CONFIDENTIAL
RESEARCH September 12 2016
ASEAN
Lo ing its lustr Indonesia’s luxury market unlikely to rebound until 2018 due to continued weakness in consumer sentiment
DEMAND ON THE SLIDE FOR APPLE AND SAMSUNG PHONES IN ASEAN
MALAYSIA LABOUR POLICY MISSTEPS HURT PRODUCTION AND ECONOMY
NEW THAI POLITICAL CHARTER ONLY BUYS SHORT-TERM STABILITY
Macro | ASEAN
2 6
CONSUMER Indonesia: Luxury market continues to flatter to deceive
11
CONSUMER Survey finds weakening demand for Apple and Samsung phones
SEP 12 2016
We consider Asean more resilient than most other emerging markets to a turnaround in investor sentiment
Emerging markets have been in the spotlight this summer: investors in the developed world funnelled over $70bn in portfolio investments into emerging market assets between June and August in a hunt for yield, according to the Institute of International Finance. 14 MACRO Asean was an early harbinger of this trend, as we predicted in late 2015 amid concerns Malaysia: Production over Chinese growth (Asean Aug 15 2015, Macro). hurt by migrant Bond yields have fallen as a result. Philippine 10-year bond yields recently reached a record labour policy low of 3.3%, while Malaysia’s are at their lowest since the 2008 financial crisis. Indonesia’s have tightening dropped substantially from a high of 9.5% in September 2015 to 6.9%, the lowest level since 2013. Yields on Thai 10-year government bonds steadily declined from early 2014 to mid-2016 19 MACRO Thailand: New – though they have rebounded recently on heightened political risk. We do not see significant charter reduces scope for further declines in yields in the region, though we consider Asean more resilient than short-term political most other emerging markets to a turnaround in sentiment. risk, longer term It has been a topsy-turvy month for regional politics. At an Asean summit in Laos, unclear most countries softened their stance on the South China Sea dispute, despite the recent international tribunal ruling against China. Nonetheless, there are indications that some 21 METRICS planned Chinese investments in the Asean region may stall. With the exception of the Philippines and Vietnam, consumption growth has continued to slow due to various political and economic uncertainties. This is impacting negatively on Indonesia’s luxury goods market (see Consumer “Indonesia: Luxury market continues to flatter to deceive”) and demand for premium mobile phone brands across most of the region (see Consumer “Survey finds weakening demand for Apple and Samsung phones”).
Indonesia
Investors will focus in the next month and beyond on the government’s renewed attempts to review the country’s controversial mineral ore export ban, initially enacted in 2009. One of the main objectives of the revision is to extend a deadline for full implementation of the mineral ore export ban from January 12 2017, because the development of a domestic smelting industry – the original aim of the 2009 law – is behind schedule, and the government cannot afford to lose tax and non-tax revenue from commodity exports. But the move also highlights the tendency of Jakarta for policy flip-flops. While this revision would provide some relief to mineral exporters – especially copper producers – it will generate uncertainty for companies that have been investing in metal smelting in the past three years. However, most smelting facilities remain unfinished, partly due to financing issues. The coal industry, which is exempt from the export ban, is likely to remain under pressure until 2017 as recent price increases are likely to be unsustainable (see chart 1). Underlying demand for Indonesian coal remains weak due to China’s slowdown. As a recovery of the commodity sector remains in doubt, finance minister Sri Mulyani Indrawati has revised the government’s 2017 GDP growth target down from 5.3 to 5.2 per cent. The government expects household consumption to grow 5.1 per cent, while government spending and private investment should expand by 4.89 and 6.1 per cent, respectively.
Thailand
Thailand’s new draft constitution passed the latest referendum with 61.35 per cent of the vote (see Macro “Thailand: New charter reduces short-term political risk, longer term unclear”). This reduces short-term political risk and makes a mid-2017 election
SEP 12 2016
3
Macro | ASEAN Indonesia Coal Reference 1. Indonesia Coal ReferencePrice Price 150 120 $/tonne
90 60 30
Ja nM 09 ay S e 09 pJa 09 nM 10 ay Se 10 pJa 10 nM 11 ay Se 11 pJa 11 nM 12 ay Se 12 pJa 12 nM 13 ay S e 13 pJa 1 3 nM 14 ay Se 14 pJa 14 nM 15 ay Se 15 pJa 15 nM 16 ay Se 16 p16
0
Source: Indonesia energy and mineral resources ministry
more likely – although we expect further delays. However, turnout of just 59.4 per cent highlights the level of political fatigue among the Thai public. Thailand’s primary consumer confidence index rose in July to 72.5 from 71.6, the first month-on-month improvement since December 2015. However, it remains near a two-year low, and our latest consumer survey found little expectation of economic improvement this year. Our Economic Sentiment Index fell to 51.1 in the second quarter from 52.1 in the first. Year-on-year GDP growth accelerated to 3.5 per cent in the second quarter, better than widely expected, from 3.2 per cent in the first quarter. Stronger consumption and government spending helped boost growth, as did the continued outperformance of the tourism sector (Asean Aug 1, Consumer). Manufacturing growth also improved, though remains sluggish at 2 per cent year-on-year. Exports slid 4.6 per cent year-on-year in July on a US dollar, balance-of-payments basis (see chart 2). Outbound shipments contracted 2.6 per cent over the first seven months of the year. Imports dropped 8.6 per cent in July, so Thailand again posted large trade and current account surpluses.
