MALAYSIA
Malaysia maintains overnight policy rate at 3%, citing continued economic support  
(05 September 2024) Malaysia’s central bank, Bank Negara Malaysia (BNM), maintained its overnight policy rate at 3%, in line with predictions, citing continued economic support. The central bank is optimistic about growth, inflation, and the ringgit, despite potential risks from weaker external demand and commodity production. BNM forecasts inflation to remain below 3%, although future domestic policy changes could affect this outlook. The ringgit, which has rebounded from a 26-year low, is expected to remain stable due to positive economic prospects and structural reforms. BNM emphasised caution regarding future rate adjustments, despite global trends of easing monetary policy, and signalled no changes to the rate through 2025.

SINGAPORE
Singapore dollar reaches strongest level against US dollar since 2014 
(05 September 2024) The Singapore dollar has reached its strongest level against the US dollar since 2014, driven by Singapore’s monetary policy that focuses on exchange rate management to combat inflation. The Singapore dollar is also nearing record highs against currencies like the Indonesian rupiah and Japanese yen. While businesses in sectors such as logistics, transportation, banking, and insurance are optimistic, others like hotels and restaurants are more concerned, particularly with Singaporeans spending abroad due to favourable exchange rates. The Monetary Authority of Singapore (MAS) maintains the currency within a set range, limiting extreme fluctuations, with the Singapore dollar’s rise being 16 cents from its pandemic low. Currency strength has led to increased transfers into US dollars, with a 364% rise from June to August year-on-year. Exporters face challenges as the strong currency could affect competitiveness. 

INDONESIA
Middle class contracts from 21.4% of population in 2019 to 17.1% in 2024
(06 September 2024) Indonesia’s middle class has contracted from 21.4% of the population in 2019 to 17.1% in 2024, with 9.5 million fewer people in this category, according to the Central Statistics Agency (BPS). The proportion of the aspiring middle class slightly increased to 49.2%, while the vulnerable population rose to 24.2%. Rising interest rates, deindustrialisation, and job losses, particularly during the pandemic, have driven this shift. Economic growth remains strong at over 5%, but inflation, currently at 2.12%, has heavily impacted middle-class spending, particularly on food (41.67%) and housing (28.52%). Economists warn that government policies, such as VAT increases and housing subsidies for the lower classes, may further strain middle-class spending power. Despite this, BPS expects recovery, while the government recognises the middle class’s critical role in driving economic consumption.

THAILAND
Thailand’s Ministry of Foreign Affairs to introduce compulsory Electronic Travel Authorization (ETA) for visa-exempt foreigners
(05 September 2024) Thailand’s Ministry of Foreign Affairs is set to introduce a compulsory Electronic Travel Authorization (ETA) for visa-exempt foreigners entering the country by air, land, or sea, with phased implementation scheduled between December 2024 and June 2025. The ETA, expected to be free, will require applications through an online portal, with email confirmations typically issued within 24 hours. While specific requirements are yet to be published, applicants may need to provide an accommodation address and proof of onward travel. The system aims to enhance security by conducting computerized checks on passport authenticity, criminal records, and Interpol notices, facilitating entry through electronic gates using a QR code. There is uncertainty regarding whether the ETA will limit the number of 60-day visa-exempt entries, potentially affecting individuals who currently extend stays indefinitely via border runs. The ETA will not apply to diplomats but appears to offer no exemption for tourists over 70. Concerns have been raised about potential links between the ETA and tax residency status for long-term visitors remitting funds into Thailand. The Ministry has yet to release comprehensive guidelines, prompting calls for detailed information well ahead of the rollout.

THAILAND
Thailand considering legalisation of casinos to boost tourism and economic growth
(01 September 2024) Thailand is considering the legalisation of casinos to boost tourism and economic growth, with a draft bill expected to be passed by the end of the decade. The proposed casinos could generate THB 187 billion (USD 5.5 billion) in revenues, equivalent to 1% of the country’s GDP. Prime Minister Srettha Thavisin initiated the drafting process, and despite leadership changes, the plan is likely to continue. Potential casino locations include the Eastern Economic Corridor and tourist hotspots like Phuket and Pattaya, with a projected USD 5 billion capital expenditure for the Pattaya project. Casinos are expected to follow an integrated resort model similar to Singapore’s, offering entertainment beyond gambling. Thai citizens may be required to pay a THB 5,000 (USD 147) entrance fee, while admission for foreigners would be free. 

BRUNEI DARUSSALAM, INDIA
Brunei Darussalam and India agree to elevate ties to Enhanced Partnership
(05 September 2024) Brunei Darussalam and India have agreed to elevate their bilateral relationship to an “Enhanced Partnership” following talks between Sultan Haji Hassanal Bolkiah and Indian Prime Minister Narendra Modi in Bandar Seri Begawan. The joint statement highlighted commitments to strengthening cooperation in defence, trade, investment, food security, energy, and technology. They also pledged to uphold peace, maritime security, and respect for international law. Both leaders agreed to collaborate on ICT, cyber security, renewable energy, and combating terrorism. They reiterated their commitment to enhancing the ASEAN-India Comprehensive Strategic Partnership and addressing climate change, with Brunei appreciating India’s support for hosting the ASEAN Centre for Climate Change.

LAO PDR
Lao PDR  prepares to connect with Korea through direct flights from Luang Prabang
(06 September 2024) The Korea Support Programme (KSP) aims to improve Luang Prabang International Airport’s airspace and flight procedures, with the goal of establishing direct flights from the Republic of Korea to Lao PDR. The project, funded by Korea’s Ministry of Economy and Finance and executed by KOTRA, seeks to enhance Lao PDR’s aviation infrastructure to meet International Civil Aviation Organization (ICAO) standards, boost tourism, and support economic recovery. During the final reporting seminar in Vientiane, Korean and Lao officials discussed the project’s proposed airspace redesign, updated flight procedures, and a conceptual airport design. The project also includes further design work and training for Lao airspace managers. Public-Private Partnerships (PPP) were highlighted as a means to finance infrastructure improvements. The project is expected to enhance air transport safety, attract Korean airlines, and strengthen economic ties between the two countries, particularly in tourism.

RCEP Monitor

CHINA
China’s wealthy shift capital abroad to pursue business opportunities
(05 September 2024) China’s wealthy are increasingly shifting capital abroad to pursue business opportunities, rather than solely for investment returns, according to asset managers. A significant trend has emerged this year, with Chinese family offices seeking to acquire smaller businesses in Japan, driven by slower domestic growth and a weaker yen. From January to July 2023, mainland China’s non-financial direct overseas investments rose 16.2% to USD 83.55 billion, covering over 6,100 businesses globally. Wealth management firm Noah Holdings reported a 23% increase in overseas registered clients, with assets under management abroad rising nearly 15%, while domestic assets declined by over 6%. The trend reflects affluent Chinese entrepreneurs’ growing interest in globalising their businesses, using markets such as Hong Kong, Singapore, and Japan as gateways for expansion.

