ASEAN
ASEAN foreign ministers and external partners to meet this week
(24 July 2024) Southeast Asian foreign ministers are meeting in Vientiane, Lao PDR, to address regional instability, with a focus on Myanmar’s civil unrest and South China Sea tensions. The main ASEAN ministerial meeting is scheduled for 25 July, 2024, followed by extended meetings with key partners like China, Japan, and the U.S. through 27 July. The gatherings aim to enhance ASEAN community building, connectivity, and resilience. Indonesia, Lao PDR, and Malaysia previously held a “troika” consultation on the five-point consensus to address the Myanmar conflict. ASEAN is also resuming talks on a maritime code of conduct, with the Philippines advocating for stronger statements on the South China Sea situation. A meeting between ASEAN and China is set for 26 July, followed by the ASEAN Regional Forum on 27 July, which includes North Korea, the U.S., and other global powers.

THE PHILIPPINES
Ban on online casinos causes significant drop in property stocks
(23 July 2024) Philippine President Ferdinand Marcos Jr.’s order to ban online casinos targeting Chinese bettors caused a significant drop in property stocks, with the property index falling by up to 2.6%, the largest decline in a month. Major developers such as DoubleDragon Corp, SM Prime Holdings Inc, Filinvest Land Inc, Ayala Land Inc, Megaworld Corp, and Robinsons Land Corp saw declines of more than 2%, with DoubleDragon Corp falling as much as 11%. The ban on Philippine offshore gambling operators (Pogos), set to take effect by the end of 2024, follows concerns about crimes like money laundering and human trafficking. Pogos account for 11% of the total gross demand for commercial office space, down from 25% in 2019. SM Prime’s CFO John Ong stated that the company anticipates minimal impact, as Pogos currently occupy 1-2% of its leasable office space, compared to 8% pre-pandemic.

THAILAND
USD 14 billion digital wallet scheme registration set for 01 August, 2024
(24 July 2024) Thailand’s ruling party is advancing its digital wallet stimulus plan, allowing registration for the THB 10,000 (USD 277) handout from 01 August through a smartphone app, Tangrat, until 15 September. Eligibility criteria include being at least 16 years old by 15 September, having no criminal record, earning less than THB 840,000 annually, and holding less than THB 500,000 in bank deposits. The Finance Ministry estimates 40 to 50 million registrations, aiming for a fourth-quarter distribution. Financing the THB 500 billion (USD 14 billion) program will come from the 2024 and 2025 budgets. The stimulus is intended to address low incomes, with spending restricted to government-registered stores within recipients’ voting districts, excluding items like alcohol and electronics. The announcement follows cabinet approval of subsidies on electricity and diesel to reduce living costs. Critics argue the scheme offers only a temporary economic boost, with economic growth forecasts lowered to 2.6% in 2024 and 3% in 2025.

INDONESIA
Indonesia aiming to reduce Chinese dominance in nickel mining and processing
(26 July 2024) Indonesia is aiming to reduce Chinese investment in new nickel mining and processing projects to qualify for US tax breaks under President Biden’s Inflation Reduction Act (IRA), which excludes tax credits for electric vehicles containing critical minerals sourced from entities with significant Chinese ownership. Indonesia, the world’s largest nickel supplier, has received substantial Chinese investment in recent years. The government and industry are working to structure new nickel investments with Chinese companies as minority shareholders to meet IRA requirements and are negotiating a limited trade agreement with the US focused on critical minerals. This effort is driven by pressure from potential customers in South Korea and Japan and involves discussions on new smelter investments, including a USD 700 million project with a Chinese minority stake. Despite efforts, Chinese companies resist restrictions, and the dominance of Chinese-owned producers in Indonesia’s nickel output poses a challenge. Indonesia’s share of global refined nickel production is expected to grow significantly. Talks between the US and Indonesia on a critical minerals agreement have shown limited progress, with US lawmakers expressing concerns over Chinese involvement and environmental impacts.

MALAYSIA, SINGAPORE
Singaporean businesses in Malaysia more optimistic about Malaysia’s political stability
(26 July 2024) Racer Technology, a Singaporean manufacturing firm, has operated in Malaysia’s Johor Bahru for nearly 20 years, navigating political instabilities that influenced its business decisions. Racer Technology’s CEO highlighted the need for diversification and backup plans during uncertain political periods, noting a cautious approach and occasional scaling back of operations. Currently optimistic about current conditions under Prime Minister Anwar Ibrahim, Koh anticipates support for foreign investors and the viability of the Johor-Singapore Special Economic Zone (SEZ), formalised through a January 2024 Memorandum of Understanding (MOU) between Singapore and Malaysia. The MOU aims to enhance economic cooperation, increase cross-border flow, and develop a comprehensive agreement. Despite initial scepticism, concrete steps like QR-code immigration clearance have bolstered business confidence. Businesses remain cautiously optimistic, though concerns about skilled labour shortages persist. Johor’s government plans a talent development council to address this issue.

