 in December 2023 and the highest since September 2022. The latest reading suggests that 2023’s downturn is losing momentum and sets the Malaysian manufacturing sector on course for a gradual recovery. It was noted that new orders, output, and exports were all scaled back to lesser extents in January, representative of a slight pick-up in the rate of GDP growth. Manufacturing new orders also moderated for the seventeenth month running in January, though the latest slowdown was the weakest recorded since October 2022.

ASEAN
Funds raised through IPOs in Southeast Asia drop over 60% in second half of 2023
(31 February 2024) Funding raised through IPOs dropped over 60% year-on-year in the second half of 2023, with companies shying away from listings due to factors such as China’s ongoing slowdown as well as domestic elections. A total of US$1.6 billion was raised in the second half of 2023, down 63% year-on-year. The number of IPOs dropped 21% to 71. Thailand saw the largest fundraising drop in the region, declining by 75% to US$773 million. This was attributed to the political uncertainty that followed the May 2023 election, when there was a delay in setting up the new government. In Indonesia, the number of IPOs in the July-December period of 2023 dropped from 42 to 31, as investors await the results of the coming elections in February 2024. Some analysts forecast the IPO space to improve in 2024 as the interest rate environment begins to stabilize.

ASEAN
Chinese EV maker BYD eyes aggressive expansion in ASEAN
(31 January 2024) Chinese electric vehicle (EV) maker BYD is pursuing an aggressive expansion in ASEAN, particularly in Singapore and the Philippines. The automaker plans to open more than a dozen sales outlets for passenger cars this year in Singapore and the Philippines. In mid-January, BYD launched three of its passenger models in Indonesia, including its Seal sedan, Atto 3 sports utility vehicle, and the Dolphin hatchback. This marked its foray into the Indonesian market. In Singapore and the Philippines, BYD works with local distributors to sell its EVs, namely automotive group Sime Darby Motors and the Philippine conglomerate Ayala respectively.

THE PHILIPPINES
Economy expands by 5.6% in 2023, missing government target of 6% to 7% growth
(31 January 2024) Annual GDP growth for the Philippines for 2023 came in at 5.6%, short of the 7.6% pace in 2022 and missing the government target of 6% to 7% growth. Growth in the fourth quarter of 2023 came at 5.6%, weaker than the 7.1% recorded in the same period in 2022. The Philippines economy faced multiple headwinds in 2023, including soaring food prices and persistent supply chain bottlenecks. In response, the central bank, the Bangko Sentral ng Pilipinas (BSP), raised interest rates to their highest in years, which also dampened household spending power. The BSP currently maintains its benchmark lending rate at 6.5%, after an emergency increase of 25 basis points in October 2023.

SINGAPORE
Investment commitments in Singapore slowed to US$9.5 billion in 2023 from US$16.78 billion in 2022
(30 January 2024) Investment commitments into Singapore slowed to US$9.5 billion in 2023 from a record US$16.78 billion in 2022. According to the Economic Development Board (EDB), these commitments are expected to create 20,045 jobs over the next five years. About 58% of those jobs are likely to be in services, 26% in research and development, and the remaining 16% in manufacturing. The EBD noted that the outlook for 2024 remains challenging due to many headwinds, including ongoing geopolitical tensions, policy uncertainty created by electoral contests in many jurisdictions, increased competition for investments, and macroeconomic uncertainty.

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CHINA
China’s debt-to-GDP ratio climbs to new record high in 2023 despite slow pace of borrowing
(30 January 2024) According to a report by the National Institution for Finance and Development (NIFD), China’s debt-to-GDP ratio rose to a new record high in 2023 despite the slow pace of borrowing, reflecting China’s weak economic growth. The macro leverage ratio, which measures total outstanding nonfinancial debt as a share of nominal GDP, rose to 287.8% in 2023, up 13.5% year-on-year. It was found that the expansion of the overall leverage ratio outpaced the growth of borrowing. The total liabilities of the household, corporate, and government sectors expanded at 9.8% in 2023, largely unchanged from 2022. The limited debt expansion and significant rise of the macro leverage ratio in 2023 were attributed to the slowdown in China’s nominal economic growth. China’s nominal growth measured at 4.6% in 2023.

CHINA
China’s benchmark PMI measures at 49.2 for first month of 2024
(31 January 2024) According to China’s National Bureau of Statistics, China’s benchmark purchasing managers’ index (PMI) came in at 49.2 for the first month of 2024. The reading was higher than the 49.0 measured in December 2023. The slight improvement in January 2024’s PMI was attributed to a rebound in the manufacturing sector. The PMI has been below the 50-point level that separates growth from contraction since October 2023 — and for most of 2023 — amid a global economic slowdown and an uneven recovery in domestic demand. The PMI rose for the first time since October 2023, backed by gains in subindexes including production and new export orders. Readings for imports and finished goods inventory also improved in the period before the country enters the Lunar New Year in early February 2024.

CHINA
Foreign investors sell net US$2 billion worth of mainland Chinese stocks in January 2024
(31 January 2024) Foreign investors sold a net US$2 billion worth of mainland Chinese stocks in January 2024. The month also produced the sixth consecutive monthly outflow since August 2023. This trend marks the ‘strongest’ and ‘longest’ net outflow since the Stock Connect trading link between Hong Kong and the mainland opened in 2014. These outflows came despite measures by the Chinese government to prop up the stock market. This included China’s central bank cutting the bank reserve ratio to boost liquidity. As well, China’s securities regulator said it was suspending stock borrowing via exchanges for short selling. According to Goldman Sachs, the Chinese and Hong Kong markets are performing the worst and third worst in Asia in dollar terms year-to-date, with losses of 10.9% and 9.8% respectively.