AUSTRALIA
Australia’s economy records weakest performance in over 30 years
(04 September 2024) Australia’s economy recorded its weakest performance in over 30 years, excluding the early COVID-19 period. GDP grew by only 0.2% in the April-June quarter and by 1% year-on-year, marking the slowest annual growth since 1991-92, according to the Australian Bureau of Statistics. On a per capita basis, GDP declined by 0.4% quarterly and 1.5% annually, reflecting the impact of record immigration. The economy is under pressure from 13 consecutive interest rate hikes by the Reserve Bank of Australia between May 2022 and November 2023, aimed at controlling inflation, which remains above the 2-3% target. Rising dissatisfaction with economic conditions has contributed to declining support for Prime Minister Anthony Albanese, with only 41% of respondents approving of his performance in a recent poll, while 54% disapproved.

NEW ZEALAND
New Zealand to raise entry fees for international tourists starting 01 October, 2024  
(03 September 2024) New Zealand will raise entry fees for international tourists from NZD 35 (USD 22) to NZD 100 (USD 62) starting 01 October, 2024, to help cover the costs of public services and environmental upkeep. The government aims to address the financial strain of tourism on local communities and infrastructure, with international visitors spending over USD 11 billion in the year ending March 2024. However, the New Zealand Tourism Industry Association has expressed concerns that the fee hike, combined with increased regional airport taxes, could further hinder the country’s post-pandemic tourism recovery, with industry profits still 5% below pre-pandemic levels.

THAILAND
Thailand’s proposed 90-kilometer ‘Land Bridge’ faces fresh roadblocks
(28 August 2024) Thailand’s ambitious plan to create a 90-kilometre highway-and-rail link across the Malay Peninsula, aimed at reducing reliance on the congested Strait of Malacca, faces significant challenges. The project, which includes two new ports in Ranong and Chumphon provinces and a special economic zone, has sparked local opposition due to environmental concerns, particularly regarding the impact on Koh Phayam’s coral reefs. Despite these concerns, the Thai government is pushing ahead, estimating the ‘Land Bridge’ will cut shipping times by four days and reduce transportation costs by 15%, with Ranong’s port projected to handle 20 million TEUs annually by 2036. However, investor interest remains tepid, with no firm bids due to the project’s estimated THB trillion cost and uncertainties about financial returns. Regional competition from Malaysia’s East Coast Rail Link and political instability in Thailand, highlighted by the recent removal of Prime Minister Srettha Thavisin, further complicates the project’s future.

ASEAN
Investor interest in Southeast Asian markets surging due to expectations of US interest rate cut  
(26 August 2024) Investor interest in Southeast Asian markets has surged due to expectations of a U.S. interest rate cut, with stock indices in the region reaching new highs. Indonesia’s Jakarta Composite Index recently hit a record, and Malaysia’s Kuala Lumpur Composite Index reached its highest level since December 2020. The rally is driven by a narrowing rate gap between the U.S. and Southeast Asia, strengthening regional currencies, and higher-than-expected GDP growth in countries like Malaysia, which saw a 5.9% increase in Q2 2023. The MSCI ASEAN Index has risen 6% in August, outperforming the S&P 500. Structural reforms and initiatives in Malaysia, along with increased foreign direct investment in sectors like semiconductors, are boosting investor confidence. Southeast Asia’s growth prospects are robust, with projections indicating an average annual growth rate of 5.1% from 2024-2034, positioning the region as a key beneficiary of shifting global supply chains amid Sino-American tensions.

THAILAND
Ongoing flooding in Northern Thailand results in THB 491 million in losses for tourism sector   
(29 August 2024) Ongoing flooding in Northern Thailand has resulted in significant damage to the tourism sector, with losses estimated at THB 491 million. The floods have led to a reduction of 57,092 visitors and a decline in tourism spending of approximately THB 200 million, affecting the livelihoods of 628 tourism workers. Several tourist attractions have been temporarily closed due to floods and landslides. In response, the Ministry of Tourism and Sports, along with the Tourism Authority of Thailand, has developed a restoration plan that includes special offers from airlines, hotels, and restaurants, as well as promotional campaigns to attract tourists back to the region. Planned events include the Amazing Nan Marathon, Wet Series Music Festival 2024 in Chiang Rai, and an art and culture exhibition in Phrae. Additionally, the government has introduced urgent support measures for flood-affected businesses, including debt payment suspensions and low-interest recovery loans through state banks.

THAILAND
Bank of Thailand reiterates readiness to adjust borrowing costs as needed
(28 August 2024) Thailand’s central bank Governor Sethaput Suthiwartnarueput reiterated the Bank of Thailand’s readiness to adjust borrowing costs as needed while maintaining flexibility in response to unexpected risks. Speaking at a Stock Exchange of Thailand forum, Sethaput highlighted the need for a pragmatic approach to monetary policy, given the current economic challenges, including deteriorating credit quality and a widening gap between consumption and manufacturing growth. Despite maintaining the benchmark interest rate at 2.5% for the fifth consecutive time on 21 August, Sethaput indicated that the central bank remains open to supporting the economy if it weakens further, though it is unlikely to join the global trend towards easing monetary policy just yet. The Thai baht has appreciated nearly 5% this month, influenced by a weaker dollar and rising gold prices.

INDONESIA
Indonesian banks to be required to publish breakdown of lending rates
(27 August 2024) Starting in October 2024, Indonesian banks will be required to publish a detailed breakdown of their lending rates, including margins, under a new regulation issued by the Financial Services Authority (OJK). The regulation aims to increase industry competitiveness, promote lending growth, and prevent excessive charges to borrowers. The OJK stated that the rule is designed to encourage banks to set interest rates more efficiently, supporting economic financing. Indonesian banks currently have the highest net interest margin (NIM) in Southeast Asia, with a NIM of 4.57% as of June 2023. The regulation mandates that banks update clients with detailed rate changes, including costs and margins, and report monthly to the OJK on the risk premium charged. Penalties for inaccurate information can reach up to IDR 15 billion (USD 970,000). Major banks such as Bank Central Asia and Bank Mandiri have indicated they will adjust their lending rates based on market conditions, liquidity, and business strategies.

INDONESIA
President-elect aims to implement mandatory 50% palm oil-based biodiesel blending by 2025
(26 August 2024) Indonesia’s president-elect Prabowo Subianto aims to implement a mandatory 50% palm oil-based biodiesel blending (B50) by early 2025, projecting a reduction in fuel imports by USD 20 billion annually. Currently, the blending level is at 35%, with plans to increase to 40% by January 2025. Although Prabowo is pushing for rapid implementation, Indonesia’s palm oil producers and biofuel experts have expressed concerns about the feasibility, citing the need for further testing and production capacity expansion. Implementing B50 will require an estimated 18 million metric tonnes of crude palm oil, up from 11 million for B35, potentially reducing export volumes. The biodiesel industry also faces challenges related to product quality, particularly regarding sediment formation during storage and transportation, which could necessitate new equipment and extended testing. Experts suggest that full implementation by the end of 2025 is more realistic. The initiative is part of a broader effort to reduce fossil fuel dependency and develop palm-based biofuels, including for aviation.

