asean in 2018: recharging investmentsapp.pmgasia.com/investasean2018/pdf/asean2018_recharging... ·...

ASEAN in 2018:

Recharging Investments

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Senior Economist

Dr Chua Hak Bin| +65 6231 5830 |

[email protected]

Synchronized Global Recovery Facing Headwinds?

Source: Bloomberg. IMF, Maybank Kim Eng

Global Real GDP

% chg % Share of

World GDP

2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 2017 2018E

World 3.2 3.5 3.7 4.0 4.0 3.8 3.8

Major Advanced Economies 60.5% 1.7 2.0 2.2 2.3 2.4 2.3 2.2

US 24.4% 1.5 2.0 2.2 2.3 2.5 2.3 2.6

Eurozone 15.8% 1.8 2.1 2.4 2.7 2.7 2.5 2.1

Japan 6.2% 1.0 1.4 1.5 1.9 2.0 1.7 1.2

UK 3.2% 1.8 2.0 1.8 1.8 1.4 1.8 1.4

BRIC 22.6% 5.0 5.5 5.6 5.7 5.7 5.7

Brazil 2.6% -3.6 0.0 0.4 1.4 2.1 0.9 2.0

Russia 1.9% -0.2 0.5 2.5 1.8 1.8 1.9

India 3.1% 7.1 6.1 5.7 6.5 7.2 6.4 7.3

China 15.1% 6.7 6.9 6.9 6.8 6.8 6.9 6.5

Asian NIEs 3.5% 2.4 3.0 2.8 3.9 3.2 3.2 2.8

South Korea 1.9% 2.8 2.9 2.7 3.8 3.0 3.1 3.0

Taiwan 0.7% 1.5 2.6 2.3 3.2 3.3 2.8 2.3

Hong Kong 0.4% 2.0 4.3 3.9 3.7 3.4 3.8 2.9

Singapore 0.4% 2.0 2.5 2.8 5.5 3.6 3.6 2.8

ASEAN-6 (incl. Singapore) 3.3% 4.6 4.7 5.0 5.6 5.3 5.2 5.1

ASEAN-5 2.9% 4.9 5.0 5.3 5.6 5.5 5.4 5.4

Indonesia 1.3% 5.0 5.0 5.0 5.1 5.2 5.1 5.3

Thailand 0.6% 3.2 3.4 3.9 4.3 4.0 3.9 4.1

Malaysia 0.4% 4.2 5.6 5.8 6.2 5.9 5.9 5.3

Philippines 0.4% 6.9 6.4 6.7 7.0 6.6 6.7 7.0

Vietnam 0.3% 6.2 5.2 6.3 7.5 7.7 6.8 6.5

Synchronized Global Recovery: PMI in Most

Countries in Expansion Phase

Markit Global Manufacturing PMI Points

to Robust Synchronized Recovery

PMI in Asian Countries Led by Taiwan and

Singapore

26/03/2018 3

Source: Bloomberg, Markit, Maybank KE

Note: Singapore’s PMI number refers to SIPMM’s numbers.

Source: Bloomberg, Markit, CEIC, SIPMM, Maybank KE

A (Triangular) “Trade-Investment-Tech” Boom

Driving Synchronized Global Growth Recovery

US Imports of Capital Goods as Share of

Total Imports Have Risen to 16-Year High

China’s Imports of Capital Goods Surged by

+14% in 2017

26/03/2018 4

Source: CEIC, Maybank KE

Note: 2017 numbers are as of 9M17.


Synchronized Global Growth: Asian Currencies

Appreciate When Exports Are Strengthening

5

Note: The ADXY is an Asian Dollar Index, where an increase represents an appreciation of Asian currencies.

Source: Bloomberg, CEIC, Maybank KE

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'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Fed Funds Rate, % AxJ Exports, %YoY (RHS) ADXY Index, %YoY (RHS)

Synchronized Global Growth: Asia Equity Markets

Rise During the Early Phase of Fed Rate Hike Cycles

6


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Fed Funds Rate, % AxJ Exports, %YoY (RHS) MSCI AxJ Index, %YoY (RHS)

US Capex Recovery Supporting Asian Export

Recovery

US Imports Improved Throughout 2017 US Capital Goods Import Growth

Continue to Accelerate

26/03/2018 7



China Imports Growing by Double Digits

China Imports Still on Uptrend, Surging by

+22% in Jan/Feb 2018

China’s Imports Driven by Commodities, Hi-

tech/Electrical Products & Semiconductors

26/03/2018 8


Note: Commodities include crude oil, iron ore, coal, soybean,

pulp and copper.


