Given recent developments in the region, Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. 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.

MALAYSIA, THAILAND
Malaysia surpasses Thailand as Southeast Asia’s second-largest auto market
(15 May 2024) Malaysia has surpassed Thailand as Southeast Asia’s second-largest auto market after Indonesia. Data from industry groups show Malaysia’s auto sales exceeded Thailand’s for three consecutive quarters through January-March 2024. The Malaysian Automotive Association reported a 5% increase in first-quarter sales to 202,245 vehicles and an 11% rise in 2023 to a record 799,731 vehicles. Sales tax exemptions for locally produced vehicles significantly boosted sales in Malaysia, particularly for national brands Perodua and Proton, which both hold a 60% market share. Although these exemptions ended in mid-2022, the fulfilment of prior tax-free bookings continued to elevate 2023 figures. In contrast, Thailand’s auto sales fell 25% in the first quarter of 2024 due to rising nonperforming auto loans and stagnant consumption. Indonesia’s sales dropped 24% in the same period, hindered by higher interest rates.

MALAYSIA
Malaysia to open autogate facility to 36 additional countries and regions from June onwards
(16 May 2024) Beginning 1 June, travellers from 36 additional countries and regions will be able to use Malaysia’s autogate facility for immigration clearance, according to Home Minister Saifuddin Nasution Ismail. This expands the existing list of 10 countries, including Singapore. New countries added include those in the European Union, Bahrain, the United Arab Emirates, Jordan, mainland China, Canada, Hong Kong, and Taiwan. This decision aims to streamline the immigration process for travellers from these low-risk regions. Between 1 January, 2023, and April 2024, Malaysia recorded 40 million entries, with 30.5 million entering through Kuala Lumpur International Airport’s Terminals 1 and 2, and Johor Bahru. The autogate facility is expected to enhance the efficiency of entry point clearances and boost tourism. The minister confirmed that security would not be compromised, as all traveller information would continue to be recorded and captured.

INDONESIA
Bank Indonesia now holds 23% of Indonesia’s rupiah bonds, surpassing local bank’s holdings
(16 May 2024) Indonesia’s central bank, Bank Indonesia (BI), now holds 23% of the nation’s rupiah bonds, surpassing local banks’ holdings. This marks a significant increase from less than 5% in early 2020, driven by efforts to stabilise the currency. BI has adopted bond buying as a key tool to counter the dollar’s dominance and manage bond market volatility. In April 2024, BI raised interest rates unexpectedly and committed to strengthening the rupiah beyond 16,000 per dollar. BI’s status as the largest holder of government bonds enables it to reduce market volatility. Foreign purchases of rupiah bonds totalled approximately US$230 million in May 2024, contributing to a near 2% appreciation of the rupiah. BI has also increased the issuance of high-yield rupiah securities to attract foreign investment, using rupiah bonds as collateral for these securities.

THE PHILIPPINES
The Philippines’ central bank may lower its key interest rate by 50 basis points in 2024
(16 May 2024) The Philippine central bank may lower its key interest rate by a total of 50 basis points in 2024, according to Governor Eli Remolona, as price risks moderate. The Bangko Sentral ng Pilipinas (BSP) might start with a 25-basis point reduction as early as August 2024, followed by another similar cut. Currently, the target rate remains at 6.50%, a 17-year high. The governor’s remarks follow softer US inflation data and weaker Australian job market indicators, suggesting a potential global easing cycle. Remolona indicated a less hawkish stance, suggesting possible rate easing in the third or fourth quarter of 2024. The BSP revised its inflation forecast for 2023 down to 3.8% from 4%, while slightly raising expectations for 2025.

SINGAPORE
Singapore Airlines to get eight months salary bonus after record profits in 2024
(16 May 2024) Singapore Airlines Ltd. will award staff a bonus payout equivalent to almost eight months of salary, following a second consecutive record annual profit. This payout exceeds the previous year’s bonus, which included 6.65 months’ pay and a maximum of 1.5 months’ ex-gratia bonus. The airline achieved a record US$1.98 billion profit for the fiscal year 2023-2024, a 24% increase from the previous year. The airline attributed its success to strong demand for travel and a robust cargo sector, despite facing higher costs, geopolitical tensions, and economic uncertainty. Monthly passenger volumes reached 97% of pre-pandemic levels by March. This bonus mirrors Emirates’ staff payout, who received five months’ bonus following their record US$5.1 billion profit. Singapore Airlines’ shares rose 0.4% on Thursday, marking a 4.3% increase for the year.

VIET NAM
As US increases tariffs on China, imports soar from Viet Nam
(16 May 2024) As the United States increases tariffs on China, it has significantly boosted imports from Viet Nam, which relies heavily on Chinese inputs for its exports. Viet Nam’s trade surplus with the U.S. reached nearly US$105 billion in 2023, 2.5 times larger than in 2018. Viet Nam now ranks fourth in trade surplus with the U.S., behind China, Mexico, and the European Union. The World Bank estimates a 96% correlation between Viet Nam’s imports from China and its exports to the U.S., up from 84% before 2018. This trade dynamic could prompt the U.S. to impose tariffs on Viet Nam, especially after the November 2024 elections. Last year, U.S. imports from Viet Nam more than doubled to over US$114 billion compared to 2018. Much of Viet Nam’s exports to the U.S. consist of Chinese components, with imported components comprising about 80% of the value of Viet Nam’s electronic exports. In the first quarter of this year, U.S. imports from Viet Nam were US$29 billion, while Vietnam’s imports from China were US$30.5 billion.

BRUNEI DARUSSALAM
Brunei Darussalam’s economy to grow by 2.7% in 2024, driven by recovery in non-oil and gas sector
(15 May 2024) Brunei Darussalam’s economy is set to strengthen in 2024 following a 1.4% expansion in 2023, with growth projected to reach 2.7% this year. This growth is driven by recovery in the non-oil and gas sector, with significant contributions from offshore oil and gas exploration and development activities. The downstream oil and gas industry is expected to support growth through diversification into new products. The government is focusing on accelerating diversification towards less carbon-intensive industries to enhance economic resilience. The non-oil and gas sector’s recovery is supported by expansions in downstream activities, agri-food, transportation, and tourism. Inflation is expected to rise to 1.4% due to food inflation, despite easing pressures from lower commodity prices and supply chain normalization.