INDONESIA
Global appetite for Indonesian bonds unaffected by pro-democracy protests
(26 August 2024) Foreign investors purchased USD 610 million worth of Indonesian bonds on Thursday, marking the largest single-day inflow in five years, driven by optimism around a potential Federal Reserve policy shift. Despite pro-democracy protests against a proposed revision of regional election laws, which led to the proposal being scrapped, investor interest remained strong, underscoring the prioritisation of yield-seeking. Indonesia’s 10-year bond yields now offer a premium of approximately 280 basis points over similar-dated U.S. Treasuries, attracting significant inflows, with rupiah bonds receiving USD 2.2 billion month-to-date. Factors such as Indonesia’s target deficit of 2.53% of GDP for 2025, lower currency hedging costs, and expectations of a rate cut by Bank Indonesia next month further support this trend. The 10-year yield closed slightly higher at 6.65% on Thursday, while the rupiah strengthened to its highest level since September, and foreign investors continued to buy Indonesian stocks.

RCEP Monitor

CHINA
Chinese officials dismiss speculations that country’s emissions may have already peaked
(29 August 2024) China’s top energy officials have dismissed speculation that the country’s carbon emissions may have already peaked, emphasizing that achieving the target by 2030 will still require significant effort. Despite a rapid increase in clean energy generation from solar and hydroelectric sources, which has reduced fossil fuel power output, officials highlighted that China’s ongoing development and rising energy demand make the outlook uncertain. The National Energy Administration stressed the need for continued efforts towards carbon neutrality. The clean energy boom, coupled with declining steel and cement production due to a real estate slump, and a reduction in gasoline consumption from the rise of electric vehicles, suggest a potential structural decline in emissions. Chinese officials are considering new targets for the country’s nationally determined contributions under the UN climate process. Last month, China’s solar and wind capacity exceeded 1,200 gigawatts, surpassing the 2030 goal set by President Xi Jinping.

AUSTRALIA
Housing crisis in Australia sees rents rise an annualized rate of 9%, fastest rate since 2008
(26 August 2024) Sydney’s rental market is facing significant challenges, with vacancy rates at 1.7% in the city and 1.3% nationally, leading to intense competition for rental properties. Rents in Australia are rising at an annualised rate of 9%, the fastest since 2008, driven by near-record low vacancy rates and a decade-long 90% increase in property prices. The median house price in Australia’s capital cities was AUD 1.1 million in June, with Sydney being the most expensive at AUD 1.6 million. Many renters are struggling to find affordable housing, often resorting to shared living arrangements. The Commonwealth Bank of Australia noted that the rising costs are delaying family formation, as more people choose to live in shared housing or with relatives. While rental price growth slowed to 0.1% in July, upward pressure remains due to a severe housing shortfall exacerbated by long-term policy decisions, construction constraints, and labour shortages. The Australian government, led by Prime Minister Anthony Albanese, has pledged AUD 32 billion to build 1.2 million homes by 2029, but faces political challenges from both the Greens and the opposition. Build-to-rent developments are being promoted as a solution, though they face high borrowing costs and policy uncertainty. The construction industry also faces significant challenges, with dwelling approvals at a 13-year low, and a need for 90,000 new workers to meet government goals.

JAPAN
Middle-aged workers sees wages rise by 2.7% and 1.0% year-on-year in second quarter of 2024
(29 August 2024) In the second quarter, wages for Japanese workers in their 40s and 50s increased by 2.7% and 1.0% year-on-year, respectively, according to data from Payroll, a Tokyo-based salary accounting service provider. This marks a significant improvement for the “lost generation,” who have faced pay stagnation since entering the workforce during the hiring freeze of the 1990s and 2000s. The wage increase, partly driven by the 5.1% rise negotiated in the spring wage negotiations (shuntō), contrasts with a 0.1% decline for these age groups in the same period last year. Despite these gains, economists remain cautious about sustained wage growth for middle-aged workers, citing the high costs for companies to increase their salaries compared to younger workers, whose wages rose 4.2% (under 30) and 3.6% (in their 30s) in the same quarter. Given the crucial role of middle-age workers in driving economic consumption, experts suggest that enhancing career flexibility and reskilling opportunities is essential for further wage growth. However, the moderate increase in wages is unlikely to significantly boost consumer confidence, and sustained efforts from both the government and companies are necessary to support this demographic.

MALAYSIA, INDIA
Malaysia and India elevate ties to Comprehensive Strategic Partnership
(21 August 2024) India and Malaysia have upgraded their relationship to a comprehensive strategic partnership, formalised during Prime Minister Narendra Modi’s meeting with Malaysian Prime Minister Anwar Ibrahim. The two countries signed nine Memorandums of Understanding (MoUs), including one focused on the welfare of 140,000 Indian workers in Malaysia. Discussions covered countering radicalisation, extremism, and the situation in the South China Sea, with both leaders affirming their commitment to freedom of navigation and peaceful dispute resolution. While terrorism was a key topic, Indian officials did not confirm if the extradition of Islamic preacher Zakir Naik was raised. India also announced a one-time allocation of 200,000 metric tonnes of white rice to Malaysia and highlighted defence cooperation possibilities. Additionally, Malaysia expressed support for India’s bid for permanent membership in the UN Security Council. The MoU on worker recruitment and repatriation includes simplified visa procedures, allowing Indian workers to be employed across all sectors open to foreign workers in Malaysia.

MALAYSIA
Foreign investment into Malaysia rising sharply due to improving growth and strengthening currency  
(22 August 2024) Foreign investment in Malaysia is rising sharply, driven by improving economic growth, political stability, and a strengthening currency. In July, foreign investors injected USD 1.75 billion into Malaysian debt markets, marking the highest inflow in a year. Malaysia’s stock market, represented by the KLCI index, has surged over 12% this year, outpacing the MSCI Southeast Asia index’s 6% rise. The ringgit, Asia’s best-performing currency in 2024, has gained over 5% this year, reaching an 18-month high against the dollar. Foreign ownership of Malaysian bonds has increased to 20%, supported by the currency’s appreciation and attractive bond yields as U.S. interest rates are expected to decrease. The economic momentum is further bolstered by a significant expansion in the second quarter, driven by sectors such as construction, power, and infrastructure. Analysts suggest that Malaysia’s appeal will continue to grow as the U.S. and regional economies cut rates while Malaysia maintains its current rates amid robust growth, which will keep the ringgit steady and make Malaysian bonds attractive.

MALAYSIA
Malaysian bonds exhibit highest correlation in emerging Asia to Treasury rally
(22 August 2024) Emerging Asian bonds have shown increasing sensitivity to U.S. Treasuries, with the 30-day correlation between EM Asia bonds and 10-year U.S. yields rising to around 0.29, nearing a seven-month peak. Malaysian bonds exhibit the highest correlation in the region at 0.53, positioning them as the most likely beneficiaries from anticipated Federal Reserve interest-rate cuts. This correlation surge has coincided with a weaker dollar, attracting foreign investors and boosting local currencies. Malaysian bonds have returned 8.3% to dollar-based investors this year, outperforming regional peers. Other bond markets in the region, including Thailand and South Korea, also show significant correlations with Treasuries. Despite dovish signals from central banks in the region, the growing link to U.S. yields increases the vulnerability of these bonds to potential increases in U.S. yields and a rebound in the dollar, which has recently shown signs of stabilising. 