Malaysia
After lowering its benchmark interest rate 25 basis points to 3 per cent in July, the Malaysian central bank decided to keep it unchanged during its recent September
2. Thai exports slideagain againininJuly July Thai exports slide Trade balance YoY export growth
Current account balance YoY import growth 10
0
0
-8
-10
-16
-20
-24
%
8
$bn
Thailand’s year-onyear GDP growth accelerated to 3.5 per cent in the second quarter, better than widely expected
Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16
Note: Balance of payments basis Source: Bank of Thailand
-30
SEP 12 2016
4
Macro | ASEAN 3. Bank margins and loangrowth growthininMalaysia Malaysia Bank margins and loan % YoY loan growth 15
225
12
200
9
175
6
150
3
Ja n1 Ap 2 r-1 2 Ju l-1 2 Oc t-1 2 Ja n1 Ap 3 r-1 3 Ju l-1 3 Oc t-1 Ja 3 n1 Ap 4 r-1 4 Ju l-1 4 Oc t-1 4 Ja n1 Ap 5 r-1 5 Ju l-1 5 Oc t-1 Ja 5 n1 Ap 6 r-1 6 Ju l-1 6
%
The Malaysian economy may get a fiscal boost as the government prepares to prsent its 2017 federal budget on October 21
Basis points
Bank margins* 250
*Difference between lending rates and funding costs Sources: Bank Negara Malaysia, FT Confidential Research
meeting. The earlier cuts have translated into lower bank lending rates, but it is unclear as yet whether it has boosted loan growth, which decelerated to 5.1 per cent year-on-year in July from 5.6 per cent in June. Meanwhile, banks’ net interest margins – the difference between average lending rates and funding costs – remain depressed as banks compete fiercely for new business (see chart 3). We think Malaysian banks CIMB and RHB will struggle to boost profitability this year despite staff cuts. In addition to a possible further rate cut in November, the economy may get a fiscal boost as the government prepares to present its 2017 federal budget on October 21. Malaysia is entering its election phase, and we believe that prime minister Najib Razak, who is also finance minister, will introduce popular measures to address cost-of-living issues and lessen the negative effects the goods and services tax has had on consumption (Asean Jul 22, Macro). However, it remains to be seen by how much spending will rise since Mr Najib appears committed to cutting the budget deficit to 3.1 per cent of GDP this year, from 3.2 per cent in 2015. Success will depend on crude oil price shifts and the impact of election campaign spending.
Philippines
Despite high-profile provocative antics on the international stage and a risky and heavyhanded war on drugs, business sentiment (both domestic and foreign) towards Rodrigo Duterte’s administration remains cautiously upbeat. On several fronts the government has sent positive signals. Successes over the last two months include measures that simplify business and licensing procedures. Other near-term priorities include tax reforms that would cut income tax while increasing excise taxes, with implementation planned for early 2017. Finally, there is a plan to expedite urban rail and road projects to alleviate Manila’s traffic issues (Asean Sep 3 2014, Macro), an area in which the Aquino administration made limited progress (Asean Feb 24 2015, Macro). Seemingly liberated by his advanced years, Mr Duterte – now 71 – appears to be pursuing loyalty-based politics to push through his agenda as quickly as possible and shows very little concern for the political status quo. This brings both upside and downside risks. Longer-term considerations include promoting greater federalism and fiscal decentralisation, as well as lowering barriers to foreign ownership across several industries, which have long stymied efforts to attract foreign capital. However, it remains too early to judge the administration’s progress. The president has
SEP 12 2016
5
Macro | ASEAN
Domestic and foreign business sentiment towards Rodrigo Duterte’s administration remains cautiously upbeat
left economic policymaking mostly in the hands of his advisors, many of whom hail from Mindanao and have variable levels of expertise and experience. Several key government departments have been entirely re-staffed, with steep learning curves for many. GDP is nonetheless set to remain in the 6.5-7 per cent range until early 2017, regardless of government policy. Annual inflation remains low at just 1.8 per cent and a recent Japan External Trade Organisation survey found that the proportion of Japanese companies invested in the Philippines that are profitable is high relative to other Asean countries (see chart 4), although many continue to wait on clarification of the new government’s incentive structure (Asean Jul 27, Trade).
