CARI Captures Issue 654: Microsoft to invest US$2.2 billion into Malaysia over next four years

MALAYSIA
Microsoft to invest US$2.2 billion into Malaysia over next four years
(02 May 2024) Microsoft has announced its largest investment in Malaysia to date, committing US$2.2 billion over the next four years to support the nation’s digital transformation. Microsoft’s chairman and CEO outlined plans to develop a world-class AI infrastructure accessible to Malaysia and to provide AI skilling opportunities for an additional 200,000 people. The investment also aims to strengthen collaboration with the Malaysian government to establish a national AI Centre of Excellence and to enhance cybersecurity capabilities. Microsoft underlined its commitment to Malaysia’s AI transformation, aiming for inclusive economic growth and innovation. This initiative aligns with the ongoing Bersama Malaysia commitment since 2021, which is aimed at elevating Malaysia as a digital hub. The Malaysian Investment Development Authority (MIDA) emphasized the transformative impact of AI and Microsoft’s contribution to bridging the digital divide and fostering business growth in Malaysia.

SINGAPORE, INDONESIA
Singapore plans to import low-carbon electricity from Indonesia
(29 April 2024) Singapore’s plan to import low-carbon electricity from Indonesia progresses well, as confirmed by Prime Minister Lee Hsien Loong after meeting with Indonesian President Joko “Jokowi” Widodo. The Energy Market Authority of Singapore has granted conditional approvals for five projects to import a total of 2 gigawatts of low-carbon electricity from Indonesia. However, challenges exist due to Indonesia’s regulations, including requirements for state utility facilitation and local sourcing of solar PV components. Lee and Jokowi discussed potential partnerships in carbon capture and storage, as well as utilising carbon credits. The meeting was also attended by incoming leaders Deputy Prime Minister Lawrence Wong and Indonesian Defense Minister Prabowo Subianto, signifying continuity in agreements and relationships.

SINGAPORE
DBS’ digital services face disruptions days after MAS-imposed ban ends
(02 May 2024) Singaporean bank DBS Group Holdings Ltd encountered fresh disruptions to its Internet banking and payment services in Singapore, days after the lifting of a six-month ban imposed by the country’s central bank in 2023 due to similar issues. The bank acknowledged the problem on its Facebook page and confirmed that it had identified the issue causing the disruption. Complaints surged around 5:40 pm local time, as reported by the Downdetector website, but services returned to normal by 8 pm local time. The Monetary Authority of Singapore lifted the ban this week, citing improvements by the bank. Despite the service disruptions, DBS reported better-than-expected results on 02 May, 2024, driven by strong lending and wealth fees, resulting in a 1.9% increase in its shares at close. This pushed DBS’ market capitalisation to S$101 billion, making it the first Singapore-listed company to surpass that milestone.

INDONESIA
Global funds to continue divesting from Indonesian equities amidst weak rupiah
(03 May 2024) Despite the Indonesian central bank’s unexpected interest rate increase, global funds are anticipated to continue divesting from Indonesian stocks. This is due to the surprise hike’s minimal impact in boosting the rupiah. Overseas investors pulled out over US$1 billion from Indonesian equities in April 2024, marking the end of a four-month influx. This trend persisted into May, with investors directing their preferences towards other markets. Janus Henderson Group Plc suggested a potential shift of funds from Indonesia to China due to China’s current momentum and reduced concerns regarding property bond defaults. It has been noted that every percentage point of rupiah depreciation against the dollar will squeeze Jakarta Composite Index companies’ earnings per share growth by a similar amount. The rate hike’s effectiveness in stabilizing the rupiah remains uncertain amidst global economic uncertainties.

VIET NAM
Unexpectedly weak export performance exacerbate currency pressures for Thailand and Viet Nam
(29 April 2024) Unexpectedly weak export performances in Asia’s emerging economies, particularly Thailand and Vietnam, may exacerbate currency pressure caused by a strong US dollar and the Federal Reserve’s hawkish stance. Thailand’s outbound shipments declined by 11% in March 2024, falling below all forecasts, while Vietnam’s exports grew by 10.6% in April, missing the median estimate of 14%. This weaker export performance could lead to continued currency depreciation for both countries, especially as stubborn inflation and sluggish economic growth in key markets such as the US, China, and Southeast Asia dampens demand for goods. Both the Vietnamese dong and the Thai baht have faced downward pressure, with the dong hitting a historic low and the baht trading at a six-month low. Thailand’s trade deficit for the third consecutive month and Viet Nam’s narrowing surplus may strain their foreign-exchange reserves required for currency intervention. Both countries’ export weaknesses were attributed to price-sensitive demand in overseas markets and shipping disruptions in the Red Sea affecting Viet Nam’s exports.