VIET NAM, THAILAND
Vietnamese EV maker postpones launch of dealership network in Thailand   
(22 August 2024) VinFast Auto Ltd., the Vietnamese electric-vehicle manufacturer, has postponed the launch of its dealership network in Thailand due to a slowdown in passenger car sales in the country. The company stated that it will reassess the timing of its EV sales in Thailand to ensure alignment with its global standards. This decision comes amidst a broader downturn in the global EV market, with major manufacturers like Ford, General Motors, Volkswagen, and Tesla scaling back their ambitions. VinFast recently delayed the opening of its North Carolina factory by three years to 2028, reduced its 2023 sales target from 100,000 to 80,000 units, and has signed agreements with several dealers in Thailand, though no new timeline has been provided. Despite the delay, Thailand remains a key market for VinFast, and the company is continuing its expansion plans in other markets. 

VIET NAM
Tech firm FPT commences construction on USD 174 million AI project in Binh Dinh province  
(21 August 2024) Vietnam’s leading tech firm, FPT, has commenced construction on a USD 174 million artificial intelligence (AI) project in Binh Dinh province, developed in collaboration with FPT City Danang, FPT Investment, and FPT Software. The project spans 93.24 hectares and includes an AI centre focused on research, software production, digital transformation, and cybersecurity, along with an education zone and a supporting urban area. FPT, valued at USD 7.7 billion on Vietnam’s Ho Chi Minh City bourse, generated over USD 2 billion in revenue last year. In April, FPT also announced plans to build a USD 200 million AI factory utilising Nvidia’s technology.

MYANMAR
Rapid depreciation of Myanmar kyat sharply increases prices of essentials  
(21 August 2024) The rapid depreciation of Myanmar’s kyat, which recently plunged to a low of 7,500 to the dollar in the black market, has sharply increased the prices of essentials, including food and medicine, exacerbating the economic hardships faced by ordinary households. Although the kyat has since partially recovered to around 6,000 to the dollar, prices remain elevated, with grocery costs rising from 25,000 kyat to 40,000 kyat per week in some areas. Contributing factors include rising transportation costs due to fuel shortages, disruptions in border trade, and the junta’s alleged currency printing to prop up the kyat. The military’s attempts to stabilise the economy, including the arrest of 56 individuals involved in currency and gold trading, have so far failed to curb inflation. The World Bank reported that poverty is more widespread than at any time in the last six years, with economic growth expected to remain at 1% for the current fiscal year, while household incomes have declined and unemployment has risen. The National Unity Government criticises the junta for lacking a proper economic management plan, attributing the crisis to the regime’s policies. 

SINGAPORE, MALAYSIA
Malaysia and Singapore finalizing agreement to establish special economic zone in Johor state
(22 August 2024) Malaysia and Singapore are finalising an agreement to establish a special economic zone (SEZ) in Johor, Malaysia, aimed at transforming the region into a major trading and transportation hub. The SEZ, covering an area in southern Johor, is expected to attract billions in foreign investments, create 100,000 new jobs, and contribute approximately USD 26 billion annually to Malaysia’s economy by 2030. Tech companies such as Nvidia and GDS Holdings are already investing in data centres in the area, which will likely benefit from the SEZ. The agreement could also address Singapore’s land constraints and provide mutual economic benefits. However, challenges remain, including historical political tensions, differing tax rates, and potential implementation issues. The SEZ is supported by Malaysia’s King Sultan Ibrahim Iskandar, a pro-business ruler with significant investments in Johor. Both countries are expected to finalise the agreement by the end of the year, with updates anticipated during the upcoming meeting between Singapore Prime Minister Lawrence Wong and Malaysia Prime Minister Anwar Ibrahim.

RCEP Monitor

CHINA
Investors increasingly betting on continued strength of China’s bond market
(22 August 2024) Investors are increasingly betting on the continued strength of China’s bond market despite the People’s Bank of China’s (PBoC) efforts to manage long-term government bond yields, which have dropped to around 2.1% for 10-year and 2.3% for 30-year bonds due to weak domestic demand. While foreign investors have reduced their direct holdings in Chinese government bonds, they have increased investments in short-term debt issued by Chinese banks, with overseas holdings of negotiable certificates of deposit rising to over RMB 1 trillion by July, up from RMB 260 billion a year earlier. These investments are enhanced by currency trades that push yields above those of U.S. Treasuries, offering returns in the 6% range in U.S. dollar terms. The PBoC has signaled potential intervention to prevent long-term yields from falling too sharply, aiming to avoid financial instability and maintain a balanced yield curve. Despite these concerns, foreign investors remain attracted to Chinese bonds due to their uncorrelated performance with other global markets and potential for decent returns, particularly as domestic banks continue to buy government bonds in the absence of strong economic growth and consumer demand.

CHINA
China significantly reduces number of permits for new coal-fired power plants by nearly 80%  
(21 August 2024) China significantly reduced the number of permits for new coal-fired power plants by nearly 80% in the first half of 2024, according to a Greenpeace East Asia report. The report also highlighted that China’s combined wind and solar capacity, reaching 11.8 terawatts (TW), surpassed its coal capacity of 11.7 TW for the first time, with renewables accounting for 84.2% of new grid-connected capacity. Despite this, China commissioned 14 new coal plants totalling 10.3 gigawatts (GW) in the first half, marking a 79.3% decrease compared to the same period in 2023. The report suggests that improving grid connectivity is essential to maximize the output of the country’s wind and solar plants. Meanwhile, analysts from the Centre for Research on Energy and Clean Air indicated that China’s carbon emissions may have peaked in 2023, with a 1% year-on-year decline in the second quarter of 2024. China continues to justify coal plant construction for grid stability during peak demand periods, such as during extreme heat events.

AUSTRALIA, SINGAPORE
Australia aims to supply 15% of Singapore’s energy needs through solar energy exports
(21 August 2024) Australia has granted environmental approval for the USD 19 billion Australia-Asia Power Link project, which will involve a 12,000-hectare solar farm in the Northern Territory. The project aims to generate 6GW of renewable energy, with one-third of it transmitted to Singapore via an undersea cable. Once operational in the early 2030s, it is expected to supply up to 15% of Singapore’s energy needs and create 14,300 jobs. The approval includes conditions to protect the greater bilby habitat. SunCable, owned by billionaire Mike Cannon-Brookes, will now proceed to the planning stage with a target Final Investment Decision by 2027. The project still faces regulatory reviews in Singapore and Indonesia. The approval follows a period of uncertainty after SunCable entered voluntary administration in January last year due to a dispute between Cannon-Brookes and Andrew Forrest, but has since been revived. The project highlights Australia’s commitment to renewable energy amidst ongoing political debate over energy sources.

