By Jayant Rikhye, HSBC
To the list of emerging Asia’s economic powerhouses, add one more: South East Asia and its 625 million inhabitants.
Spanning countries as diverse as Vietnam, Indonesia, the Philippines and Singapore, the Association of South East Asian Nations (Asean) is often considered an “also-ran” that gets far less attention than China and India.
To underestimate the region, however, would be a mistake. Read more
Emerging Asia is set to be the world’s fastest-growing region again in 2015, skirting the contagion from Russia’s crisis and riding the fall-out from weak commodity prices, according to Fitch, the credit rating agency. Nevertheless, structural frailties stalk seven out of 10 countries in the region, with surging debt levels a particular concern, the agency said.
The region, excluding China, is expected to expand by 5.9 per cent in 2015 and 6.1 per cent in 2016 – compared to an average for global emerging markets of 4.1 per cent and 4.5 per cent respectively, Fitch said in a report. These forecasts compare with the International Monetary Fund’s (IMF) estimates that developing economies would this year grow at 4.3 per cent, accelerating to 4.7 per cent in 2016. Read more
By Gavin Bowring and Hafiz Noor Shams
Malaysia has informed a leading Chinese real estate company of a decision to slash the size of a huge but controversial development bordering Singapore following complaints from the city state’s government, according to local media reports.
The Malaysian Insider, a popular bilingual local news site, reported that Kuala Lumpur has cut the size of “Forest City” – a joint venture between the Chinese developer Country Garden and the sultan of Johor – to 405 hectares from the originally planned 1,600 hectares. In its shrunken form, the project is set to be slightly smaller than the Singaporean island of Sentosa, which covers 500 hectares. Read more
By Gavin Bowring and Hafiz Noor Shams
Only a few hundred meters from Singapore, the sleepy fishing villages that flank the Malaysia-Singapore Second Bridge, to the west of Johor Bahru’s famous Iskandar development, feel a world away from skyscrapers and hustle.
But this is set to change. Country Garden, one of China’s largest real estate developers, has bought a huge 1,800 hectare area of land and sea, and has made progress on developing “Forest City”, a planned mega-project almost entirely built on four separate reclaimed islands.
When completed, it would be even larger than Singapore’s Sentosa Island and have a skyline reminiscent of Dubai or Shanghai’s Pudong district (see photo). Read more
Some might call it investing Nirvana. Combine a company with a steady – inevitable, even – growth in its customer base with a trend towards higher spending. Sell it as a rare route into the growing wealth of the ethnic Chinese middle class. The enterprise in question is even called Nirvana – and it sells funeral services.
Nirvana Asia, a southeast Asian undertaker, opened the books on its $300m initial public offering in Hong Kong on Tuesday. Late in the first day of a week-long roadshow, bankers reported bids had already covered the shares on offer.
The deal would create in Hong Kong a mini-sector of what bankers like to call “deathcare services” following the listing last year of Fu Shou Yuan, a China-focused group in the same business, which enjoyed a 45 per cent opening day bounce. Read more
Anything you can do, we can do better.
Malaysian policymakers might not be fans of the hit song from the musical Annie, but they’re acting as if they are, fast FT reports.
Days after Indonesia’s new president, Joko Widodo, lowered fuel subsidies – resulting in a 31 per cent rise in petrol and 36 per cent rise diesel prices – Malaysia has gone a step further. Read more
The dream of an “Asean car” was first floated, in broad terms, by former prime minister of Malaysia, Mahathir Mohamad, when he spearheaded the creation of Proton in the 1980s. The idea was to form a national Malaysian car company that could be exported to Southeast Asia and beyond.
That didn’t quite work. Proton failed to gain traction much beyond its home market of Malaysia, although it did see some success as a low-priced, competently engineered vehicle in Britain for a time, thanks to the provision of engines by Mitsubishi of Japan.
Now, the idea has resurfaced. Najib Razak, current Malaysian prime minister, has announced that Malaysia and Indonesia plan jointly to develop an “Asean car”. Read more
Critics who slam Malaysia for spending beyond its means in racking up a level of household indebtedness that surpasses the US are misjudging the country’s economic resilience, a senior official said.
Abdul Wahid Omar, a minister in the prime minister’s department, told the Financial Times that Malaysia “deserves better” than the negative outlook on its sovereign debt rating that was reaffirmed last month by Fitch, the rating agency.
“We believe we deserve better,” said Wahid Omar, who heads the country’s Economic Planning Unit. “We have demonstrated our ability to manage government finances better (and) we are taking measures to reduce subsidies and introduce the GST (Goods and Services Tax).” Read more
Nations have negotiated trade agreements in one form or another for centuries. And for centuries economists have undoubtedly been facing the same question: Do trade agreements really matter?
