CARI Captures Issue 662: Southeast Asia’s IPO market sees 71% decline in market capitalization in first half of 2024

ASEAN
Southeast Asia’s IPO market sees 71% decline in market capitalization in first half of 2024
(08 July 2024) In the first half of 2024, Southeast Asia’s IPO market saw a significant decline, with market capitalization dropping 71% to US$5.8 billion. The region recorded 67 IPOs, down 21.2% from the previous year, raising US$1.38 billion, a 59.4% decrease. Only one large IPO exceeded US$1 billion in market capitalization and raised over US$200 million, compared to three large IPOs the previous year. This decline continues a downward trend that began in late 2022, influenced by geopolitical instability and high interest rates. Indonesia experienced the steepest drop, with market capitalization of listings falling 92.2% to US$1.22 billion and the IPO proceeds raised down 89.1% to US$248 million. Despite this, there is cautious optimism for improvement post-2024, with potential for AI-related IPOs and a return of REIT listings as interest rates decrease.

MALAYSIA, VIET NAM
Viet Nam and Malaysia reaffirm commitment to enhancing bilateral trade relations
(10 July 2024) On 09 July, 2024 Viet Nam’s Minister of Industry and Trade and Malaysia’s Minister of Investment, Trade and Industry reaffirmed their commitment to enhancing bilateral trade relations. The ministers co-chaired the fourth meeting of the Vietnam-Malaysia Joint Trade Committee in Hanoi. Viet Nam emphasised Malaysia’s importance as a trade and investment partner, noting increasing Malaysian investments in Vietnam. Malaysia expressed high expectations for cooperation with Vietnam. A joint statement was signed to solidify these commitments. A technical meeting held on 08 June, 2024 highlighted satisfaction with progress in economic, scientific, and technical cooperation since their last meeting in 2015. Both sides committed to implementing agreements from Malaysian Prime Minister Anwar Ibrahim’s visit in July 2023, focusing on promoting trade and investment. They also agreed to work towards a bilateral trade turnover target of US$18 billion, facilitating market access for products, including halal goods, in both countries.

MALAYSIA, SINGAPORE
Malaysia and Singapore near agreement to establish ASEAN’s first cross-border SEZ
(10 July 2024) Malaysia and Singapore are nearing an agreement to establish Southeast Asia’s first cross-border special economic zone (SEZ), expected to be unveiled in September 2024. Malaysia’s Economy Minister Rafizi Ramli and Johor state Chief Minister Onn Hafiz Ghazi indicated that the geographic makeup of the zone is almost finalised. The SEZ aims to facilitate the free movement of goods and people between Johor and Singapore. Malaysia has completed its proposals and is awaiting feedback from Singapore. The SEZ will encompass 3,505 square kilometres and include 16 sectors such as electronics, manufacturing, and healthcare. Malaysia plans to offer fiscal incentives for companies within the SEZ, to be detailed in an upcoming budget speech. The SEZ is expected to benefit from a proposed high-speed rail project between Kuala Lumpur and Singapore, with Malaysia considering several private proposals for the rail project.

INDONESIA
Incoming President Prabowo Subianto to allow national debt to increase to 50% of GDP
(11 July 2024) Indonesia’s incoming president, Prabowo Subianto, will allow the national debt to increase to 50% of GDP to fund his spending programmes, contingent on boosting tax revenue. The debt-to-GDP ratio, currently at 39%, could rise to 50% while maintaining an investment-grade rating, based on discussions with the World Bank. The administration plans to increase revenues through taxes, excise taxes, royalties, and import duties. Key spending includes a US$28 billion free lunch programme for school children and pregnant mothers, projected to add 1.2% to GDP. Prabowo aims for 8% annual growth, supported by initiatives like building power plants, refineries, homes, and expanding food production. The government intends to gradually achieve the debt target, adding 2% annually over five years. Establishing a state revenue agency and considering subsidy cuts and state asset sales are part of the strategy to increase revenue. Rating agencies have warned that a significant rise in debt could weaken Indonesia’s sovereign credit profile.

THE PHILIPPINES
Tourism sector generates over US$4.83 billion in revenue in first half of 2024
(11 July 2024) The Philippines’ tourism sector generated over US$4.83 billion in revenue for the first half of 2024, marking a 32.81% increase from US$3.64 billion in the same period of 2023. The Tourism Secretary highlighted that this revenue growth will enhance livelihood opportunities for Filipinos, boosting the economy. As of 10 July, 2024 tourist arrivals totalled 3.17 million, with 2.9 million foreign nationals and 236,401 overseas Filipinos. South Korea led foreign arrivals with 824,000 visitors, followed by the United States with 522,000, and China with 199,000. The DOT expects both revenue and employment in tourism-related industries to continue rising in the second half of the year.

