VIET NAM
Viet Nam’s economy grew by 7.4% year-on-year in Q3 2024
(06 October 2024) Vietnam’s economy grew by 7.4% in Q3 2024 compared to the same period last year, surpassing the previous quarter’s 6.93%. The General Statistics Office attributed the growth to a 15.8% rise in exports, despite Typhoon Yagi’s impact, which caused factory activity to contract in September and hit agriculture, which grew by 2.58% versus 3.34% in Q2. The typhoon, which struck on 7 September, caused USD 3 billion in damages. Despite these disruptions, Vietnam’s GDP grew 6.82% in the first nine months of 2024, close to its pre-COVID-19 growth of 7.3%. However, VinaCapital warned that slowing U.S. demand, driven by the Federal Reserve’s recent rate cut, may reduce exports of goods like laptops and mobile phones. Electronics exports, which rose 20.6% in Q3, continue to play a crucial role in the country’s growth. The government is prioritising collaboration with global semiconductor and AI partners to strengthen its high-tech sector.

MALAYSIA
Stronger ringgit and softer oil prices present opportunity for government to remove petrol subsidies
(08 October 2024) Malaysia’s stronger ringgit, which appreciated over 14% against the US dollar in Q3 2024 and 8% year-to-date, along with softer oil prices, presents an opportunity for the government to remove petrol subsidies, particularly for RON95. Analysts suggest that subsidy rationalisation could reduce the government’s annual fuel subsidy burden of MYR 15-20 billion. Socio-Economic Research Centre’s Lee Heng Guie and Sunway University’s Yeah Kim Leng highlight that the current environment would result in a manageable 24% rise in RON95 prices to RM2.55 per litre, or lower if the ringgit strengthens further. Despite public dissatisfaction following targeted diesel subsidy cuts in June, inflationary pressures have remained subdued, and UOB maintains a 2024 inflation forecast of 2%. With Prime Minister Anwar Ibrahim’s upcoming 2025 budget announcement, analysts see this as a politically viable time to implement these reforms.

MALAYSIA
Malaysia and UAE finalize Comprehensive Economic Partnership Agreement
(10 October 2024) Malaysia and the United Arab Emirates (UAE) have finalised a Comprehensive Economic Partnership Agreement (CEPA), aimed at reducing tariffs, removing trade barriers, and fostering private-sector collaboration to boost investments. This marks Malaysia’s first free trade agreement with a Gulf Cooperation Council (GCC) nation. Key benefits include zero import duties for Malaysian exports such as electronics, machinery, jewellery, and palm oil. The agreement positions Malaysia as a gateway for UAE companies to access ASEAN markets, particularly benefiting small and medium enterprises (SMEs) through regional integration. Bilateral non-oil trade between the two nations reached USD 4.9 billion in 2023, and USD 2.5 billion in the first half of 2024, a 7% increase from the previous year. The UAE, Malaysia’s second-largest Arab trade partner, aims to elevate its non-oil foreign trade to USD 1 trillion, with the CEPA playing a key role in strengthening ties with Southeast Asia.

INDONESIA
Bank Indonesia intervenes to support rupiah following slump 
(07 October 2024) Indonesia’s central bank, Bank Indonesia (BI), is intervening in the spot, domestic non-deliverable forwards, and bond markets to support the rupiah, which is on its longest losing streak since 2023. Edi Susianto, executive director for monetary management, attributed the rupiah’s 1.3% decline to external factors, including global market developments, escalating tensions in the Middle East, and stronger-than-expected U.S. economic data. The rupiah reached 15,693 per dollar, following an 8% rally in Q3 based on expectations of further U.S. Federal Reserve rate cuts. BI’s foreign-exchange reserves, which stood at USD 149.9 billion in September, are sufficient to cover 6.4 months of imports and external debt obligations, providing the bank with resources to stabilise the currency. Market expectations now suggest BI may hold its policy rate in its upcoming meeting on 16 October, following a surprise rate cut in September.

INDONESIA, SINGAPORE
Indonesia introduces visa-free entry for Singapore permanent residents
(08 October 2024) Indonesia has introduced visa-free entry for Singapore permanent residents to visit Batam, Bintan, and the Karimun Islands, with the aim of boosting tourism and investment in these regional economic zones. The new policy, announced by Indonesia’s Director General of Immigration, allows visitors to stay up to four days and applies to several ports in the Riau region. This visa-free option is distinct from the broader ASEAN visa-free policy and targets Singapore’s 545,000 permanent residents. The initiative is part of Indonesia’s broader efforts, which include “second home” and golden visas, to attract leisure and business travellers, particularly to key areas like Nongsa Digital Park and Bintan Resort, which are important hubs for tourism and the digital economy.