The orthodox answer is obviously that they do. When you lower the barriers to trade goods flow more freely across borders and businesses, consumers and economies as a whole benefit as a result. But HSBC and the Economist Intelligence Unit are out with a new business survey that offers some interesting practical realities. Read more
Of all the colonial legacies left by Britain, France and the Netherlands in Asia, one of the least talked-about – yet arguably one of the most lasting and problematic – is the patchwork of legal systems that divides the region.
Doing business in the Association of Southeast Asian Nations (Asean) is gradually getting easier thanks to the elimination of tariff barriers, expansion of supply chains and gradual harmonisation of customs procedures.
Yet one of the big “soft” barriers to greater Asean integration, and one which makes life hard for multinationals and ambitious local companies alike, are the differing jurisdictions across the 10-member bloc. Read more
“When eating an elephant, take one bite at a time”, US Army officer and Vietnam veteran Creighton Abrams once said.
In his new book, The Rise of the New East, Ben Simpfendorfer does just that. His elephant is “The East”, the group of almost 50 emerging markets ranging from Turkey to China that is home to well over half of the world population.
Simpfendorfer gives his topic a thorough treatment. While his insights seem logical and intuitive, taken together they give an impressive oversight of into key trends shaping the region. beyondbrics noted five insights that particularly stood out. Read more
By Jennifer Hughes
Malaysia Airlines was struggling long before its two disasters this year. Higher costs and tougher competition in its own backyard from Tony Fernandes’s AirAsia had already inflicted financial damage in spite of it’s having tapped the markets for $2bn of equity and debt since 2005. Read more
It is a truth almost universally recognised that internet penetration in the 10-member bloc known as Asean – the Association of Southeast Asian Nations – is low, even though the region is humming economically.
Or is it?
UBS has come out with some interesting research that will give the e-commerce crowd something to cheer. The bank finds that Asean has a 32 per cent “internet penetration rate”, or almost 200m users, out of a total population of 620m.
This contrasts with market data apparently widely accepted – and cited by UBS – saying that penetration could be as low as 62m users. Read more
If you are doing business in Asean – the Association of Southeast Asian Nations – be prepared for an electric shock.
Analysts at ANZ have looked at what’s happening with electricity prices across the region and are warning that they are set to rise, making it considerably more expensive to run factories. It will also add half a basis point on average to inflation, which is already inching up. Read more
This was supposed to be the year of the rise of sukuk markets. As the Malaysian economy recovered and the Arab spring passed, another record year of sharia-compliant debt issuance was predicted.
But that changed after a day in May. Ben Bernanke dropped hints that the Fed would taper its bond-buying programme, and sukuk sales shrivelled in the third quarter. The number of issues this year is expected to be just above that of 2011. Read more
Nomura has released its Global Annual Economic Outlook for 2014, and its prognosis for Asia is interesting.
The investment bank states that the region’s economic leaders for the coming year will be: Korea, Malaysia and (despite a devastating typhoon) the Philippines. Read more
Indonesia, the Philippines, Malaysia and Thailand are on the face of it a relatively homogeneous, integrated group of nations with similar trading partners. So why did the first two emerge from the 2008 financial crisis in a much better shape than the latter?
A working paper from the IMF concludes that it was because Indonesia and the Philippines were less open to trade and had greater fiscal stimuli. Read more
Out of 60 countries, Indonesia and the Philippines are home to the most optimistic consumers. Thailand comes fourth on the consumer confidence index compiled by Nielsen, a research company.
Yet ask these consumers how they will spend their cash, and they tell Nielsen they’d prefer to save it, actually. Read more
The UK’s decision to launch an Islamic bond has been a long time coming. For a decade the prospect has been raised at the many Islamic finance conferences that have been held in London; Ed Balls, when he was City of London minister, announced the first Shariah-compliant government bonds from the UK Treasury back in April 2007.
The rationale then, as now, was to bolster London’s standing as an international financial centre. The logic then, as now, was that London ought to offer everything it can to financial markets, and that if launching a sovereign sukuk bond helps to create a benchmark for others to issue against, then that’s what it should do so as not to miss out. Read more
Malaysia is not a market littered with private equity deals. Nor is the wider region of southeast Asia. Dealmakers have struggled with relatively high asset prices in Indonesia, and governance and other concerns in Malaysia and Vietnam.
But on Wednesday KKR, the big US-based private equity firm, closed a deal to invest Rm642m ($200m) in Weststar Aviation Services, a company that operates helicopters for the offshore oil and gas business. Read more