Vietnam
Vietnam’s macroeconomic environment has remained largely unchanged over the last month. The sudden announcement by Hanoi that it plans to sell majority public stakes in Sabeco and Habeco, the country’s two largest beer companies, was notable. We have previously highlighted some of the factors that have complicated this sale, so progress is encouraging (Asean Apr 15 2015, Trade). A widening fiscal deficit (Asean Apr 26, Macro), as well as a desire to show that the state “equitisation” process is gaining momentum, may have helped drive such progress. However, even more significant is the proposed process by which this sale will take place. Regulators have instructed both companies to first be listed on the stock exchange, hoping to support market-based price discovery. If successful, this structure could be replicated for future government divestments. Both foreign direct investment inflows and tourist arrivals remain strong, with the latter up 25.8 per cent year-on-year year-to-date, boosted by a recent visa waiver programme. n
Share ofof Japanese 4. Share Japanesebusinesses businessesininprofit profitininoverseas overseasmarkets markets % of total, total,financial financialyear year2015 2015 % of
Export-oriented
Domestic-oriented
Overall
80 70 60 50 % 40 30 20 10 0
Philippines
Indonesia
Malaysia
Thailand
Vietnam
China
Source: Japan External Trade Organisation
CONFIDENTIAL
RESEARCH
Asean: Principal Liz Chong Director of Research Gavin Bowring Researchers: Malaysia – Hafiz Noorshams Philippines – Felipe Salvosa Thailand – Dan Gallucci Indonesia – Andy Haswidi
FT Confidential Research: Chairman James Kynge Managing Editor Jeremy Grant Head of Production Heidi Wilson Research Editor Richard Wells Senior Designer Paramjit Virdee Commercial Director James Mann Account Manager James Troy Product Managers David Griffith, Jenny Andrews Email: research.ftconfidentialresearch@ft.com Web: www.ftconfidentialresearch.com FT Confidential Research is published by The Financial Times Limited, Number One Southwark Bridge, London SE1 9HL © The Financial Times Limited 2016 The Client acknowledges that FT cannot provide the Client with any advice on dealing in specific investments and accordingly FT is not providing any such advice or making any recommendation to the Client on the merits of buying or selling or otherwise dealing in particular investments.
SEP 12 2016
Consumer | ASEAN
6
Indonesia: Luxury market continues to flatter to deceive
FIND OUT ABOUT OUR CHINA LUXURY BRAND SURVEY ON OUR WEBSITE: FTCONFIDENTIALRESEARCH.COM
•
Indonesia’s luxury goods market is likely to remain depressed until the end of 2017. Weakness in discretionary spending and the rupiah will continue to drag on sales, affecting brands such as Mercedes-Benz, Hermès and Chanel.
•
Some luxury brands have pinned their hopes on the government’s tax amnesty programme to boost sales but we expect it to provide only a limited short-term lift. • In the longer term, Indonesia remains an attractive luxury market, especially for entry-level products, with the number of people with savings of at least Rp100m ($7,500) growing at an average annual rate of 16 per cent over the past five years.
•
Among the Indonesians in our survey planning to buy luxury products, Gucci, Chanel and Louis Vuitton were the most popular fashion brands, while Rolex was the clear top choice for watches.
FIRST PUBLISHED ON AUG 31
MOST POPULAR LUXURY FASHION AND WATCH BRANDS % of respondents Indonesia
LUXURY FASHION GUCCI Chanel Louis Vuitton Armani Prada Burberry Hermes YSL Dior Givenchy Other GUCCI Armani Louis Vuitton Chanel Burberry Prada Hermes Dior Versace YSL Other
Asean
WATCHES
ROLEX Bulgari Omega Cartier Jaeger-Le Coultre Tiffany Lotus Tudor Chopard Patek Philippe Other ROLEX Omega Longines Bulgari Cartier Patek Philippe Tiffany Lotus Baume & Mercier Tudor Other 0
5
10
15
20
25
0
10
20
30
40
50
Q: Which of the following luxury fashion/watch brands do you plan to buy over the coming six months? (Multiple-choice question with a maximum of two answers) Note: Rebased to remove non-premium brands and “I don’t plan to buy” responses Source: FT Confidential Research
SEP 12 2016
7
Consumer | ASEAN
Indonesia: Luxury market continues to flatter to deceive Our research into Indonesia’s luxury goods market suggests that slower GDP growth, weak commodity prices and currency depreciations are likely to continue to undermine demand. In spite of a recent return to growth in the luxury car and precious stones sectors, we expect overall luxury sales to continue to slow, sustaining a trend stretching back to 2013.
FTCR survey offers reasons for caution
Our latest quarterly survey of the discretionary spending of 1,000 urban Indonesians underpins our pessimism, with our Discretionary Spending Index falling to a record low of 76.9 in the second quarter, down from a recent peak of 85.3 in the fourth quarter of 2015 (see chart 1). The urban consumer is the main target demographic for luxury brands in Indonesia. Future Consumer Borrowing and Household Income indices for the country also slipped to record lows in the second quarter: the latter fell to 79.6, from 86.2 in the first quarter, while our borrowing metric slipped 5.4 points to 50.2, the lowest reading in the history of the survey. “Sales have definitely been impacted recently [by weak consumer sentiment], more so this year compared to last year,” said Shannon Hartono, vice president of Time International, which holds retailing rights for 40 global watch and fashion brands, including Cartier, Rolex and Chanel’s fragrance and beauty line. Drawing on numerous indicators, including government records on revenue from the imported luxury goods tax, we calculate that luxury sales, excluding property, fell 15.5 per cent in 2015 to Rp10.8tn (see chart 2). This contraction follows on from a 26.7 per cent slide in luxury sales in 2014 and a 13.6 per cent fall in 2013, when the so-called mini currency crisis began after the US Federal Reserve announced it would taper its quantitative easing programme.