THE PHILIPPINES, VIET NAM
Viet Nam and the Philippines agree to establish rice industry alliance
(10 July 2024) Viet Nam and the Philippines have agreed to establish a rice industry alliance and upgrade their trade relationship to an investment partnership. The Vietnamese Minister of Agriculture noted that the Philippines is Viet Nam’s largest rice export market, accounting for 35-40% of total exports. In the first half of this year, Vietnam exported 4.68 million tonnes of rice worth US$2.98 billion, a 104% increase in volume and 32% in value from the same period in 2023. Viet Nam aims to improve rice quality, reduce costs, adapt to climate change, and ensure food security. The Philippines’ Secretary of Agriculture stated that the country imported 2.17 million tonnes of rice in the first half of the year, with 1.59 million tonnes from Viet Nam. The Philippines seeks to address agricultural challenges by importing Vietnamese machinery and technologies and aims to import fertilisers first.

MALAYSIA, THAILAND, LAO PDR, CHINA
New cargo rail service linking Malaysia, Thailand, Lao PDR, and China launches
(11 July 2024) A new cargo rail service, the ASEAN Express, has launched, connecting Malaysia, Thailand, Lao PDR, and China, aiming to open new markets and reduce costs for businesses and people in the region. The first train departed from Malaysia’s Kelana Jaya depot on 27 June, 2024 and arrived in Chongqing, China, on 11 July, carrying electronic appliances and agricultural products, with a transit time of under 14 days, compared to up to three weeks by sea. The service is expected to lower logistics costs by up to 30% and boost the rail manufacturing industry. The ASEAN Express links key inland ports, including Malaysia’s Kontena Nasional Inland Clearance Depot, Thailand’s Latkrabang Inland Port, and Lao PDR’s Thanaleng Dry Port. The rail service is 30% cheaper than road transport and is more sustainable. Experts see the service as a significant development for regional rail connectivity and anticipate lower logistics costs and increased efficiency.

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JAPAN
40-year government bond yields reach 3% for first time
(11 July 2024) Japan’s 40-year government bond yield reached 3% for the first time since its 2007 issuance. Caution from domestic life insurers and selling by overseas investors, ahead of the Bank of Japan’s (BOJ) 31 July, 2024 policy decision, contributed to the rise. The yield on the most recently issued 40-year bond remained below 3%, while three older bonds surpassed this level. Persistent yen weakening fuels speculation about BOJ’s potential policy normalization. Foreign investors sold Japanese medium- to long-term bonds for the fourth consecutive week, the longest streak in about a year, and offloaded the most 10-year JGB futures in late June. Traders anticipate BOJ may reduce bond buying and raise interest rates at the July policy meeting to support the yen, though this may not curb the yen’s decline and could further elevate bond yields.

CHINA
China’s exports grew 8.6% year-on-year in June 2024, fastest pace since March 2023
(12 July 2024) China’s exports grew 8.6% year-on-year in June, the fastest pace since March 2023. This exceeded the Reuters poll forecast of 8% growth. Imports, however, declined 2.3%, missing the forecasted 2.8% growth. Policymakers are relying on exports and manufacturing to drive growth amid weak domestic demand and a property sector slowdown. US and EU have increased tariffs on Chinese imports, including electric vehicles. Analysts suggest the export surge is due to manufacturers front-loading shipments ahead of US tariffs effective in August 2023. Disruptions in Red Sea shipping routes have also prompted early dispatches. June’s trade balance was US$99.05 billion, surpassing the US$85 billion forecast. For the first half of the year, exports rose 3.6% and imports 2%.

NEW ZEALAND
New Zealand’s house-building costs fall for first time in at least 12 years
(10 July 2024) New Zealand’s house-building costs fell for the first time in at least 12 years, driven by a 1.1% decline in the second quarter from the first. This marks the first recorded drop in the series since it began in 2012. Annual growth through June was 0.6%, the lowest on record. The Reserve Bank’s monetary tightening and weaker economic growth have reduced demand for new homes, leading to falling house prices and reduced consumer confidence. On 10 July, 2024 the Reserve Bank of New Zealand kept the Official Cash Rate at 5.5%, noting that high borrowing costs are curbing demand and inflation. CoreLogic Chief Property Economist Kelvin Davidson attributed the cost decline to reduced workloads in the construction sector and a slowdown in the growth of average hourly wage rates. Stable economic conditions and lower interest rates in 2025 are expected to revive house-building activity.

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)