China’s PPI and Industrial Profits Rising; Industrial

Production Boosted by ICs and Computers

China – Industrial Profits Rising Together with PPI

26/03/2018 9



China – Production of Semiconductors and Computers Still Accelerating

China’s New Economy: Online Sales Remain Strong

China – Online Retail Sales in Both Goods

and Services Rising

China – Online Retail Sales Continue

Trajectory of Double-Digit Growth

26/03/2018 10



ASEAN: Exports & Loan Growth Are Improving

ASEAN Exports Seeing a Firm Recovery Bank Loans: Firm Recovery in Sing and Thai,

While Growth Stabilized in Indo and Malaysia

26/03/2018 11



ASEAN Central Banks Will Tighten in 2018: Malaysia

Hiked in Jan, Phil & Sing to Tighten in First Half

12

Note: BNM policy rate prior to Apr-04 refers to 3M KLIBOR; BI and BSP used new policy rate starting Aug-16 and Jun-16

respectively.


0

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'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

MY: BNM Policy Rate

PH: BSP Reverse Repurchase Rate

SG: 3M SIBOR

TH: BoT Policy Rate

ID: BI Policy Rate (RHS)

% %

Trade War: The Battlelines

26/03/2018

Trump Threatens China with US$60bn of Tariffs;

China Retaliates with Tariffs Worth US$3bn

US May Target China’s Telecoms,

Consumer Electronics & Apparel Imports

List of US Imports Subjected to China

Tariffs

26/03/2018 14


Source: China Ministry of Commerce, Maybank KE

Products to be subject to

15% tariff

(Worth US$977mn of US

exports to China)

Products to be subject to

25% tariff

(Worth US$2bn of US

exports to China)

1 Fresh fruit, dried fruit

and nut products 6 Pork and products

2 Wine 7 Aluminium scrap

3 Modified ethanol

4 Ginseng

5 Seamless steel pipe

China’s Top Source of Imports (2016) for Selected

Products

15

Source: Observatory of Economic Complexity, Maybank KE

Cars ($44bn) Soybeans ($34bn) Planes, Helicopters, Spacecraft ($20.4bn)

Country Share of

imports Country

Share of

imports Country

Share of

imports

1 Germany 27% 1 Brazil 46% 1 United States 62%

2 United States 27% 2 United States 41% 2 France 17%

3 Japan 17% 3 Argentina 9.5% 3 Germany 16%

4 United Kingdom 14% 4 Uruguay 2.0% 4 Brazil 1.8%

5 Slovakia 3.5% 5 Canada 1.8% 5 Canda 1.7%

Pork ($3.2bn) Wine ($2.4bn) Aluminium, waste or scrap ($2.2bn)

Country Share of

imports Country

Share of

imports Country

Share of

imports

1 Germany 21% 1 France 42% 1 United States 31%

2 Spain 16% 2 Australia 24% 2 Hong Kong 18%

3 United States 13% 3 Chile 11% 3 Malaysia 15%

4 Denmark 10% 4 Spain 6.7% 4 Australia 15%

5 Canada 10% 5 Italy 5.6% 5 United Kingdom 7.1%

6 Netherlands 7.4% 6 United States 2.5% 6 Netherlands 2.9%

Top 16 Countries – Largest Bilateral Trade Surplus

with United States, 2017

16

Note: Numbers in brackets refer to ranking by trade surplus size in 2016.


China May Also Retaliate by Restricting Number of

Chinese Students and Limiting Apple iPhone Sales

Students from China Account for the

Largest Share of Foreign Students in the US China is Apple’s Largest Source of

Revenue Outside Asia and Europe

26/03/2018 17

Source: Institute of International Education, Statista, Maybank KE

Source: Apple, Statista, Maybank KE

China’s Large Imports from the US: Aircrafts,

Soybeans, Cars, Semiconductors, Industrial Machines

18


China data (HS Classification) US data (Classification by End Use)

China's top exports to US Share of total %YoY US top imports from China Share of total %YoY

Total 100% 11.3 Total 100.0% 9.3

1 Electrical Machinery and

Equipment 24.7% 14.8 1

Clocks, Port Typewriters, Other

Household Gds 13.9% 14.4

2 Other Types of Machinery 21.1% 15.0 2 Computers 9.0% 12.7

3 Miscellaneous Mfg Article 12.0% 12.3 3 Telecommunications Equipment 6.6% 15.6

4 Textiles and Textile Articles 9.8% 0.2 4 Computer Accessories,

Peripherals and Parts 6.3% 12.1

5 Base Metals and Articles 5.3% 13.6 5 Toys, Shooting and Sporting

Goods and Bicycles 5.3% 6.9

China's top imports from US Share of total %YoY US top exports to China Share of total %YoY