ASEAN
ASEAN Members seek to broaden partnerships through BRICS and OECD memberships 
(12 August 2024) In July, ASEAN hosted a series of meetings in Lao PDR, which included discussions among ASEAN foreign ministers and top diplomats from Japan, the U.S., China, India, and the EU. The meetings underscored ASEAN’s intent to enhance its global diplomatic role. However, three founding ASEAN members—Indonesia, Thailand, and Malaysia—are pursuing different international affiliations. Malaysia applied for BRICS membership following a meeting with Russian Foreign Minister Sergey Lavrov. Indonesia and Thailand applied for OECD membership, with Thailand also seeking BRICS membership. Indonesia’s choice for OECD over BRICS reflects a desire to bolster its investment appeal and continue economic reforms, while Malaysia’s BRICS pursuit aims to diversify economic ties and reduce reliance on the U.S. dollar. Thailand’s dual application represents a strategy to engage with both established and emerging markets. The differing approaches highlight the countries’ distinct strategic priorities and economic standings, with ASEAN’s collective influence facing challenges amid rising global tensions.

MALAYSIA
Economy likely grew by 5.8% year-on-year in Q2 of 2024 
(14 August 2024) Malaysia’s economy likely grew by 5.8% in the second quarter of 2024, marking its fastest expansion since Q4 2022, driven by a strong rebound in exports and increased household consumption, according to a Reuters poll of 20 economists. Exports rose by 9.1% in April, 7.3% in May, and moderated to 1.7% in June year-on-year, contributing to an overall 3.9% growth in the first half of 2024. The economy’s performance aligns with Bank Negara Malaysia’s growth estimate of 4.0% to 5.0% for the year, with expectations that the downturn in technology and electronics exports has bottomed out. Renewed economic ties with China are anticipated to further boost Malaysian exports, and investment trends, particularly foreign direct investment, are being closely monitored for their potential impact on cyclical growth. Economic growth for 2024 is expected to average 4.4%. 

MALAYSIA, INDIA
Malaysia and India to sign multiple agreements during Malaysian PM visit to New Delhi 
(13 August 2024) India and Malaysia are expected to sign multiple agreements during Prime Minister Anwar Ibrahim’s visit to New Delhi on 19 August, 2024, with a key focus on a memorandum of understanding regarding the recruitment, employment, and repatriation of Indian workers. This agreement has gained importance due to past concerns about the treatment of Indian workers in Malaysia, where around 185,000 Indian nationals currently reside. Ibrahim’s visit, his first as prime minister, aims to reset bilateral relations strained by previous political issues, including disputes over India’s internal policies and the presence of controversial preacher Zakir Naik in Malaysia. The discussions will also cover enhancing trade and investment, with potential agreements on accepting India’s Unified Payments Interface (UPI) system and RuPay payment service, as well as trade settlements in domestic currencies. Malaysia ranks as India’s 13th largest trade partner, with bilateral trade amounting to nearly USD 20 billion in 2022-23.

LAO PDR
Lao PDR reports trade deficit of USD 154 million in July
(14 August 2024) In July, Lao PDR reported a trade deficit of USD 154 million, with total trade valued at over USD 1.2 billion. Exports totalled USD 533 million, while imports amounted to USD 687 million. Key export items from Lao PDR included mixed gold, electric equipment, salt, rubber, paper, wasted wood, sugar, cassava flour, copper ore, and cassava. Major imports comprised diesel, mechanical equipment, finished chemical products, land vehicles, electrical appliances, steel, plastic products, gasoline, vehicle spare parts, and beverages. China, Viet Nam, and Thailand were notable export destinations, and the same countries were primary sources of imports for Lao PDR.

THE PHILIPPINES
BSP lowers target interest rate by 25 basis points to 6.25%, first rate cut in nearly four years  
(15 August 2024) The Bangko Sentral ng Pilipinas (BSP) reduced its target interest rate by 25 basis points to 6.25% on Thursday, marking its first rate cut in nearly four years. This decision aligns with forecasts from 13 of 23 economists surveyed by Bloomberg. The BSP Governor indicated that further rate cuts might follow, potentially an additional 25 basis points in October or December. The BSP had previously implemented 450 basis points of tightening to control inflation. Despite a strong GDP growth, domestic demand has shown stress, prompting the rate cut to support consumption. The BSP raised its inflation projection for 2024 to 3.3% from 3.1%, anticipating a decrease in inflation due to lower import tariffs on rice, despite a recent acceleration in inflation to its highest in nine months.

THAILAND
Thai markets expected to face pressure due to removal of Prime Minister
(15 August 2024) Following the removal of Prime Minister Srettha Thavisin by Thailand’s Constitutional Court for an ethics violation, the country’s markets are expected to face ongoing pressure. Analysts are concerned that the transition in leadership may delay crucial policies aimed at enhancing investor confidence. Issues such as elevated household debt and investment attractiveness are unlikely to be addressed promptly until a new government is in place. Additionally, there are uncertainties regarding the implementation of a USD 14 billion cash handout programme. The SET Index, already struggling this year, fell by 0.4% on Wednesday, and the baht declined against regional currencies in early Asian trading.

INDONESIA
New planned capital city Nusantara attracts increased investor interest
(14 August 2024) Indonesia’s planned new capital, Nusantara, is attracting increased investor interest despite previous delays and concerns about its future under incoming President Prabowo Subianto. On Monday, local companies, including Bank Central Asia (BCA), began major projects in Nusantara, collectively investing over IDR 4 trillion (USD 250 million). BCA’s project includes a IDR 75 billion branch office, while other developments include a IDR 1.2 trillion convention centre by Royal Golden Eagle Group, and a IDR 300 billion hotel by Hotel Papua Internasional. Intiland Development plans to invest at least IDR 2.6 trillion in various facilities. So far, private sector commitments total IDR 56.2 trillion across 55 projects, but this is short of the IDR 466 trillion target by 2045. The government is offering long-term land concessions and tax incentives to attract foreign investors. The Nusantara Capital City Authority (OIKN) is discussing nearly USD 2 billion in public-private partnerships, with interest from 475 companies, including foreign firms from China, Singapore, Japan, and Malaysia.

RCEP Monitor

JAPAN
Japan’s economy grows annualized 3.1% in Q2 2024, exceeding 2.1% forecast  
(15 August 2024) In the second quarter, Japan’s economy grew an annualised 3.1%, significantly exceeding the 2.1% forecast and rebounding from a revised 2.3% contraction in the first quarter. This growth was driven by a 1.0% increase in private consumption, surpassing the predicted 0.5% rise and marking its first gain in five quarters. The Bank of Japan (BOJ) is considering further interest rate hikes following last month’s increase, supported by robust economic performance and real wage growth. However, the resignation of Prime Minister Fumio Kishida and potential political instability may delay additional rate hikes. Government officials expect continued economic recovery, buoyed by strong wage negotiations and increased tourism spending. Capital spending rose 0.9%, matching market forecasts, while external demand slightly detracted from growth. The Japanese yen showed little change at 147.38 to the dollar, and the Nikkei index gained 1.01% in response to positive Wall Street trends.

