CARI Captures Issue 647: Taylor Swift’s Eras tour causes economists to upgrade Singapore’s GDP forecast

Given recent developments in the region, Captures will widen its scope to include news related to members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

Taylor Swift’s Eras tour causes economists to upgrade Singapore’s GDP forecast
(08 March 2024) The Singapore leg of singer-songwriter Taylor Swift’s Eras tour caused economists to upgrade the country’s GDP forecast for 2024. Economists now predict Singapore’s economy will expand by 2.9% in the first quarter of 2024, and 2.5% for the whole year (from a previous forecast of 2.3%). It is believed her concerts added 0.2% percentage points of GDP to the city-state’s economy in the first quarter. The Singapore leg of the Eras tour involved the singer performing six concerts through 09 March, carrying benefits for Singapore’s hospitality, food & beverage, and retail activities.

Potential free trade agreement between the Philippines and United States soon
(12 March 2024) A potential free trade agreement (FTA) between the Philippines and the United States will be discussed once a visiting delegation of American business leaders, organized by US President Joe Biden, returns to the US. The Chairman of the President’s Export Council (PEC), mentioned the possibility of a US-Philippines FTA during a forum in Makati City. The PEC advises the US president on trade-related government policies and programs. The Chairman stated that discussions on the FTA would occur upon their return to the US, but warned that FTA negotiations involve multiple branches of the US government, including Congress. Currently, the US ranks as the Philippines’ third-largest trading partner globally, with total trade reaching approximately US$20 billion. The United States presently has 14 FTAs with 20 countries, according to the ITA.

Viet Nam expected to be upgraded to emerging market indexes by 2025
(09 March 2024) Viet Nam is striving for inclusion in emerging market indexes, with the demand for upfront funding from equity investors posing a significant obstacle. JPMorgan Chase & Co. and HSBC Holdings Plc anticipate an upgrade for Viet Nam’s US$269 billion stock market by FTSE Russell later in 2024, with a target inclusion by 2025. Despite being a strong candidate on paper due to its robust economy and stock market performance, foreign investors are concerned about the requirement for investors to have fully-funded accounts in the country before trading can commence. Vietnam’s progress towards an upgrade has been slower than anticipated, partly due to issues with fund availability checks and cumbersome account opening processes. Another challenge is the cap on foreign holdings in certain sectors, hindering international investment. However, Vietnam aims to address these concerns and increase its stock market capitalization to 100% and 120% of GDP by 2025 and 2030, respectively.

Semiconductor manufacturers shifting operations to Malaysia amidst US-China chip war
(11 March 2024) Semiconductor manufacturing firms are increasingly investing in Malaysia amidst the ongoing Sino-US trade war. Much of this influx is driven by a global strategy adopted by semiconductor firms termed “China plus one,” which aims to diversify supply chains away from China. Malaysia’s appeal lies in its established history of semiconductor manufacturing (primarily back-end operations), bolstered by the current government’s ambition to move up the value chain. Malaysia attracted RM60.1 billion in foreign direct investment in 2023, demonstrating its growing attractiveness to investors. However, challenges such as a shortage of engineering talent and political vulnerabilities remain. The influx of Chinese companies may also attract scrutiny from the US, potentially impacting the Malaysian semiconductor industry’s future access to the American market. Despite these challenges, Malaysia is aggressively pursuing high-end investments to position itself as a key player in the global semiconductor market.

Malaysia secures potential investments worth US$9.68 billion during Germany visit
(13 March 2024) During his visit to Germany, Malaysian Prime Minister Anwar Ibrahim highlighted significant support and recognition from German leaders and business figures, with potential investments amounting to MYR 45.4 billion (US$9.68 billion). Anwar discussed Malaysia-Germany relations and various economic cooperation aspects with German Chancellor Olaf Scholz. The potential investments span industries such as semiconductors, aerospace, medical devices, chemicals, and services. During a roundtable meeting, attended by over 35 industry leaders, representatives from companies like Siemens AG, B. Braun GmbH, and Airbus Asia Pacific discussed potential business collaborations. Malaysia and Germany have strong trade ties, with Malaysia being Germany’s largest trading partner in ASEAN and over 700 German companies operating in Malaysia, contributing to the creation of 65,000 jobs.