Total 100% 14.8 Total 100.0% 12.8

1 Vehicle, Aircraft, Vessel &

Transport Equip 19.3% 10.0 1

Civilian Aircraft,Engines, Eqp &

Part 12.5% 11.6

2 Electrical Machinery and

Equipment 11.3% 5.2 2 Soybeans 9.5% -12.9

3 Vegetable Product 10.9% 2.0 3 Passenger Cars, New and Used 8.1% 19.0

4 Other Types of Machinery 10.6% 13.7 4 Semiconductors 4.7% 2.0

5 Product of Chemical or Allied

Industry 9.6% 18.8 5 Other Industrial Machines 4.2% 11.7

A “Reciprocal Tax”? China’s Import Tariffs High for

Motorcycles, Cars, Cereals, Beverages & Footwear

19


Product Average AV

Duties

Minimum AV

Duty

Maximum AV

Duty

Motorcycles 45.0 45.0 45.0

Motor cars and other motor vehicles 25.0 25.0 25.0

Cereals 24.2 0 65.0

Beverages, spirits and vinegar 22.8 0.0 65.0

Footwear and gaiters 19.3 10.0 24.0

Edible fruit and nuts 18.0 0.0 30.0

Articles of apparel and clothing accessories 16.2 14.0 25.0

Ceramic products 13.8 8.0 24.5

Glass and glassware 13.7 0.0 24.5

Rubber and articles thereof 11.7 0.0 25.0

Articles of iron and steel 9.8 3.0 30.0

Cotton 8.9 5.0 40.0

Plastics and articles thereof 8.0 4.3 14.0

Pharmaceutical Products 4.5 0.0 10.0

Office machines 3.0 0 12.0

Restricting Service – Curbs on Chinese Researchers,

Students, Travel Would Hit US Services Surplus

Largest US Services Trade Balance is with

China

Rising Service Trade Surplus with China

26/03/2018 20



China Intellectual Property Payments Have Eased

in Recent Years with Its Own Strides in Innovation

China – Payments for the Use of Intellectual Property Has Slowed in the Past Three Years

US Intellectual Property Exports to China

Mainly on Industrial Processes

26/03/2018 21



China Emerging as a Major Competitor to the US in

Patent Applications

China Seeing Fastest Growth in Number

of PCT International Patent Applications

Top 10 PCT Applications by Individual

Company, 2016

26/03/2018 22

Source: UN WIPO, Maybank KE

*Refers to telecom firms.

Source: UN WIPO, Maybank KE

Rank Country

Number of

applications,

2016

%YoY Share of

total

1 US 56,595 -0.9% 24.3%

2 Japan 45,239 2.7% 19.4%

3 China 43,168 44.7% 18.5%

4 Germany 18,315 1.7% 7.9%

5 South Korea 15,560 6.8% 6.7%

6 France 8,208 -2.5% 3.5%

7 UK 5,496 3.9% 2.4%

8 Netherlands 4,679 8.0% 2.0%

9 Switzerland 4,365 2.3% 1.9%

10 Sweden 3,720 -3.2% 1.6%

Rank Country Applicant PCT applications

published in 2016

1 China *ZTE Corporation 4,123

2 China *Huawei Technologies 3,692

3 US *Qualcomm 2,466

4 Japan Mitsubishi Electric 2,053

5 Korea LG Electronics 1,888

6 US Hewlett-Packard 1,742

7 US Intel 1,692

8 China BOE Technology 1,673

9 Korea Samsung Electronics 1,672

10 Japan Sony 1,665

China’s Outward Direct Investment to US Rising

Rapidly, Partly Due to Flows into Tech Sector

China’s Outward Investment to the US

More than Doubled in 2016

China’s Investment in US Boosted by

Software and IT Services in 2016

26/03/2018 23



China’s Investment in US Venture Capital Rising,

Prompting Tighter Scrutiny Over Chinese Deals

Chinese Investment in US Venture

Capital Market Rising

Major China-Related Deals Rejected by

CFIUS

26/03/2018 24

Source: CB Insights, Maybank KE

Source: News sources, Maybank KE

Investor Target Details

Ant Financial

Money-Gram

(money

transfer

company)

The proposed US$1.2bn deal

collapsed in Jan 2018 after CFIUS

denied approval over national

security concerns.

Canyon Bridge

Capital

Lattice

(chipmaker)

Canyon Bridge received investment

from a group that included China

Venture Capital Fund Corporation,

to acquire Lattice. The deal was

formally blocked in Sep 2017 by

President Trump.

GO Scale Philips

(electronics)

GO Scale, an investment fund partly

sponsored by GSR Ventures of China,

had an agreement to purchase a

controlling stake worth $2.9bn in

Philips' automotive and LED business.

Philips cancelled the deal in Dec

2016 after failing to resolve CFIUS'

concerns.

China Accounts for the Largest Share of US

Doctorate Recipients with Temporary Visas

Students from China Account for the

Largest Share of Foreign Students in the US China is Apple’s Largest Source of

Revenue Outside Asia and Europe

26/03/2018 25

Note: China includes Hong Kong. Stay rate refers to % of doctorate recipients on temporary visas who indicated where they intended to stay (US vs. foreign) after graduation.

Source: National Science Foundation, Maybank KE

Note: China includes Hong Kong.

