CARI Captures Issue 730: China proposes new trade MoU with Malaysia in wake of US trade agreement

MALAYSIA
Improving fiscal conditions see increased foreign interest in Malaysian bond market
(04 December 2025) Malaysia’s bond market is attracting increased foreign interest, with global funds purchasing about USD 1.3 billion in corporate and government bonds in November, the largest monthly inflow since May. Citigroup, Fidelity International and State Street Investment Management have highlighted improving fiscal conditions, moderating inflation, a strengthening ringgit and expectations of export recovery as key supports. A Bloomberg index shows Malaysian bonds have returned about 14% this year for dollar-based investors, while equities saw USD 271 million in outflows in November, the ninth month of withdrawals this year. The ringgit is near its strongest level against the dollar since 2021, boosting unhedged foreign investor returns, and potential US rate cuts in December may add further support. Fiscal discipline remains a driver, with the 2025 deficit projected at 3.5%–3.6% of GDP versus a 3.8% target, partly due to possible cancellation of year-end bond auctions. The 2026 deficit target is 3.5%, and S&P Global Ratings notes the government has consistently met fiscal goals. Maybank projects bond returns of up to 5% in 2026 after a 5.4% gain so far this year. Real yields remain elevated, with October inflation at 1.3% lifting real rates to 145 basis points, nearly one standard deviation above the five-year average. Fidelity expects Malaysia to be a “rising star” in regional local currency bonds in 2026 due to strong domestic investment and a stable policy environment.

THE PHILIPPINES
Inflation slows to 1.5% in November 2025, below consensus estimate of 1.7%
(05 December 2025) Philippine inflation slowed to 1.5% in November, below the 1.7% consensus estimate and marking a ninth consecutive month under the central bank’s 2%–4% target. The governor of the Bangko Sentral ng Pilipinas indicated that monetary authorities may consider another benchmark rate cut at the 11 December meeting, with inflation expectations described as anchored. The current graft investigations involving flood infrastructure has weakened consumer demand and investor sentiment, contributing to third-quarter economic growth falling to a four-year low. The central bank has reduced its policy rate by 175 basis points since August last year, bringing the overnight reverse repurchase rate to 4.75%, its lowest level since September 2022.

INDONESIA
Indonesia’s 25 special economic zones (SEZs) just 1% of Malaysia’s in terms of land size
(02 December 2025) Indonesia’s Secretary of the Coordinating Ministry for Economic Affairs reported that the country’s 25 special economic zones (SEZs) cover a combined 20,900 hectares, significantly smaller than Malaysia’s 2.1 million hectares of SEZ land. A single Johor Bahru zone spans over 350,000 hectares, making it about 18 times larger than all Indonesian SEZs combined. The secretary said Indonesian SEZ utility costs for electricity, water and gas remain less competitive than those in Malaysia, and noted that Batam continues to lag behind Johor Bahru due to higher operating costs and weaker infrastructure. He said these disparities should prompt a comprehensive review of Indonesia’s SEZ framework, including spatial planning, infrastructure readiness and investment-attraction strategies.

INDONESIA
Indonesia to allocate USD 1 billion to BRICS-led New Development Bank
(02 December 2025) Indonesia will allocate USD 1 billion to the BRICS-led New Development Bank, with the Coordinating Economic Ministry stating that the contribution is intended to support sustainable development projects. Indonesia formally joined BRICS earlier this year as President Prabowo Subianto sought broader market access amid US tariff pressures. President Prabowo is also pursuing a higher international profile within a non-aligned foreign policy framework. Prabowo confirmed Indonesia’s plan to join the New Development Bank in March following discussions with the president of the bank in Jakarta. The BRICS founders — Brazil, Russia, India, China and South Africa — hold 94% of the bank’s subscribed shares, with Algeria, Bangladesh, Egypt and the UAE holding the balance. Up to now, the founders have subscribed USD 50 billion in paid-in and callable capital.

VIET NAM
Viet Nam’s data centre market experiencing rapid expansion
(05 December 2025) Viet Nam’s data centre market is experiencing rapid expansion, driven by rising Generative AI demand and the country’s broader digital transformation, with forecasts indicating that 70% of global data centre processing from 2023–2030 will be AI-related and that Asia-Pacific will account for 45–55GW of global demand by 2028. Increasing AI workloads are pushing demand for higher rack density and enhanced cooling, accelerating a shift toward large-scale and hyperscale colocation models above 5MW. Data centres have become the second most preferred alternative asset class in the CBRE Asia-Pacific Investor Intentions Survey 2025. Vietnam’s operating capacity of 104MW is projected to rise by 5.6 times from 2030 onwards, supported by strong domestic digital demand. CBRE Vietnam reported construction costs of around USD 7 million per MW, roughly 50% below costs in markets such as Tokyo and Singapore, creating competitive advantages as hyperscale demand accelerates. CBRE noted that investors should prioritise joint ventures or mergers and acquisitions to manage risks linked to power supply constraints and project deployment timelines and to capture Vietnam’s projected sixfold market growth over the next decade.

VIET NAM
Viet Nam set for largest coffee crop in four years despite rain-related harvest delays
(02 December 2025) Vietnam is set for its largest coffee crop in four years, with 2025–26 production expected to rise 10% from the previous season despite rain-related harvest delays, according to the chairman of the Vietnam Coffee and Cocoa Association, who warned that further rainfall could affect bean quality. Exports of robusta are projected to increase about 7% to 1.6 million tonnes, while total output of arabica and robusta is estimated at 1.9 million tonnes, Simexco Daklak stated, noting that low inventories in consuming countries are boosting demand for Vietnamese shipments, though higher domestic consumption may limit exports. Storms and flooding in key provinces such as Dak Lak and Gia Lai raised concerns over crop damage, but farmers have completed at least 10% of the harvest and quality impacts appear limited to under 3% of production. Improved drying technology is supporting quality, and Simexco’s output is expected to increase 10% to 132,000 tonnes, with Vinh Hiep Co. forecasting similar gains. Simexco Daklak highlighted uncertainty over prices due to weather risks, unpredictable tariffs and low inventories, even as robusta prices remain at record highs.