Japan’s Toppan Holdings plans to build semiconductor package substrate plant in Singapore
(14 March 2024) Japan’s Toppan Holdings intends to construct a semiconductor package substrate plant in Singapore to begin operations by late 2026, in response to rising demand linked to artificial intelligence. The investment in the plant is estimated at US$338 million, with 200 jobs expected to be created. Further capacity expansions are anticipated in the future, with total investments potentially surpassing 100 billion yen. Toppan’s main customer, Broadcom, may provide financial support for future capacity expansions. The Singapore facility will be strategically located near semiconductor assembly and testing contractors in Malaysia and Taiwan. The chip substrate market is projected to reach US$29 billion by 2028. Toppan received support from Singapore’s government and Broadcom in selecting the plant site and hiring personnel. This move strengthens Toppan’s business continuity plan, complementing its existing production base in Ishikawa prefecture acquired in 2023.

Trade surplus measures at US$870 million in February 2024, smallest in nine months
(15 March 2024) In February, Indonesia reported its smallest trade surplus in nine months, standing at around US$870 million, significantly lower than the expected surplus of US$2.32 billion polled by Reuters and January’s US$2 billion surplus. This marks the smallest surplus since May 2023. Indonesia, known for exporting commodities such as coal, palm oil, and nickel, experienced a 9.45% drop in exports to US$19.31 billion, driven by declines in coal and palm oil shipments. This decline may be attributed to 2023’s drop in commodity prices and delays in the issuance of mining permits affecting activities in key mines. Meanwhile, imports surged by 15.84% to US$18.44 billion, surpassing market expectations, driven mainly by increased imports of machinery, plastic, and electrical equipment.

RCEP Monitor

Prices of new homes continue sinking despite mortgage rate cuts
(15 March 2024) In February 2024, official data revealed a further decline in the prices of new homes in China, with top-tier cities like Beijing, Guangzhou, and Shenzhen leading a 0.3% monthly drop despite recent mortgage rate cuts. This decline matched the pace seen in January. Year-on-year, prices fell by 1%, attributed in part to a high base effect. Prices for secondhand homes in top-tier cities also decreased by 0.8% in February, indicating continued affordability challenges for many citizens. Other key provincial cities experienced even larger price drops amid subdued demand amidst weaker economic conditions. China’s real estate sector has been under pressure since the implementation of the “three red lines” policy in 2021 to curb overborrowing by developers, leading to defaults among major real estate firms. To support growth while managing risks, authorities hinted at further monetary easing, including maintaining the interest rate on medium-term lending facility loans at 2.5%.

Bank of Japan to discuss exiting negative rate policy next week amidst wage hikes
(14 March 2024) The Bank of Japan (BOJ) is set to deliberate on the potential termination of its negative interest rate policy during its upcoming meeting, spurred by optimism over achieving the 2% inflation target amidst rising wage levels. The decision hinges on the outcome of Japan’s annual wage negotiations, the results of which will be disclosed by Rengo, the top labour confederation, on Friday. If the negative interest rate policy is lifted, it would mark Japan’s first interest rate hike since February 2007, signalling a shift in monetary policy. Discussions also involve the potential discontinuation of yield curve control, coupled with the cessation of asset purchases, including exchange-traded funds and real estate investment trusts. On 13 March, Toyota Motor and other major corporations agreed to meet labour union demands on wages, bolstering expectations for policy adjustments by the BOJ. BOJ Governor Kazuo Ueda emphasised the significance of the negotiation outcomes in the decision-making process.

Australian stocks among world’s worse this week amid China concerns
(15 March 2024) The S&P/ASX 200, a key Australian stock index, experienced a decline of 2.3% during the week, marking its poorest performance since September. The downturn was attributed to concerns over China’s economic condition, particularly in the commodities sector, which heavily influences the Australian market. Mining companies bore the brunt of the losses, despite a rise in copper prices, following perceived inadequacies in Chinese stimulus measures. Additionally, banks suffered significant setbacks, emerging as the worst-performing sector for the week. This decline was exacerbated by discouraging US economic data, which diminished expectations for relaxed monetary policies. Analysts noted that Macquarie’s downgrades of Australian banks further compounded the negative sentiment among investors.

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