Source: National Science Foundation, Maybank KE

China is the Largest Foreign Holder of US Treasury

Securities, May Impact USD if Reduces Purchases

26

Source: Bloomberg, Maybank KE

Testing “Goldilocks”

26/03/2018

The “Phillips Curve” – Trade-Off Between

Unemployment & Inflation - Has “Broken Down”

US 10Y Bond Yield Surged to 2.8% on

Stronger Jobs & Wage Data

Probability of PCE Price Index Reaching

+2.5% in the Next 12 Months Still Low

26/03/2018 28


Note: Price Pressures Measure refers to the probability that the

expected PCE Price Index over the next 12 months will exceed +2.5%.

Source: Federal Reserve Bank of St. Louis, CEIC, Maybank KE

“Amazon Effect” Keeping Inflation in Check,

US Labour Market May Not be as Tight as It Seems

US – E-commerce Sales Rising While

Online Prices Fall

US Labour Force Participation Rate and

Employment to Population Ratio Remain Low

26/03/2018 29

Note: 2017 data refers to average of the first three quarters.

Source: Bureau of Economic Analysis, Maybank KE


Inflation in Asia Remains Contained So Far (Except

for the Philippines)

30

^Philippines rebased its CPI numbers to 2012=100 starting Mar 2018.

*Hong Kong numbers refer to Composite CPI.


Headline CPI, %YoY Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Jan/Feb

average

Indonesia 3.8 3.7 3.6 3.3 3.6 3.3 3.2 +3.2

Malaysia 3.6 4.2 3.7 3.4 3.5 2.7 1.4 +2.1

^Philippines 2.7 3.1 3.1 3.0 2.9 3.4 3.9 +3.7

Singapore 0.4 0.4 0.4 0.6 0.4 0.0 0.5 +0.2

Thailand 0.3 0.9 0.9 1.0 0.8 0.7 0.4 +0.6

Vietnam 3.4 3.4 3.0 2.6 2.6 2.7 3.2 +2.9

Korea 2.6 2.1 1.8 1.3 1.5 1.0 1.4 +1.2

China 1.8 1.6 1.9 1.7 1.8 1.5 2.9 +2.2

India 3.3 3.3 3.6 4.9 5.2 5.1 4.4 +4.8

*Hong Kong 1.9 1.4 1.5 1.6 1.7 1.7 3.1 +2.4

Taiwan 1.0 0.5 -0.3 0.3 1.2 0.9 2.2 +1.5

Food Prices Softening and Offsetting Impact from

Rising Oil Prices

UN FAO Food Price Index Declining Over the

Past Two Months, Offsetting Oil Price Increase

Food Inflation in ASEAN Has Stayed Muted,

Except for Indonesia’s Spike in Jan 2018

26/03/2018 31



Recessions & Bear Markets Occur When Bond Yields

Plunge, Not Rise

32

Note: Shaded periods are Fed rate hike episodes.


“Inverted” US Yield Curve Often a Predictor of

Recessions

33

Note: Latest datapoint is as of 23 Mar 2018.


Rising 10Y US Bond Yield Unlikely to Trigger the

“Taper Tantrum” Episodes Seen in 2013

ASEAN Currencies Hit during Taper Tantrums Few Signs of a Repeat of “Taper Tantrums”

26/03/2018 34



“Black Monday Crash” Oct 1987 – Parallels?

35

Source: “A Brief History of the 1987 Stock Market Crash” (Washington Federal Reserve Board) , Maybank KE

ASEAN’s Investment Revival

26/03/2018

Investment in ASEAN Has Slumped in Recent Years

Investment in ASEAN Sluggish in Recent

Years Compared to Pre-GFC Years

Weakness Was Largely Because of a

Private Investment Slump

26/03/2018 37

Note: GFCF stands for gross fixed capital formation.


Note: ASEAN-3 refers to Malaysia, Singapore and Thailand, which

have breakdown for GFCF by public & private.


Synchronized Global Growth Recovery Increasing

Investments in Advanced Economies

Investment is Picking Up in G3

Economies

Imports of Capital Goods in G3 Recovered

in 2017

26/03/2018 38



ASEAN Investment Typically Tracked Export Recovery

in Past 3 Fed Hike Cycles, But Lagging in This Episode

39

Note: ASEAN-5 GFCF refers to the weighted average growth rate.

Source: CEIC, Maybank KE estimates

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'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Fed Funds Rate, % ASEAN-5 GFCF (RHS) ASEAN-5 Exports (RHS)

%YoY

ASEAN-5 Exports

Fed Funds Rate

ASEAN-5 GFCF

ASEAN: Private Investment Closely Correlated with

Exports in Thailand, Malaysia and Singapore

Sensitivity of Total Investment to Exports Sensitivity of Private Investment to Exports

26/03/2018 40

Note: Period covered is between 1Q06 and 2Q17.


Note: Private investment data not available for Indonesia, Philippines and Vietnam. Period covered is between 1Q06 and 2Q17.


