ASEAN Forum Hong Kong by Maybank
We are delighted to participate in the inaugural ASEAN Forum Hong Kong hosted by Maybank in January. Our Portfolio Manager, Kenny Chung joined the panel – ASEAN: Finding Growth Opportunities in a Fragmented World, discussing the economic growth and investment trends in ASEAN amid changing interest rate landscape and the Trump 2.0 regime with other industry experts.
Kenny spoke alongside with Ho Sing Foong, Dr. Chua Hak Bin and Dennis Fok
Kenny first explained the ASEAN bond market condition. The positive differentiation between ASEAN rates and the US Treasury rates gradually diminished with the beginning of the rate hike cycle, the rates in some regions were even surpassed by the US rates. As a result, the incentive for ASEAN sovereigns and corporates to issue offshore USD bonds was low and limited the supply, which created technical support for the existing offshore USD bonds.
‘In the post-COVID era, banks are willing to go down the credit curve and extend their loan offerings to more corporates,’ Kenny then elaborated. This is because while banks have loan target since pre-COVID to catch up with, the economic fundamentals of the region support business to thrive with a GDP level at mid-to-high single digit. As the onshore funding channels were improved, then the fundamentals of their USD bonds. This drove a continuous wave of credit spread compression since the rate peaked in late-2023 and sustained until late-2024.
Apart from the rate landscape, an inevitable topic was how the ASEAN bloc navigate their way under Trump 2.0. ‘During Trump 1.0, the bullseye of his tariff policy was precise – China. For countries such as Vietnam, which has a similar export mix with China, with a correlation of 0.55 times, they benefited with an increase of export to the US by 1.2%.’ However, Kenny pointed out that Trump 2.0 is facing a very high base rate versus his 1.0, it remains uncertain if he can implement a high tariff rate on China or a unilateral tariff to all countries.
Kenny further commented how the differences between Trump 2.0 vs 1.0 will possibly impact the ASEAN economy. ‘The semiconductor sector was not a focus during Trump 1.0 but constantly under the spotlight now. While the sector is emerging in countries ASEAN countries such as Malaysia and Singapore, they will benefit as a substitution to the Chinese export.’
To conclude from a credit market perspective, Kenny highlighted that within the first weeks in January, 3 ASEAN corporates indicated plans for USD bond issuance. With the stabilized and trending down interest rate, backed by a resilient economic growth, the variety of investment themes, especially in sectors, will improve.
The article is a market outlook for information purposes only and should not be regarded as an offer to sell or a solicitation of an offer to buy any security.