CHINA
Industrial production grows by 5.1% year-on-year in July, slowest rate in four months
(15 August 2024) In July, China’s industrial production grew by 5.1% year on year, the slowest rate in four months, slightly below the 5.2% forecast and a decrease from June’s 5.3% growth. Unemployment increased to 5.2% from 5% in June, marking the first rise since February. The property market remains weak, impacting household consumption and investor confidence, with new house prices down 4.2% and secondhand prices falling 8.8%. Retail sales rose 2.7%, outperforming expectations, while fixed asset investment grew 3.6% year-to-date, below forecasts. Analysts anticipate further easing measures from the government to stimulate the economy, including potential relaxations in housing policies and mortgage rates. Despite incremental measures, the property market’s downturn has led to warnings of a severe slump in steel production and cement output, with declines of 4% and 12.4%, respectively. 

SOUTH KOREA
South Korean retail investors purchase USD 9 billion in US stocks in H1 2024
(14 August 2024) South Korean retail investors are increasingly investing in US stocks, continuing a trend despite recent global market downturns. In the first half of 2024, South Korean “ant” investors purchased USD 9 billion in US stocks, driven by dissatisfaction with local market returns and valuations. Notably, they have significantly reduced their holdings in domestic stocks, selling a record KRW 16.3 trillion (USD 11.9 billion) and contributing to a 1.3% drop in the KOSPI index. In contrast, foreign investment in Korean stocks also increased to a record KRW 27 trillion, but still lags behind the retail investment proportion. The disparity in dividend payments and valuations between South Korean and US companies, with the latter offering higher returns and more robust growth, continues to draw South Korean investors abroad. Government efforts to boost the domestic market, including proposed tax incentives and a “Corporate Value-up Programme,” face challenges due to entrenched issues within family-run conglomerates and limited immediate impact. As of late July, South Korean holdings in US stocks totalled USD 13.6 billion in Tesla, USD 12 billion in Nvidia, and USD 5.1 billion in Apple. Despite a planned capital gains tax, retail investors remain optimistic about long-term gains from US investments.

MALAYSIA
Infineon opens largest power chip plant in Malaysia
(08 August 2024) Infineon has begun production at its largest power chip plant in Kulim, Malaysia, which will become the world’s biggest silicon carbide (SiC) factory within five years. This plant is a significant development for Malaysia’s semiconductor industry. The facility is expected to support demand from sectors such as renewable energy, electric vehicles, and AI data centres. The Malaysian government is actively attracting chip investment, as highlighted by Prime Minister Anwar Ibrahim’s attendance at the inauguration. Infineon plans to invest an additional EUR 5 billion for a second phase of the plant, which has already secured EUR 1 billion in prepayments and EUR 5 billion in design win commitments. Infineon forecasts at least EUR 600 million in revenue from SiC-related solutions for fiscal 2024. The wide-bandgap semiconductor market, crucial for high-power applications, is projected to reach USD 13 billion by 2028, though SiC chips remain more expensive and challenging to produce than silicon-based alternatives. Malaysia’s role in the global semiconductor supply chain is expected to grow, but competition for investment remains intense.

MALAYSIA, THAILAND
Thailand and Malaysia agree to expedite construction of second Sungai Golok-Rantau Panjang bridge
(03 August 2024) Malaysia and Thailand have agreed to expedite the construction of the second Sungai Golok-Rantau Panjang bridge, highlighting their commitment to accelerating regional economic growth. Malaysian Prime Minister Datuk Seri Anwar Ibrahim stated that the bridge, which will connect Narathiwat in southern Thailand and northern Kelantan in Malaysia, is a key project aimed at enhancing economic cooperation between the two countries. Construction is set to begin in April 2024 and is expected to take two years, with hopes to complete it by late 2026, ahead of the initial 2027 timeline. Anwar emphasised the importance of initiating development projects around the bridge to boost local businesses in Kelantan. The project tender involves 10 companies from each country. Additionally, the existing bridge, operational since 1971, will be upgraded following the completion of the new bridge. Anwar praised Thai Prime Minister Srettha Thavisin for his practical approach and commitment to the project, noting that both governments will review a progress report within two weeks to ensure the project proceeds efficiently. 

CAMBODIA
Cambodia initiates construction of USD 1.7 billion 180-kilometre Funan Techo canal
(05 August 2024) Cambodia has initiated construction on the USD 1.7 billion, 180-kilometre Funan Techo canal, funded by China, to connect Phnom Penh with Kep province and provide access to the Gulf of Thailand. The canal, intended to reduce shipping costs and decrease reliance on Vietnamese ports, has raised environmental concerns, particularly regarding its impact on the Mekong River, which supports agriculture and fisheries across six countries. Despite Vietnam’s quiet concerns about the canal’s potential effects on its Mekong Delta rice production and shifting trade routes, Cambodia has dismissed these issues. The canal, expected to be controlled by Cambodian companies with a 51% share, will be constructed by the Chinese state-owned China Road and Bridge Corporation. This project underscores China’s significant influence in Cambodia, which includes numerous Chinese-funded infrastructure projects and nearly 40% of Cambodia’s foreign debt owed to China.

VIET NAM, UNITED STATES
US decides to maintain Viet Nam’s classification as non-market economy
(03 August 2024) The United States has decided to maintain Viet Nam’s classification as a non-market economy, a status it has held since 2002, despite Viet Nam’s request for removal of the designation. The US Commerce Department cited extensive government involvement in Viet Nam’s economy, which it says distorts prices and costs, making them unsuitable for calculating anti-dumping duties. The decision means that the US will continue to use market-based prices from countries with similar economic development to calculate these duties. Viet Nam’s Ministry of Industry and Trade expressed regret over the decision, noting that 72 countries, including Australia, Britain, and Japan, recognise Viet Nam as a market economy. The US remains Viet Nam’s largest export market, with a significant increase in export revenue and foreign direct investment from the US in recent years. Concerns about China potentially using Viet Nam for transshipments and pressure on the Biden administration to maintain a strong foreign policy stance were factors influencing the decision.

INDONESIA
Indonesia inaugurates USD 478 million China-built anode plant for EV batteries 
(07 August 2024) Indonesia’s President Joko Widodo inaugurated a new plant by China’s BTR New Material Group and Singapore’s Stellar Investment, which will produce anode materials for electric vehicle (EV) batteries. The plant, located in Kendal, Central Java, represents a USD 478 million investment in its first phase and will have an annual production capacity of 80,000 metric tons. BTR plans to start construction on a second phase in Q4 2024, aiming to double capacity to 160,000 tons annually with an additional USD 299 million investment. This project is part of Indonesia’s broader strategy to build a domestic EV industry by leveraging its rich nickel resources, following the 2020 ban on raw nickel exports. Once completed, the facility will position Indonesia as the second-largest global producer of anode materials, trailing only China. The development has attracted significant investments from major EV and battery manufacturers, including Hyundai Motor Group and LG Energy Solution, who have recently launched the country’s first battery cell production facility.