Private Investment Tracks Exports Closely in

Malaysia and Thailand

Malaysia - Private Investment and

Exports Correlate Closely

Thailand – Strongest Correlation Between

Private Investment and Exports

26/03/2018 41



Lead Investment Indicators Improving

26/03/2018 42

• Capacity Utilization Rising, At Record Highs for Malaysia &

Philippines

• PMIs (Manufacturing) in Expansion, Singapore PMI Near 7-

Year Highs

• Business Loans Turning Up, Particularly Philippines,

Singapore, and to some extent, Thailand

• Terms of Trade Rising, as Chip (Electronics) Prices Rise &

Commodity Prices Recover, Particularly Malaysia & Indonesia

• Capital Goods Imports Rising Strongly in Indonesia & Malaysia

• Business Confidence Surveys Positive

Malaysia and Philippines: Infra Investment Set to

Grow Strongly in 2018

Malaysia – Record Level of Infrastructure

Projects Awarded in 2016

Philippines – Government’s Ambitious Plan

to Increase Infrastructure Expenditure

26/03/2018 43


Note: Numbers prior to 2017 are actual expenditure; numbers from 2017 are government targets.

Source: CEIC, Department of Budget and Management, Maybank KE

Indonesia’s Infra Budget Relatively Small While

Vietnam’s State Investment Highest in Region

Indonesia – Infrastructure Budget for

2018 Not Much Higher than 2017

Vietnam – State Investment in

Infrastructure High at Nearly 6% of GDP

26/03/2018 44

Source: CEIC, news sources, Maybank KE Note: Infrastructure investment refers to state investment in transportation/ storage, utilities and construction.


ASEAN Corporate Debt Manageable & Should Not

Impede Investment

45

Note: Corporate debt refers to credit to non-financial corporations from all sectors published by BIS. For Philippines,

corporate debt refers to loans for economic activities. ASEAN-4 excludes Singapore.

Source: BIS, CEIC, Maybank KE

25%

30%

35%

40%

45%

50%

55%

0

200

400

600

800

1,000

1,200

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17

ID MY PH SG TH % of GDP (RHS) % of GDP (RHS)

US$bn ASEAN Corporate Leverage

ASEAN-5

ASEAN-4

(ex SG)

Balance Sheet & Leverage Ratios in ASEAN-5 (Asian

Crisis, Global Financial Crisis & Current)

46

Note: *Indonesia public/govt debt as at end 1997. **Indonesia foreign govt debt as at end 1996. ^ Thailand public debt as of 3Q97.

Malaysia household debt figures as at end of respective year. Indonesia and Philippines household debt estimated using

outstanding consumer loans. Thailand household debt includes loans from commercial and state banks, credit card companies,

saving corporations and other non-bank institutions.

All international claims and domestic credit as of 2Q17.

Source: BIS, CEIC, World Bank, Maybank KE estimates

As % of GDP

Indonesia Malaysia Philippines Singapore Thailand

2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest

Public Debt 72.5* 34.1 27.7 31.4 41.0 51.9 52.4 66.9 43.5 69.1 89.3 110.5 40.5^ 37.4 41.4

Govt debt – Foreign 26.3 14.4 12.3 3.1 2.9 1.8 23.3 30.8 16.1 - - - 8.8 3.0 1.2

External Debt 56.1 32.7 34.4 43.6 28.8 65.0 44.2 36.9 23.5 - 507.5 438.6 - 26.4 33.2

Household Debt - 10.9 16.1 - 63.6 84.6 - 2.0 8.8 68.0 63.5 74.8 - 51.7 79.8

Domestic Credit - 39.4 40.4 156 112.6 137 - 53.5 60.9 66.6 71.3 138 - 104.5 125.7

Foreign Bank Claims 26.2 15.5 15.2 35.3 56.9 51.3 21.0 20.7 13.3 240.8 139.2 149.4 42.9 19.5 34.1

Corporate Debt - 14.7 22.2 - 58.2 64.5 - 36.8 39.5 - 103.3 116.1 99.8 46.4 50.3

Current Account -2.7 2.4 -1.7 -6.5 15.4 3.0 -3.5 5.4 -0.8 16.3 26 18.8 -6.2 5.5 10.8

Balance Sheet & Leverage Ratios in Rest of AxJ

(Asian Crisis, Global Financial Crisis & Current)

47

Note: *China and Hong Kong CA balance as at 1Q98. **Taiwan household debt as of 4Q15. ^ India debt data as of 1Q97.

All international claims and domestic credit as of 2Q17.

Taiwan’s household debt includes non-profit institutions serving households.