Secondary market also feeling the pinch
Further weakening of demand is also clear in the popular secondary market. “I felt the pressure brewing in 2014, but things didn’t turn for the better in 2015. This year, however, is definitely the worst,” said 33 year-old Della Rae, a luxury goods reseller who specialises in Hermès and Chanel products. Our research suggests there are at least 500 individual merchants or resellers currently selling new and used luxury goods originally purchased overseas, taking advantage of
1. FTCR consumerindices indicesfor forIndonesia Indonesia FTCR consumer Discretionary Spending Index Household Income Index
Future Consumer Borrowing Index
90 80 50=no change
“Sales have definitely been impacted recently [by weak consumer sentiment], more so this year compared to last year”
70 60 50
Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216
Q: How has your household spending on non-essential items changed this month compare to a year ago? Q: How do you expect your consumer borrowing to change in the next 6 months? Q: How has your household income this month changed compare with the same month last year? Any index reading above 50 indicates an increase; any reading below 50 indicates a decrease Source: FT Confidential Research
SEP 12 2016
8
Consumer | ASEAN
Indonesia: Luxury market continues to flatter to deceive Annual transaction 2. Annual transactionvalue valueofofluxury luxuryproducts productsin inIndonesia Indonesia property Excludes property
Annual growth rate 80
20
70
15
60
10
40
5
20
0
0
-10 -20
%
Rp tn
Total value 25
-20 2011
2012
2013
2014
2015
2016E
2017E
-40
Source: FT Confidential Research
cheaper prices and better availability in other markets. Resellers typically display their products on Instagram or Facebook, and also make use of WhatsApp or Line chat groups. The market slump has led to merchants slashing prices. For example, the classic Birkin bag from Hermès is now being offered for Rp170m, down from Rp200m. But Ms Rae told us that even with a discount, many agents were still struggling to sell goods, adding that people are trading down to smaller items. Rubby Rulianto, a reseller and personal shopper for high-net-worth individuals (HNWIs), top politicians and government officials, said she has been forced to diversify into niche segments and monitor the latest trends more closely, though vintage Birkin and Kelley bags still draw huge interest, fetching prices as high as Rp1bn.
Rolex and Gucci on top
Similarly, Ms Rulianto highlighted Rolex as a brand for which demand has remained robust. This is in line with our second quarter consumer brands survey, which found the Swiss watchmaker was the number one choice among respondents planning to buy a luxury watch in all five Asean countries we survey. Similarly, it was the number one aspirational watch brand in our recent China survey (China Aug 9, Consumer). Bulgari was the second-ranked timepiece brand in Indonesia, notably different from the four other Asean markets surveyed, where Omega took second place. In terms of luxury fashion brands, our survey found reasons for confidence for Gucci, Chanel and Louis Vuitton in Indonesia, with these results similar to elsewhere in the region.
Tax amnesty to the rescue?
Rp170m Current price of the classic Birkin bag from Hermès, down from Rp200m
Yet at the same time we believe that luxury retailers should temper expectations that demand will rebound sharply on the back of the government’s tax amnesty programme. The amnesty allows Indonesians to register undeclared assets for a one-time progressive tax of 2-10 per cent, depending on how soon they are declared, rather than face more severe penalties. The programme is largely intended to encourage the repatriation of offshore funds and boost liquidity in the financial system. Retailers told us they expected some of this liquidity to trickle down to them, boosting demand for big-ticket items, such as property, cars and luxury consumer products. However, after roughly 50 days the government had raised only Rp2.14tn in revenue from the programme, just 1.3 per cent of its Rp165tn target, from Rp103tn of newly declared assets. Interestingly, only 21.1 per cent – or Rp21.8tn – of that total was actually held offshore, and only Rp7.7tn has been repatriated so far. In other words, the scheme has been more beneficial to Indonesians with undisclosed onshore assets, rather than those holding wealth offshore.
SEP 12 2016
Indonesia: Luxury market continues to flatter to deceive
BLOOMBERG
9
Consumer | ASEAN
The amnesty may also indirectly boost luxury spending. The Indonesian authorities have cracked down on tax evasion under President Joko Widodo, but as their resources are limited, they have had to get creative. They started collecting data on luxury purchases and making big shoppers prove how they could afford such goods, which discouraged luxury spending in general. As such, those who take part in the amnesty programme should no longer be wary of tax investigations and spend more freely. Yet in aggregate the impact of the tax amnesty is likely to disappoint what were overinflated expectations.