INDONESIA
Indonesia plans to increase palm oil-based biodiesel blending mandate from 35% to 50%
(07 August 2024) Indonesia is preparing to increase its palm oil-based biodiesel blending mandate from the current 35% to 50% under the incoming administration of President-elect Prabowo Subianto, who takes office in October 2024. The transition government has ordered tests for the B50 mandate, including static tests by the energy ministry and stakeholders, followed by vehicle road tests, which typically take a year. The increase aims to reduce oil imports but raises concerns in the palm oil industry over supply for exports. The Indonesian Biofuel Producers Association (APROBI) noted that B50 would require new processing capacity, while the Indonesian Palm Oil Producers Association (GAPKI) warned that a higher mandate could hurt exports due to stagnating production, which has grown less than 1% annually since 2019. GAPKI’s chairman, Eddy Martono, suggested maintaining the current B35 mandate, given stagnating production rates and the potential impact on domestic cooking oil prices, exports, and government revenues. The B50 mandate is expected to consume 18 million metric tons of crude palm oil annually, compared to 11 million tons under B35. 

THE PHILIPPINES
The Philippines’ GDP grows by 6.3% in Q2 2024, exceeding 6.2% forecast
(08 August 2024) The Philippines’ GDP grew by 6.3% in Q2 2024, exceeding the 6.2% forecast and improving from the 5.8% growth in Q1. Government expenditure, driven by infrastructure projects and defence upgrades, increased by 10.7% year-on-year, contributing to this growth. However, household spending, which makes up a significant portion of GDP, rose by only 4.6%, reflecting weaker consumer demand amid high inflation and interest rates. The Bangko Sentral ng Pilipinas’ key policy rate is at 6.5%, with consumer inflation at 4.4% in July 2024, above the target range. The revised GDP growth for Q1 was 5.8%, slightly up from the initial estimate of 5.7%. Despite an average GDP growth of 6.0% across the first two quarters, concerns remain about sustaining this momentum due to a decelerating quarter-on-quarter growth trend, uneven sector performance, and reliance on government spending.

RCEP Monitor

NEW ZEALAND
New Zealand experiences significant emigration of its citizens to Australia
(08 August 2024) New Zealand is experiencing a significant emigration of its citizens to Australia, driven by higher wages and lower living costs across the Tasman. In 2023, 44,534 New Zealanders, nearly 1% of the population, relocated to Australia, resulting in a net migration loss of 27,011, an 85% increase from 2022. This trend is attributed to the contrasting economic strategies of the two countries, with New Zealand’s aggressive interest rate hikes leading to a double-dip recession and rising unemployment at 4.6%, compared to Australia’s more moderate 4.1%. Average weekly earnings in Australia are 30% higher than in New Zealand, making it a more attractive destination, especially for young professionals facing job insecurity and high living costs. Meanwhile, inward migration to New Zealand, though at a record 239,000, has not offset the exodus of 25 to 44 year olds, raising concerns about the country’s long-term economic prospects.

JAPAN
Recent rate hike by Bank of Japan triggers substantial market volatility 
(07 August 2024) Japan’s financial landscape has undergone a significant shift following the Bank of Japan’s recent interest rate hike, led by Governor Kazuo Ueda, which marked a departure from its long-standing zero or negative rate policy. This move triggered a sharp appreciation of the yen, substantial market volatility, and forced investors to reassess strategies dependent on a weak yen and stable rates. The Nikkei 225 experienced its most severe decline since 1987, followed by a 10% rebound, highlighting the market’s instability. The yen’s rise also disrupted carry trades, leading to a swift closure of positions. Despite Deputy Governor Shinichi Uchida’s assurance of not raising rates in unstable markets, concerns persist about the potential negative impact on consumer confidence and investment. Analysts are divided on the BOJ’s actions, with some viewing them as necessary given Japan’s macroeconomic conditions, while others suggest political pressure may have influenced the decision, risking tension between the government and the central bank. 

SOUTH KOREA
Korean think tank recommends early interest rate cuts citing weaker economic growth
(08 August 2024) The Korea Development Institute (KDI) has recommended early interest rate cuts, citing weaker economic growth and inflation due to sluggish domestic demand. The KDI revised its 2024 growth forecast to 2.5%, slightly down from 2.6% predicted three months prior, while maintaining a 2025 growth projection of 2.1%. Inflation forecasts were also lowered to 2.4% for 2024 and 2.0% for 2025, compared to previous estimates of 2.6% and 2.1%, respectively. Despite an export-led growth, domestic demand remains weak, hindering economic recovery. KDI’s inflation outlook for the second half of 2024 aligns with the central bank’s target of 2.0%. The think tank’s recommendation for rate cuts follows South Korea’s unexpected economic contraction in Q2 2024 and the Bank of Korea’s recent indication of potential rate cuts after maintaining a 3.50% interest rate for 12 consecutive meetings.

ASEAN
Southeast Asian countries raise barriers against cheap Chinese imports
(31 July 2024) Kurniadi Eka Mulyana, a 26-year-old worker in Bandung, West Java, was laid off in March due to declining sales at his textile factory, attributed to competition from TikTok Shop’s Chinese imports. This year, 49,000 workers in Indonesia’s textile, garment, and footwear sectors have been laid off across Banten, West Java, and Central Java. In response, Indonesian Trade Minister Zulkifli Hasan proposed up to 200% duties on imported fabrics and other goods. Southeast Asian countries, including Malaysia and Thailand, are also raising barriers against cheap Chinese imports. Thailand imposed a 7% VAT on low-value imports, and Malaysia added a 10% sales tax on online purchases under MYR 500. Southeast Asia’s trade deficit with China is widening, with Malaysia’s deficit growing from USD 3.1 billion in 2020 to USD 14.2 billion in 2023, and Thailand’s from USD 20 billion to USD 36.6 billion. Indonesia posted a USD 5 billion non-oil and gas trade deficit with China in the first half of 2024. China is redirecting exports to Southeast Asia due to Western trade tensions, impacting local industries like Thailand’s steel sector, where domestic production fell by 497,000 tonnes last year.

THAILAND
Top stocks in Thailand benefiting from digital wallet rollout
(01 August 2024) Thailand’s digital wallet initiative, worth THB 500 billion (USD 14 billion), is set to benefit major conglomerates and wealthy families. Stocks such as CP All and Muang Thai Capital have risen with each announcement about the program, despite the Stock Exchange of Thailand’s main index falling by 15% over the past year. Approximately 50 million adults earning less than THB 70,000 monthly will receive a one-time THB 10,000 payment via a mobile app, to be spent on necessities within their voting district. Goods making up nearly 60% of CP All’s sales, which totalled THB 921 billion in 2023, will be purchasable under the scheme. The program has also boosted shares in CP Group’s CP Axtra and other retailers like Berli Jucker and Central Retail Corp. However, department stores and hypermarkets are excluded from accepting digital wallet payments. Geographical restrictions may limit the scheme’s success, particularly in cities like Bangkok and Chiang Mai. The initiative is projected to boost GDP by 1.2% to 1.8% in 2025, though the Bank of Thailand predicts a smaller impact. 