Source: BIS, CEIC, World Bank, Maybank KE estimates

As % of GDP

China Hong Kong India Korea Taiwan

2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest 2Q97 4Q07 Latest

Public Debt 7.4 43.9 53.8 - 1.2 0.1 66.3^ 71.4 68.6 8.0 27.7 36.2 24.9 32.1 36.2

Govt debt – Foreign 0.4 1.0 0.2 - - - 10.9^ 4.4 3.0 1.1 1.1 0.4 0.0 0.0 0.0

External Debt 13.7 11.1 12.7 - 343 459 23.7 17.7 20.1 29.8 31.8 27.2 - 23.1 31.7

Household Debt 0.2 18.7 44.8 48.3 50.4 67.2 2.2 9.7 9.2 56.0 76.2 95.6 52.0 82.7 86.8**

Domestic Credit 96.1 129.7 211.1 164.8 122.8 225.9 - 73.0 87.0 - 140.8 162.7 160.3 155.9 187.2

Foreign Bank Claims 6.5 7.8 9.8 208.5 177.1 269.4 7.0 17.0 11.1 19.4 33.4 19.7 12.3 25.8 38.4

Corporate Debt 102.3 96.8 166.2 129.8 131.8 232.4 - - - 101.6 88.6 103.7 48.3 51.5 59.6

Current Account 4.9* 8.8 1.8 3.4* 11.5 2.1 -1.4 -1.0 -2.0 -1.9 1.9 5.6 1.5 11.1 17.5

The ASEAN Consumer: Disrupted

26/03/2018

E-Commerce in ASEAN: Still in Early Stage of

Disruption?

Online Sales Share Still Small in ASEAN;

Singapore’s Online Share Soaring

Rising Share of Online Sales in Korea, China and

US

26/03/2018 49

Source: Euromonitor, Maybank KE

Note: China’s numbers refer to online retail sales of goods & services

as a share of total retail sales of consumer goods.


Online and Offline Retail Sales May Have Not Yet

Converged Even in Established Markets

50


Indonesia: Is E-Commerce Distorting Data? Imports of

Consumer Goods & Consumer Confidence Strong

Imports of Consumer Goods Surged by

+21% in 4Q17

Consumer Confidence Rising For the

Largest Cities

26/03/2018 51


Note: Index above 100 indicates optimism.


Indonesia: Cashless Payments Gaining Traction

Credit Card Transaction Rose by +6% in

2017 vs. +0.2% in 2016

E-Money Transaction Surging by >+100%

in 4Q17

26/03/2018 52



China’s Rising Wall of Savings / Belt & Road

26/03/2018

China Lifting Global Savings Rate to Historical High

China’s Gross Domestic Savings Far

Exceeds that of the US and Japan

China’s Savings over Global GDP Driving

Up Global Savings Rate

26/03/2018 54

Note: Total savings estimated by deducting final consumption

expenditure from nominal GDP.


Note: Global GDP is based on the 4 largest economies: US,

EU, China and Japan.


US10Y Bond Yield and Fed Rate Have Trended

Lower from their Highs in 1990s

55


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7

8

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Fed Funds Rate, % US 10Y bond yield, % AxJ Exports, %YoY (RHS)

China’s Gross Savings Rate Falling at a Remarkably

Gradual Pace

China’s Exceptionally High Gross Savings

Rate

Largely Due to China’s High Household

Saving Rate

26/03/2018 56


Note: China and Taiwan’s household savings rate is estimated from

official data (household disposable income less expenditure, as

share of GDP).

Source: OECD, China National Bureau of Statistics, CEIC, Maybank

KE estimates

China’s Gross Foreign Asset Position Remains Far

Behind US and UK

Net Foreign Asset Position of 4 Big Economies,

as of 3Q17 : China, US, Japan and UK

Gross External Assets for 4 Big Economies,

as of 3Q17: China, US, Japan and UK

26/03/2018 57

Note: Data for China and Japan prior to 2004 and 1996 respectively

are from the "External Wealth of Nations" database.

Source: "External Wealth of Nations" database, CEIC, Maybank KE

Note: Data for China and Japan prior to 2004 and 1996 respectively

are from the "External Wealth of Nations" database.

Source: "External Wealth of Nations" database, CEIC, Maybank KE

Still in Early Wave: China’s Gross Foreign Assets

Remain Small as Share of GDP

58

Note: Numbers for Taiwan and Malaysia are as of 4Q16 and 1Q17 respectively.


Gross Foreign Assets as % of GDP, 3Q17: Asia, US and UK

Top Sovereign Wealth Funds – Oil & Gas Producing

Countries vs. Emerging Asia (as of Feb-18)

59

*This number is a best guess estimation.