THAILAND
Finance Ministry presses Bank of Thailand to lower rates to weaken baht
(09 October 2024) Thailand’s finance ministry is pressing the Bank of Thailand (BOT) to lower interest rates to support economic growth and weaken the baht, currently at 33.39 per US dollar. Thailand’s Deputy Finance Minister indicated a possible rate cut of 25 basis points, potentially this or the next meeting, to bring the baht closer to 34.5 per US dollar. Prime Minister Paetongtarn Shinawatra’s administration is prioritising economic growth, targeting a rate cut to address low inflation and weak GDP growth, which has averaged less than 2% annually. High household debt, however, is a factor in BOT’s reluctance to reduce rates, with the bank considering the current 2.5% rate “neutral”. The government is also weighing measures to support economic growth, such as tax incentives and soft loans for households, and adjusting the 2025 inflation target to 1.5%-3.5%. Efforts to influence BOT policy include potentially appointing Kittiratt Na-Ranong as BOT chairman, despite warnings from former BOT Governor Tarisa Watanagase about risks to the economy.

THE PHILIPPINES
Philippines’ sovereign bonds expected to continue gaining from falling rice prices
(10 October 2024) Philippine sovereign bonds are expected to continue gaining as falling rice prices reduce inflation, bolstering the case for more interest rate cuts by Bangko Sentral ng Pilipinas (BSP). Inflation in September reached a four-year low, aided by India’s easing of rice export restrictions, with HSBC identifying the Philippines as the primary beneficiary due to rice comprising 9% of its inflation basket. BSP began its easing cycle in August with a 25-basis-point rate cut, followed by a 250-basis-point reduction in banks’ reserve requirements, effective from 25 October. Further rate cuts are anticipated, with BSP Governor Eli Remolona signalling a 25-basis-point cut at the 16 October meeting, potentially followed by another in December. However, a larger reduction could occur after Finance Secretary Ralph Recto supported a half-point cut. Analysts expect 10-year bond yields to decline to 5.5% within six months, down from the current 5.74%. 

RCEP Monitor

CHINA, AUSTRALIA
Australia to resume rock lobster exports to China by end-2024
(10 October 2024) Australia will resume rock lobster exports to China by the end of 2024, marking the end of a nearly four-year ban that halted a AUD 700 million trade. Australian Prime Minister Anthony Albanese announced the agreement after a meeting with Chinese Premier Li Qiang at the ASEAN summit. Before the 2020 ban, over 90% of Australia’s rock lobsters were exported to China, but trade plummeted following sanctions linked to political tensions. The lifting of the ban is part of broader efforts to stabilise Australia-China relations, which have seen the removal of other trade barriers on products like wine and beef. Andrew Ferguson, managing director of a South Australian seafood company that relied on China for 98% of its lobster exports, expressed relief, noting the severe impact of the ban on his business. He emphasised the need to diversify markets moving forward, as the ban had forced many producers to exit the industry. The reopening of the Chinese market is expected to significantly benefit Australian exporters during the upcoming Lunar New Year season.

CHINA
China’s stock market rally slows after officials hold off on further stimulus measures
(09 October 2024) China’s stock market rally slowed after the National Development and Reform Commission (NDRC) refrained from announcing additional stimulus measures. The CSI 300 index rose 10.8% but closed 5.9% higher. Hong Kong’s Hang Seng index dropped 9.4%, and the Hang Seng Tech index fell 12.8%, as investors shifted funds to mainland markets. Analysts had anticipated more fiscal spending alongside existing monetary stimulus, which had contributed to a 33% rise in the CSI 300 over the past month. The NDRC Chair reaffirmed confidence in China achieving its 5% GDP growth target and noted plans to issue ultra-long-dated sovereign bonds in 2025. Industrial commodities also saw declines, with Brent crude falling 5.4% and copper dropping 1.7%. China recorded 765 million domestic trips during its Golden Week holiday, contributing RMB 700.8 billion in travel spending.

NEW ZEALAND
Reserve Bank of New Zealand cuts official cash rate by 50 basis points
(09 October 2024) The Reserve Bank of New Zealand (RBNZ) cut its official cash rate (OCR) by 50 basis points to 4.75%, marking the second consecutive reduction in its easing cycle. Despite inflation returning to the target range of 1%-3%, the central bank maintained that the current policy stance remains restrictive. The kiwi dollar dropped 0.9% to USD 0.6084 following the decision, while swap rates indicated further expected rate cuts. The RBNZ minutes indicated inflation is converging towards the 2% midpoint, and the economy is experiencing excess capacity, prompting the adjustment in policy. Economists anticipate further easing, with Citi projecting a 75 basis points cut at the November meeting. The central bank also warned of potential risks from the ongoing Middle East conflict and slowing growth in the US and China. ANZ and ASB economists highlighted the continued restrictive stance, despite the recent cuts.