Currency matters
An often overlooked factor, but one likely more crucial to the fortunes of the luxury market in Indonesia, is the movement of the rupiah, which severely crimps purchasing power for international goods. Sales of high-end cars, for example, have correlated closely with movement in the currency over recent decades. As the rupiah began to weaken against the US dollar in 2012, in line with The longer-term prospects for Indonesia’s luxury market are bright lower demand for Indonesian commodities, so did total unit sales of high-end saloon cars, breaking a five-year growth streak by falling 4.1 per cent to 5,116 units. As the currency has continued to slide, so have sales, falling to 4,653 units by 2014 (see chart 3). Although sales rose 8.4 per cent last year there are signs that this recovery will be short-lived: luxury saloon sales were down 38.9 per cent year-on-year in the first six months of 2016. This fall has come despite the strengthening of the rupiah against the dollar in the past three quarters, as risk appetite for emerging market assets has grown, capital has flowed in following the Brexit vote and economic fundamentals have improved. While the impact of currency depreciation on demand for luxury goods is immediate, the positive impact of
3. Sales luxurysaloon salooncars carsaffected affectedby bystrength strength of of rupiah rupiah Sales ofof luxury Luxury saloon unit sales
Mercedez Benz unit sales*
Rp/$ exchange rate 0 3,000
6
6,000
4
9,000
2
12,000
0
15,000
19 9 19 1 92 19 9 19 3 94 19 9 19 5 96 19 9 19 7 98 19 9 20 9 00 20 0 20 1 02 20 0 20 3 04 20 0 20 5 06 20 0 20 7 08 20 0 20 9 10 20 1 20 1 12 20 1 20 3 14 20 15
8
*S, E and C series Source: Gaikindo, World Bank, FTCR calculations
Rate (inverted)
Units (000s)
10
SEP 12 2016
10
Consumer | ASEAN
Indonesia: Luxury market continues to flatter to deceive appreciation and stabilisation tends to take some time to manifest. As such, and assuming the rupiah does not fall back significantly in the interim, we do not expect the luxury market to rebound until 2018.
Is set to open a sixth store in Indonesia next year
Look to the aspiring middle class
As with other emerging markets, we believe this recovery will actually be led not by the affluent or HNWIs, but by Indonesia’s growing aspirational middle class. The demand for luxury goods among the middle class is in fact already strong. Of the 27.7 per cent of Indonesians in our survey who expressed plans to purchase luxury fashion goods within the next six months, more than half were in the middle-income group, defined as those earning Rp30m-300m a year. In an attempt to assess the true purchasing power of this income group, we analysed savings data at Indonesian banks. Our research found that there were just over 2m Indonesians with savings of more than Rp100m in 2015 (see chart 4), up from just 1.2m in 2010 – an average annual increase of 16 per cent. Meanwhile, nearly 500,000 had in excess of Rp500m in savings, more than double the 240,000 five years prior. Even at the lower of those two savings levels (Rp100m), entry-level luxury is relatively affordable. For example, the Speedy handbag from Louis Vuitton currently retails at about Rp15m, while espadrilles slip-on shoes from Chanel go for Rp9m a pair. Reflecting the rise of this aspirational middle-class consumer, Mercedes-Benz and Lexus both told FTCR they are focusing on sports utility vehicles and crossovers that offer more affordable price points and sporty designs. More broadly, the continued rapid expansion of the potential luxury customer base means that, despite its slide in recent years, Indonesia’s luxury market will continue to attract investment. Bulgari is set to open a sixth store in the country next year, while we have learned that Time International, which currently operates 92 stores in Indonesia, plans to open new ones in Jakarta, Bali, Bandung and Surabaya soon. So while we expect the country’s luxury market to underwhelm in the short term, the longer-term prospects are much brighter. n
4. Personal savings held in Indonesian banks Personal savings held in Indonesian banks Average savings/ person (Rp)
85.7m
3.9m ($293) 905,000
140.4m
322.5m
No. of people with bank savings
738.6m 611,000
1.4bn
250,000
3.1bn
126,000 75,000 41,000
24.2bn ($1.8m)
Source: FT Confidential Research
SEP 12 2016
Consumer | ASEAN
11
Survey finds weakening demand for Apple and Samsung phones
FOLLOW US ON TWITTER: @FTCR_ASEAN
•
FT Confidential Research’s latest survey found a fall in the share of Asean consumers surveyed – with the exception of Filipinos – that plan to buy Apple and Samsung phones in the next six months.
•
Demand for Chinese brands increased sharply among our survey respondents in Indonesia – the region’s largest market – as growth in mobile phone penetration from a relatively low base drives demand for entry-level handsets. In Malaysia and Thailand, by contrast, demand for Oppo and Xiaomi fell, though this reflected a broader weakening of purchasing plans due to economic slowdowns and relatively high smartphone penetration rates.
•
Overall phone demand in the Philippines continues to rise in line with its relatively strong economic situation.