SINGAPORE
Core inflation deaccelerates to 2.9% in June 2024 from 3% in Ma
(23 July 2024) Singapore’s core inflation rate decelerated to 2.9% in June 2024, down from 3% in May, reaching a level last seen in March 2022, according to the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry. The all-items inflation also slowed to 2.4% from 3.1% in May, driven by reduced gains in private transport and healthcare costs. Month-on-month, the headline inflation measure fell 0.2% compared to a 0.7% increase in the previous month. This deceleration provides the central bank with room to maintain supportive monetary settings for economic growth amid rising geopolitical tensions. The MAS, expected to review monetary policy on 26 June, is likely to keep the local dollar appreciating to mitigate imported inflation. The authority anticipates the economy to grow closer to its potential rate of 2%-3%, with the latest assessments of inflation and growth to be provided at the upcoming quarterly decision on Friday.

VIET NAM, UNITED STATES
US postphones decision on upgrading Viet Nam to market economy status
(25 July 2024) The US Commerce Department has postponed its decision on upgrading Viet Nam to market economy status until early August due to IT disruptions caused by a CrowdStrike software bug. Originally scheduled for 26 July, the decision, now expected by 2 August, is significant as it could reduce anti-dumping duties on Vietnamese imports. The upgrade is supported by some business groups but opposed by US steelmakers, shrimpers, and honey farmers. The delay aligns with the state funeral of Vietnam’s Communist Party leader Nguyen Phu Trong, avoiding potential diplomatic tensions. The US is balancing its strategic interests with Viet Nam against domestic industry concerns, particularly with the upcoming presidential election. The review’s outcome will influence US-Viet Nam relations, particularly amid rising competition with China. Viet Nam argues that its economic reforms justify market economy status, while opponents claim it still operates under significant state control.

RCEP Monitor

SOUTH KOREA
South Korea’s economy contracts by 0.2% in second quarter of 2024
(25 July 2024) South Korea’s economy contracted by 0.2% in the second quarter, marking its first quarterly decline since late 2022. Gross domestic income fell by 1.3%. In contrast, the economy had grown by 1.3% in the first quarter. Export growth, driven by automobiles and chemical products, increased by 0.9%, while private consumption decreased by 0.2% and government consumption rose by 0.7%. Exports in the first half of the year grew by 9.1%, with semiconductor shipments up 52.2% and hybrid vehicle exports rising 19.5%. However, domestic conditions remain weak, with rising loan delinquency rates and declining retail sales, equipment investment, and construction investment. The number of business bankruptcies increased to 987 in the first half of the year.

JAPAN
Nikkei average closes at three-month low as yen appreciates
(25 July 2024) The Nikkei average fell 3.28% to 37,869.51 on 25 July, 2024, its lowest close since 25 April, marking its biggest daily decline in three years. The broader Topix index dropped 2.98% to 2,709.86. The Nikkei’s losing streak extended to seven days, its longest since October 2021. The yen strengthened to its highest level against the dollar in 2.5 months and reached multi-month highs against other currencies ahead of next week’s Bank of Japan (BOJ) meeting, impacting exporter shares. It has been noted that the yen’s appreciation and concerns over a U.S. economic slowdown affected investor sentiment. The yen’s rally, driven by Japan’s intervention, hedge fund actions, and carry trade unwinding, saw it rise 1% to the JPY 152 range against the dollar. Decisions at the upcoming BOJ and Federal Reserve meetings could determine if this is a turning point. Around 90% of BOJ watchers anticipate a potential rate hike on 31 July, despite it not being the base-case scenario, while the Fed faces increasing pressure to cut rates.

AUSTRALIA
Australian regulators to step up focus on private markets over next 12 months
(25 July 2024) The Australian Securities and Investments Commission (Asic) has established a specialised unit to engage with private markets over the next 12 months, addressing ongoing concerns regarding valuations. The chairman stated that private markets are now a top five priority for Asic, with a focus on ensuring a level playing field with public markets, preventing misconduct, conflicts of interest, poor valuation practices, and investor misinformation. The regulator aims to enhance transparency in private markets, which currently lack the openness of public markets. This initiative comes as asset valuations and liquidity management practices are scrutinised due to the growing holdings of unlisted assets by money management firms. The issue is particularly significant in Australia, which boasts the world’s fastest-growing retirement savings pool, now worth AUD 3.9 trillion (USD 2.6 trillion). Asic and the Australian Prudential Regulation Authority (Apra) oversee this sector, with Apra previously expressing concerns over the frequency of valuation disclosures for private assets.