Source: Sovereign Wealth Fund Institute, Maybank KE

Oil producing countries Emerging Asia

Ranking Country Fund Assets,

USD bn Ranking Country Fund

Assets,

USD bn

1 Norway Government Pension Fund (Global) 1,033 2 China China Investment Corporation 900

3 UAE Abu

Dhabi Abu Dhabi Investment Authority 828 6 Hong Kong

Hong Kong Monetary Authority

Investment Portfolio 457

4 Kuwait Kuwait Investment Authority 524 7 China SAFE Investment Company 441*

5 Saudi Arabia SAMA Foreign Holdings 494 8 Singapore Government of Singapore Investment

Corporation 359

9 Qatar Qatar Investment Authority 320 10 China National Social Security Fund 295

11 Saudi Arabia Public Investment Fund 224 13 Singapore Temasek Holdings 197

12 UAE Dubai Investment Corporation of Dubai 210 15 Korea Korea Investment Corporation 122

14 UAE Abu

Dhabi Mubadala Investment Company 125 24 Brunei Brunei Investment Agency 40

16 UAE Abu

Dhabi Abu Dhabi Investment Council 110 25 Malaysia Khazanah Nasional 39

18 Iran National Development Fund of Iran 91

19 Russia National Welfare Fund 72

20 Libya Libyan Investment Authority 66

21 US Alaska Alaska Permanent Fund 62

23 Kazakhstan Kazakhstan National Fund 58

26 US Texas Texas Permanent School Fund 38

Size of all oil & gas related funds $4,301 Size of all Asia sovereign wealth funds $2,850

China’s Outward FDI has Grown Rapidly Over the

Past Decade

China’s Outbound FDI 2nd Largest Globally as of

2016, after the US and Japan China’s Growing Outbound FDI Overtook

Japan’s Level in 2016

26/03/2018 60

Source: CEIC, UNCTAD, Maybank KE

Source: CEIC, UNCTAD, Maybank KE

Pattern of Chinese Outward Direct Investment has

Evolved from Mining to Services

China’s Target Industries Have Evolved from

Mining to Services Industries (Outward Flow)

China’s Stock of Outbound Investment in

Top 10 Sectors, 2016

26/03/2018 61

Note: Chart shows outbound investment flow of top 6 industries.

Source: CEIC, Ministry of Commerce, Maybank KE


USD

billion

Share of total

outward direct

investment

CAGR 2011

to 2016

Total Outward Direct

Investment 1,357 100% +26%

Leasing and Commercial Service 474 35% +27%

Financial Intermediation 177 13% +21%

Wholesale and Retail Trade 169 12% +28%

Mining 152 11% +18%

Manufacturing 108 8% +32%

Information Transmission,

Software and Information

Technology Service

65 4.8% +47%

Real Estate 46 3.4% +39%

Transport, Storage and Postal

Service 41 3.1% +10%

Construction 32 2.4% +32%

Electricity, Gas & Water

Production and Supply 23 1.7% +26%

Asia Largest Recipient of China’s Investment (at

67%), ASEAN about 6%

Asia Accounts for 67% of China’s Total

Stock of Outward Direct Investment

China’s Outward Investment Flow to Asia

in 2016

26/03/2018 62

Source: CEIC, Ministry of Commerce, Maybank KE

*Hong Kong’s number refers to share of China’s total outward investment.

Source: CEIC, Ministry of Commerce, Maybank KE estimates

USD bn

Share of China's

total outward

direct

investment

CAGR (2011 to

2016)

Total Outward

Direct Investment 1,357 100% +26.2%

Asia 909 67% +24.5%

Latin America 207 15% +30.3%

Europe 87 6% +29.0%

United States 61 4% +46.4%

Africa 40 3% +19.7%

Oceania 38 3% +26.1%

China Outward

Investment

(USD mn)

Share of China's

total ex-Hong

Kong outward

investment

CAGR (2013

to 2016)

*Hong Kong 114,233 58.2% +22

Singapore 3,172 3.9% +16

Malaysia 1,830 2.2% +44

Indonesia 1,461 1.8% -2.2

Vietnam 1,279 1.6% +39

Korea 1,148 1.4% +62

Thailand 1,122 1.4% +14

Cambodia 626 0.8% +8

Japan 344 0.4% -7

Laos 328 0.4% -25

Myanmar 288 0.4% -15

Brunei 142 0.2% +156

India 93 0.1% -14

Funding for Belt Road Initiative Crosses $1 Trillion

63

Source: Office of the Leading Group for the BRI, Inclusive Development International, various news sources, Maybank KE

Institution type Institutions Details

Funds

Silk Road Fund A $55bn fund. Signed $6bn for 15 projects as of end 2016. Supports BRI through

equity and other forms of financing.

China-ASEAN Investment Cooperation Fund $1bn fund to target infrastructure, energy, minerals and agriculture investment in

ASEAN.

China Insurance Investment Fund A $49bn fund set up in Jan-16, which will be capitalized by Chinese insurance

companies and actively invest in the BRI.

Silk Road Gold Fund Raising $16bn within 5 to 7 years to invest in gold-related businesses and mining

firms in OBOR countries.

Green Ecological Silk Road Investment Fund $4.8bn private equity (from private Chinese enterprises) to fund projects that

improve the ecological environment.

State-owned

Commerical

Banks

Bank of China (BOC) Committed $67.4bn in loans as of end 2016. Target of $100bn in 2015-17.

Industrial and Commercial Bank of China (ICBC) Committed $67.4bn in loans for 212 projects as of end 2016.

China Construction Bank (CCB)

Committed $90bn in loans as of end 2016. Signed an MOU with IE Singapore to

contribute $22bn of financing to support firms on infrastructure projects under

OBOR.