FIRST PUBLISHED ON AUG 9
Mobile phone brand buying intentions in Asean Top 5 brands in each country
VIETNAM
THAILAND PHILIPPINES MALAYSIA
INDONESIA
2015
35.9
32.0
Samsung
34.6
24.7
Apple
35.3
44.6
Samsung
32.1
27.5
Apple
38.8
30.4
Apple
22.1
0.3 17.9
Apple
31.4
24.4
Samsung
30.3
33.7
13.3 7.1 Xiaomi
27.2
6.3 9.8 Xiaomi
7.8
8.6 Sony
18.8
Samsung
Oppo
6.2
6.3
▼
6.4
4.3
4.5
Oppo
4.0
▼
5.7
4.8
4.2
5.2
4.4
Lenovo
Oppo
4.0
3.3 Sony
15.1
7.2 Oppo
Q: Which brand of mobile phone do you plan to buy over the next six months? Source: FT Confidential Research
6.6 10.1 Nokia
86.7 63.7
82.7 97.8
LG
2.6
1.0 Nokia
▼
10.4 7.0
76.3
Sony
▲ 4.9
76.6
Lenovo
10.8
Samsung
22.5
6.8
5.3
23.0
Apple
30.5
Total
2016
5.8
8.2 Sony
▼
74.0 63.2
82.9 72.5
SEP 12 2016
12
Consumer | ASEAN
Survey finds weakening demand for Apple and Samsung phones GETTY
Apple and Samsung remained the top smartphone brands in our Q216 consumer survey
Apple and Samsung remained the top smartphone brands in FT Confidential Research’s Q216 survey of Asean consumers, but purchasing intentions weakened almost across the board for premium phone brands, with the Philippines the only exception. In Malaysia and Thailand weaker demand is now also hitting the lower-end of the market, with lower popularity for Chinese brands Oppo and Xiaomi.
Gloomy picture in Malaysia and Thailand
Phone purchasing sentiment was very weak among respondents in Malaysia and Thailand, which likely reflects their shared pessimism about their respective countries’ economic prospects (see chart 1). Despite the high-profile release of the Apple iPhone 7 in September and the Samsung Galaxy S7 earlier this year, purchasing intentions for Apple were 9.9 percentage points lower than in our 2015 survey, and those for Samsung had slipped 7 percentage points.
1. FTCR Economic Sentiment Index readings across Asean FTCR Economic Sentiment Index readings across Asean Indonesia
Malaysia
Philippines
Thailand
Vietnam
80
50=no change
70 60 50 40 30 20
Q313
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
Q415
Q116
Q216
Q: How will the economic climate change in the next 6 months? Note: Any index reading above 50 indicates positive sentiment, any reading below 50 indicates negative sentiment Source: FT Confidential Research
SEP 12 2016
13
Consumer | ASEAN
13.3%
Of our Indonesian respondents planned to buy a Xiaomi phone in the following six months, up from 7.1 per cent last year
Survey finds weakening demand for Apple and Samsung phones The economic mood has grown so gloomy that respondents are even beginning to eschew cheap Chinese brands, although this is also being driven by the fact that consumers in both countries are relatively well-equipped with phones. Though these markets are far from saturated, smartphone penetration rates for both Malaysia and Thailand exceed 60 per cent, according to data from GSMA Intelligence. In contrast, the penetration rate is 48.8 per cent in the Philippines, 46.7 per cent in Indonesia and just 30.9 per cent in Vietnam (see chart 2). Last year, our survey found a surge in interest in brands Oppo and Xiaomi at the expense of premium brands (Asean Jun 10 2015, Consumer). But as our Q216 survey shows, the honeymoon did not last long. While many were attracted initially by lower prices, issues with the quality of the Chinese brands are eroding their popularity in the region.
Chinese brands on the rise in Indonesia
This does not, however, include Indonesia, where demand for entry-level phones among our survey respondents rose sharply. Xiaomi’s rise was particularly impressive: in the second quarter of this year, 13.3 per cent of our Indonesian respondents planned to buy a Xiaomi phone in the following six months, up from just 7.1 per cent last year. This reflects the fact that mobile phone penetration remains relatively low, which is driving demand for cheaper handsets as first-time buyers enter the market. The picture is more mixed in Vietnam, with both Samsung and Oppo improving in popularity. Purchasing intentions for Apple fell a sharp 8.4 percentage points since our last survey, while those for Nokia slipped 3.5 percentage points. The Finnish brand’s Windowspowered Lumia models were popular in Vietnam, despite the company’s global struggles in recent years, but it is increasingly being squeezed out by Android-based smartphones. Only 6.6 per cent of our Vietnamese respondents planned to buy a Nokia phone this year, down from 10.1 per cent in 2015.
Smartphone demand up sharply in Philippines
The most positive survey findings were in the Philippines. Filipinos with whom we spoke planned to purchase more phones this year than in our last survey as the country’s economy continues to expand faster than its Asean peers. Buying intentions improved for all of the major phonemakers. A substantial 44.6 per cent of respondents planned to buy a Samsung phone, up from 35.3 last year, while 33.7 per cent wanted an Apple handset, up 3.4 percentage points year-on-year. Purchase plans also improved for Sony, Lenovo and LG – the other top brands in this market. Filipinos we surveyed had little appetite for the cheaper Chinese brands, unlike many of their Asean peers. Only 1.5 per cent of our respondents in the Philippines intended to buy a Xiaomi smartphone in Q216. n
2. Asean smartphonepenetration penetrationrates rates Asean smartphone Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
80 70 60 %
50 40 30 20 10
Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216
Source: GSMA Intelligence
14 18 INSIGHT: Malaysia’s army of foreign workers
Macro | ASEAN
SEP 12 2016
Malaysia: Production hurt by migrant labour policy tightening •
The Malaysian government is finding it hard to phase out sectors of the economy dependent on low-skilled labour, with policy flip-flops on migrant workers disrupting agricultural and manufacturing production.