THAILAND
Bank of Thailand Governor affirms bank’s independence despite political pressure
(29 April 2024) The Bank of Thailand’s Governor affirmed the central bank’s commitment to making interest rate decisions independently despite political pressure. He stated that recent decisions demonstrate the bank’s adherence to economic considerations rather than succumbing to political influence. The central bank maintained the key interest rate at 2.50% during its April 2024 policy meeting, despite pressure from the government to lower rates. The monetary policy committee expressed concerns over elevated household debt, recognizing its potential impact on long-term economic growth. The governor acknowledged the challenge of balancing weak economic recovery with monetary policy management. He noted that the current interest rate supports recovery while ensuring responsible debt management. The Thai economy is projected to grow by 2.6% in 2024 and 3.0% in 2025, supported by private consumption and tourism. Inflation is expected to gradually increase and return to the target range of 1% to 3% by the end of the year.

THAILAND
Thailand’s CPI increases by 0.19% year-on-year in April 2024
(03 May 2024) In April 2024, Thailand’s headline Consumer Price Index (CPI) increased by 0.19% compared to the previous year, contrasting with a 0.47% year-on-year decline in March. This figure surpassed the Reuters poll forecast of a 0.25% decrease and marked the first positive inflation in seven months. The core CPI, excluding volatile food and energy prices, rose by 0.37% in April. The Director of Trade Policy and Strategy Office attributed this increase to last year’s low base for electricity prices, the rise in agricultural prices, and a weak baht. Despite the rise, inflation has remained outside the central bank’s target range of 1% to 3% for the 12th consecutive month. Factors contributing to this trend include escalating global energy prices and increased agricultural product prices due to a hot climate. The ministry maintained its inflation forecast for the year at 0.0% to 1.0%. Over the first four months ending in April, the average CPI decreased by 0.55% compared to the same period the previous year.

---

RCEP Monitor

---

CHINA
Chinese stocks gain momentum due to supportive policies
(29 April 2024) China stocks have seen a surge in momentum recently, attributed to supportive policies. Most notably, there was a daily record US$3.1 billion northbound inflow on 26 April, 2024. Foreign investors utilising the Connect system recorded the largest single-day net investment since its inception in 2014, with buying of A-shares continuing on 29 April, reaching the sixth-largest single-day net investment this year. The Hang Seng Index, driven by tech stocks, surpassed the 18,000 mark on Monday morning, with even beleaguered Hong Kong-listed Chinese property companies experiencing significant gains. Notably, the CSI 300 rose by 1.11% on Monday to 3,623.91, while the Hang Seng closed 0.54% higher at 17,746.91. China’s securities watchdog aims to enhance listing company quality and shareholder returns. They’ve also announced separate measures to bolster the Hong Kong market, including broadening product availability through the Connect scheme. Concerns persist regarding the sustainability of the rallies without fundamental economic change. While investors flock to Hong Kong on expectations of a weaker yuan and attractive stock valuations, sustained interest from long-term foreign investors remains uncertain due to challenging macroeconomic conditions and stagnant earnings growth.

CHINA
Chinese rare-earth industry face declining revenues due to greater global competition
(29 April 2024) China’s rare-earth industry is facing declining revenues and profits despite government efforts to protect the sector, as global competitors establish their own supply chains and domestic economic conditions remain challenging. China Rare Earth Resources and Technology, a key listed arm of state conglomerate China Rare Earth Group, reported a 5.4% decrease in annual revenue for 2023, amounting to US$550 million. The company attributed this decline to accelerated consolidation and structural adjustments in the global rare-earth industry, leading to falling prices. The latest data from the U.S. Geological Survey (USGS) shows China leading in rare earth reserves and production, but other countries are also increasing their output. Supply-demand pressures, combined with a slowing domestic economy, pose further risks of falling prices.

SOUTH KOREA
President Yoon reaffirms pledge to raise monthly basic pension for seniors
(03 May 2024) President Yoon Suk Yeol reaffirmed his pledge to raise the monthly basic pension benefit for seniors during his tenure. Yoon stated this while speaking at a Parents’ Day ceremony, marking the first time a sitting president attended the annual event. The Yoon government aims to increase the pension from around US$234.76  to US$293.45 per month for individuals aged 65 and above within the lower 70 percent income bracket. He emphasized the ongoing contributions of the older generation and proposed measures to enhance their quality of life, such as creating more job opportunities and boosting wages. Yoon also committed to expanding senior care services, including easing the financial strain of nursing fees.

15 participating countries	20 chapters	2.2 billion	US$26.2 trillion	28%
ASEAN member states, Australia, China, Japan, South Korea, New Zealand	trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement	combined population, 30% world’s population	combined GDP, 30% global GDP	global trade (based on 2019 figures)