Policy Banks

Export-Import Bank of China (EXIM Bank) Signed $100bn in 1,100 projects, with $80bn in loans.

China Development Bank (CDB) Signed more than $40bn in 100 projects, with $30bn in loans. Earmarked $890bn for

around 900 projects.

Sovereign Wealth

Funds

CITIC Limited Committed to invest $113bn on 300 projects between 2015 and 2025.

China Investment Corporation (CIC) Raising $50bn-$100bn for overseas investment, focusing on OBOR countries. One of

the contributors of Silk Road Fund’s initial capital (15%).

Development

Bank

Asian Infrastructure Investment Bank (AIIB) Extended $1.7bn in loans to 9 projects as of end 2016. Launched with a capital of

$100bn.

New Development Bank (NDB)

Plans to expand lending to $4bn in 2018, which is a 60% increase from the $2.5bn

expected in 2017. As of Sep-17, NDB has approved loans amounting to $3bn for 11

projects. Has $100bn of authorized capital to focus on projects in BRICS and other

developing countries.

Insurance China Export & Credit Insurance Corporation Insured more than $320bn of export and investment projects in the B&R countries.

Chinese M&A Investment to OBOR Countries Rose

Steadily over the Past Three Years

China’s M&A Investment into OBOR by

Region

China’s M&A Investment into OBOR

Countries (2005 to 2016)

26/03/2018 64

Source: Dealogic, Chinese Academy of Social Sciences, Maybank KE


China’s M&A Investment into OBOR Countries by

Sector (in US$100mn)

65


Oil & gas

IT

Communi

cation

Mining

Public

utilities

& energy

Chemicals Finance Real

estate Transport

Health &

Insurance

Consumer

goods

Food &

Beverage Others Total

2005 50.0 0.8 0.1 50.9

2006 62.3 10.0 0.5 9.8 0.3 82.9

2007 6.2 4.2 4.7 0.9 0.6 0.6 1.2 0.2 5.8 24.4

2008 3.6 0.7 0.3 36.2 1.1 20.1 2.1 0.1 4.2 68.4

2009 37.5 0.1 7.4 1.2 2.2 5.3 0.5 0.2 0.1 6.6 61.1

2010 17.8 0.8 2.4 1.8 21.1 0.1 2.2 5.5 0.1 8.2 60.0

2011 5.0 1.5 11.2 0.2 15.6 0.8 2.8 1.4 1.2 1.2 0.8 5.5 47.2

2012 0.6 0.8 7.6 0.1 1.1 1.0 1.6 0.1 0.1 0.5 0.8 14.3

2013 253.6 0.6 35.7 0.2 22.0 13.3 10.9 1.4 2.7 0.7 0.4 6.6 348.1

2014 15.3 28.9 3.0 1.0 3.2 4.4 2.7 1.3 13.9 18.0 91.7

2015 42.6 24.1 21.2 49.9 6.8 9.6 14.6 6.2 12.8 7.5 5.9 201.2

2016 34.0 89.3 44.0 35.7 51.2 5.1 21.5 14.0 14.8 8.1 0.2 3.6 321.5

Total 528.6 151.1 147.5 127.5 114.3 66.1 54.9 39.9 27.7 25.4 23.1 65.8 1371.9

Malaysia’s Key Belt & Road Project: East Coast Rail

Link

66

Source: Straits Times, various news articles, Maybank KE

Distance 620 km

Expected

completion

year Before 2024

Contract

awarded to China Communications

Construction Company

Cost MYR 55bn or USD 13bn

Funding

85% of project to be financed with

a soft loan (with a 7-year

moratorium) from Export-Import

Bank of China at 3.25%; remaining

15% to be funded through

Malaysia's sukuk programme.

Benefits

To reduce travel time between

Kota Bharu and Port Klang from 7

hours to 4 hours

Create 80k jobs, and Malaysian

contractors to be given at least

30% of high impact projects

Boost growth in east coast states

by 1.5%

Macro & Strategy in 2018

26/03/2018 67

• Synchronized Global Growth will Support Asian Currencies (of Export-

Oriented Economies) and Equity Markets

• US-China Trade War a Risk, But Compromise Likely in Coming Months

• End of “Goldilocks” But Inflation Not Likely to Flare Up

• Private Investment Revival: Beneficiaries include Commercial, Industrial &

Logistics Real Estate; Capital Equipment Players; Infrastructure

• Disruption Intensifies: Caution as “Brick & Mortar” Consumer Names & Retail

Property Under Pressure

• China’s Wall of Savings & Belt & Road Funds Will Keep Long-End Interest Rates

Contained

• Rising Domestic Interest Rates But Gradual: ASEAN Central Banks Will Start

Tightening in 2018, Banks Beneficiary

• ASEAN Macro: Positive on Thai, Indo, Spore, Mal; Cautious on Phil

APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

26/03/2018 68

DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or

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