•
As the cost of hiring migrant workers rises, the profit margins of builders and manufacturers such as Top Glove are falling. While some manufacturers may leave Malaysia for cheaper bases, the latest policy tightening is unlikely to reduce the country’s dependence on migrant labour.
•
We think tight labour policy will exacerbate problems with weak domestic and external demand to drag down 2016 GDP growth to 3.9 per cent from 5 per cent last year.
A
fter a series of policy flip-flops, the Malaysian government has made regulatory changes that reduce the supply and increase the cost of foreign workers. FT Confidential Research believes the controversial move is more likely to slow economic growth than significantly reduce Malaysia’s reliance on migrants, at least in the short term. We expect GDP to grow just 3.9 per cent this year, down from 5.0 per cent last year, with economic drag from weak domestic and overseas demand now supplemented by increased levies on foreign workers and an unexpected suspension of migrant labour intake.
Low-skilled, labour-intensive industries hard to phase out
While Malaysia is keen to move its economy up the value chain, labour-intensive industries remain important employers and cannot be easily phased out. Sectors such as construction and agriculture that rely on migrant workers to fill low-skilled positions also employ many locals, largely in more skilled positions such as engineers and managers. Malaysians make up about one-quarter of the 1m-strong construction workforce, mostly occupying mid- and higher-level positions. As such, cutting off the supply of migrant labour would, in time, eliminate many higherpaying jobs and push up unemployment, which could undermine still-fragile political stability. Furthermore, locals are unlikely to take over jobs vacated by migrants, as many view work in factories or agriculture as dirty, dangerous and demeaning. When the government unexpectedly enacted a ban on new migrant labour from March to May of this year, businesses could not find enough locals willing to take on these positions. A rise in the unemployment rate this year, to 3.4-3.5 per cent from 3 per cent in early 2015, has done little to drive locals into the lowest-paying jobs. Prime Minister Najib Razak wants to replace these jobs with higher-skilled ones. He has liberalised foreign equity ownership in telecoms, engineering, healthcare, education and other professional services to encourage investment and create more lucrative jobs in these fields. But these measures will take many years to bear fruit.
Policy inconsistency hurts production FIRST PUBLISHED ON AUG 17
The conflicting objectives of a smaller migrant population and stable economic growth are complicated by the absence of an integrated immigration system. According to a 2015 study by the World Bank, more than 10 ministries, each with separate objectives,
SEP 12 2016
1. YoY manufacturingproduction productiongrowth growthin inMalaysia Malaysia YoY manufacturing 7 6 % 5 4 3 n1 Fe 5 b1 M 5 ar -1 Ap 5 rM 15 ay -1 Ju 5 n15 Ju lAu 15 g1 Se 5 p1 Oc 5 t-1 No 5 v1 De 5 c1 Ja 5 n1 Fe 6 b1 M 6 ar -1 Ap 6 rM 16 ay -16
No. of additional Bangladeshi workers to be recruited in the next three years to fulfil Malaysian labour demand
are involved in the approval process for incoming workers. This bureaucratic web has contributed to a series of policy flip-flops, including the new migrant labour ban earlier this year. In February, the Human Resource Ministry announced that Malaysia would recruit 1.5m additional Bangladeshi workers to fulfil domestic labour demand in the next three years. But a public uproar ensued, with migrant labour often blamed for depressed local wage growth. Home Minister Ahmad Zahid Hamidi, also the deputy prime minister, reacted later that same day by freezing further labour intake. The wild policy swing caught industries off guard. Vacancies went unfilled and manufacturing production was disrupted for several months (see chart 1). Oil palm planters suffered even more. Palm fruits have a short shelf-life and harvesting the crop requires extensive manual labour. The ban caused sections of the harvest to go uncollected, and production – already strained by the El Niño dry season – tumbled (see chart 2). The second quarter results for various large companies affected by the ban have yet to be released but we expect their net earnings to have taken a significant hit. This is especially so for plantation groups with outsized upstream activities like Felda Global Ventures and Genting Plantation. Felda and Sime Darby are the largest employers of foreign labour in
Ja
1.5m
Malaysia: Production hurt by migrant labour policy tightening
Source: Department of Statistics Malaysia
YoY palm 2. YoY palmoiloilproduction productiongrowth growthininMalaysia Malaysia 15 10 5 0 % -5 -10 -15 -20 -25
Ja n15 Fe b15 M ar -15 Ap r-1 5 M ay -15 Ju n15 Ju l-1 5 Au g15 Se p15 Oc t-1 5 No v15 De c15 Ja n16 Fe b16 M ar -16 Ap r-1 6 M ay -16 Ju n16
15
Macro | ASEAN
Sources: Department of Statistics Malaysia, Malaysian Palm Oil Board
SEP 12 2016
16
Macro | ASEAN
Levy and intake bans on foreign workers in Malaysia Increase in levy (%) Construction 48 Manufacturing 48 Services 48 Plantation 8 Annual levy per person (Rm) Construction 1,850 Manufacturing 1,850 Services 1,850 Plantation 640 Additional intake ban Construction No Manufacturing No Services Yes Plantation No Source: Ministry of Home Affairs
Malaysia: Production hurt by migrant labour policy tightening the agriculture sector, employing about 44,000 workers between them. Felda lost Rm60m ($15m) in the first quarter of the year due to low production and we expect the company to take bigger losses in the next quarter. Persistent complaints from businesses forced the government to partially lift the intake ban in May, with the embargo only still in place in the service sector. Nevertheless, significant damage has been done, and this is even before considering the harm wrought by separate moves to increase levies on employing migrant labourers.