THAILAND
Thailand to be second Southeast Asian country to introduce carbon tax
(30 JUly 2024) Thailand will introduce a carbon tax next year, becoming Southeast Asia’s second country to do so after Singapore. The tax will be THB 200 (USD 5.60) per tonne of CO2 on oil products like diesel and gasoline, converted from existing oil product taxes, thus not increasing revenue or consumer costs. This initiative aims to signal a priority for reducing carbon footprints, despite its minimal immediate impact on emissions. The tax will likely expand to more sectors and increase over time, forming part of the Thailand Climate Change Act, which includes mandatory emissions reporting and a potential emissions trading scheme. The Thai government will negotiate with the EU to prevent double penalties on Thai exports under the EU’s Carbon Border Adjustment Mechanism starting in 2026. Experts emphasize the need for regional cooperation within ASEAN for effective carbon pricing and the importance of investing carbon tax revenues in renewable energy and technology to ensure long-term benefits.

THAILAND
Thailand welcomes 20.3 million overseas visitors in first seven months of 2024
(31 July 2024) Between 01 January 1 and 28 July, Thailand welcomed 20,335,107 overseas visitors, generating approximately THB 957.31 billion for local businesses. China was the top source market with 4,065,109 arrivals, followed by Malaysia (2,837,922), India (1,186,288), South Korea (1,073,792), and Russia (996,990). Minister Sermsak Pongpanich reported 716,631 foreign arrivals from 22-28 July, averaging 102,376 daily, a 1.04% increase from the previous week. Short haul markets, including South Korea, Japan, and Taiwan, saw a 0.85% increase due to school holidays, while long haul markets rose by 1.57% with the start of summer holidays in Europe and the Middle East. Sermsak anticipates stable arrival numbers for the following week, influenced by European summer holidays, eased travel measures, and increased flights. The government targets 36.7 million foreign visitors in 2024, compared to nearly 40 million in 2019.

INDONESIA
Indonesian President starts work from presidential palace in Nusantara
(30 July 2024) Indonesian President Joko Widodo has started working from the presidential palace in Nusantara, the new administrative capital planned for East Kalimantan province. The USD 33 billion project, announced in 2019, aims to move the capital from Jakarta but is significantly delayed. Widodo noted the palace is 90% complete, with thousands of workers still on-site. Nusantara is set to host its first Indonesia Independence Day celebration on 17 August, marking the official capital transfer. However, construction delays and missed deadlines have led to the resignation of key officials and adjustments to the relocation timeline for 12,000 civil servants. Widodo expects the city to be 15% complete by Independence Day, with full completion by 2045. The project relies heavily on private investment, with the state covering 20% of costs. A presidential regulation was signed to grant investors land rights up to 190 years. Current infrastructure includes a 10-megawatt solar power plant and a reservoir for drinking water, but an additional 40 megawatts is needed.

MALAYSIA
Malaysian ringgit erases yearly losses to mark eight-day gain streak
(31 July 2024) The Malaysian ringgit has erased its yearly losses, rising 0.6% to 4.5922 against the dollar, marking an eight-day gain streak, the best since November 2019. After hitting a 26-year low in February, it has become Asia’s top performer this year. This recovery is supported by Bank Negara Malaysia’s encouragement for state-linked firms to repatriate and convert foreign income, use of forwards, and a global technology cycle upturn aiding export recovery. Analysts attribute the ringgit’s strength to expectations of a Fed rate cut, foreign inflows into local shares, and a recovering semiconductor cycle. KWAP, Malaysia’s largest state pension fund, paused its foreign investment plans to support the ringgit. With US swaps pricing a quarter-point cut by September, the Fed’s potential rate cut could make ringgit-denominated assets more attractive. Malaysia’s economy, showing growth momentum and a second-quarter GDP exceeding expectations, supports the central bank’s steady borrowing costs, further buoying the ringgit.

CAMBODIA, HONG KONG
Cambodia and Hong Kong pledge to enhance trade and investment cooperation
(31 July 2024) Cambodia and the Hong Kong Special Administrative Region (HKSAR) have pledged to enhance trade and investment cooperation, as stated during a meeting between Cambodian Prime Minister Hun Manet and HKSAR Chief Executive John Lee on 31 July. The discussions, held at the Peace Palace in Phnom Penh, covered potential areas for collaboration including trade, investment, banking, finance, technology, digital economy, tourism, education, and people-to-people connectivity. Both parties also explored increasing direct flights between HKSAR and Siem Reap. The meeting concluded with the signing of two memorandums of understanding focused on trade and investment promotion. Lee’s visit to Cambodia is part of a broader Southeast Asian tour, which includes stops in Laos and Vietnam.

RCEP Monitor

SOUTH KOREA
South Korea’s CPI rises 2.6% year-on-year in July 2024
(01 August 2024) South Korea’s consumer inflation increased in July, ending a three-month decline, driven by supply-side pressures and surpassing market expectations. The consumer price index (CPI) rose 2.6% year-on-year, compared to June’s 11-month low of 2.4%, while economists had predicted a 2.5% rise. Monthly CPI increased by 0.3%, the fastest rise in five months, against an expected 0.25% increase. Petroleum product prices grew by 3.3%, and agricultural products increased by 0.9%, with vegetable prices surging 6.3%. Core inflation, excluding volatile food and energy items, remained steady at 2.2% for the third consecutive month. Last month, the Bank of Korea indicated potential future rate cuts while maintaining interest rates at a 15-year high of 3.50%.

JAPAN
Japanese authorities spent JPY 5.53 trillion to support the yen in July 2024
(31 July 2024) Japanese authorities spent JPY 5.53 trillion (USD 36.8 billion) to support the yen in July, according to Japan’s Ministry of Finance data covering 27 June to 29 July. This intervention aligns with expectations and follows official warnings about countering volatile currency movements. The action occurred after the yen reached a 38-year low against the U.S. dollar. In response, the Bank of Japan (BOJ) raised its benchmark interest rate to “around 0.25%” from 0% to 0.1%, the highest since 2008. Following the BOJ’s decision, the yen appreciated sharply, trading around 150 per dollar, a significant recovery from its earlier decline to 161.96 per dollar. The yen has faced pressure since the BOJ ended its negative interest rate policy in March. 

JAPAN
Japanese companies see limited impact on fundraising costs after BOJ raises rates
(01 August 2024) Japanese companies foresee limited impact on fundraising costs after the Bank of Japan’s recent monetary policy shift. Marubeni’s CFO stated that the impact would be manageable given the company’s profit levels, while Sumitomo Corp’s CFO highlighted measures to minimise interest rate fluctuation risks. On 31 August, the BOJ raised its policy interest rate to 0.25%, the highest since 2008, suggesting potential future hikes. Although the rate increase may affect fundraising costs and strengthen the yen, most companies do not anticipate significant earnings impacts. Hokkaido Electric Power mentioned that long-term loans with fixed interest rates would not be immediately affected, but future financing could be. The yen’s appreciation reached 148.5 per dollar, which could moderate benefits from a weak yen for trading houses. Japan Airlines’ CEO noted that a stronger yen would positively impact outbound tourism, offsetting fuel cost increases.

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.

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.

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.

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.