Levy hikes squeeze margins
We believe the measures to raise levies on foreign workers have affected manufacturing even more severely than the temporary intake ban. Manufacturers must now pay Rm1,850 for each migrant hired, a 48 per cent increase from prior levels. Plantations have to pay Rm640 per head, an 8 per cent rise. Manufacturers are already struggling this year as both external and domestic demand cools. Margins are now being eroded on the cost side as well. Among the manufacturing subsectors heavily dependent on foreign workers are: • electronics • rubber products • garments; and • furniture. Top Glove, one of the world’s largest disposable-glove makers, has been forced to raise its average selling price by $0.20-0.25/1,000 pairs this year to address rising input costs, including wages. Smaller manufacturers may not be able to raise their selling prices and weaker industrial production growth suggests they are cutting production instead. Manufacturing accounted for nearly a quarter of the Malaysian economy in 2015, so any downturn will have a significant impact on overall growth (see chart 3). The overall dismal economic picture is reflected in pessimism among Malaysian consumers. FTCR’s Economic and Property Buying sentiment indices for Malaysia have both been below 50 since early 2015, indicating that a majority of respondents believe the economic situation will worsen and that it is a bad time to buy property (see chart 4). We believe the higher levy will also further discourage property developers from starting new projects, instead relying on public infrastructure jobs. Taken in sum, these levies and the migrant labour curbs exacerbate weakening domestic and external demand to support our expectations that GDP growth will slide to 3.9 per cent this year, from 5 per cent in 2015.
Sectoral share 3. Sectoral shareofofMalaysian MalaysianGDP GDPinin2015 2015 Services
Manufacturing
Mining
Agriculture
4.4% 9.0% 9.1%
54.2% 23.3%
Source: Department of Statistics Malaysia
Construction
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17
Macro | ASEAN
Malaysia: Production hurt by migrant labour policy tightening BLOOMBERG
Construction sector relies on migrant workers to fill low-skilled positions, but also employs many locals in more skilled positions such as engineers and managers
Some manufacturers may desert Malaysia
FTCR believes, in the short term, employers will have to simply pay up for the migrant workers they need and accept the margin erosion. But, in the longer term, some may leave Malaysia. Singapore’s experience is instructive. The city-state has been raising levies on foreign workers since 2013 in a bid to quell public discontent over its large foreign population. About 40 per cent of the total population in 2015 were foreigners, versus 10.7 per cent in Malaysia (see Insight). Higher levies led to a labour shortage and GDP growth slowed to 2 per cent last year, from 4.7 per cent in 2013. Smaller industrial companies migrated to the nearby Malaysian state of Johor to lower costs. We see signs of a similar trend starting to play out in Malaysia. In July, hard-drive maker Western Digital announced plans to transfer parts of its Penang operations to Thailand, where it also has a manufacturing base, in order to control costs. Approximately 400 Malaysians and 800 foreigners will be laid off. Seagate, which in 2014 invested Rm1bn in Batu Kawan in Penang, is also moving its operations to Thailand next year.
FTCR’s Economic Malaysia 4. FTCR’s Economicand andProperty PropertyBuying Buyingsentiment sentiment indices indices for Malaysia Economic Sentiment Index
Property Buying Sentiment Index
60
50=no change
50 40 30 20
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
Q: How will the economic climate change in the next six months? Q: Do you think now it is a good time to buy property? Note: Any index reading above 50 indicates positive sentiment, any reading below 50 indicates negative sentiment Source: FT Confidential Research
SEP 12 2016
18
Macro | ASEAN
Malaysia: Production hurt by migrant labour policy tightening A US embassy official in Kuala Lumpur told FTCR that US companies were concerned with the labour situation in Malaysia, and more could relocate, though he stressed that the main driver was weak global electronics demand and technological changes affecting the industry. Nevertheless, if more large manufacturers threaten to leave, the government may hesitate to tighten its labour policy further. n
INSIGHT: Malaysia’s army of foreign workers
M
alaysia is heavily dependent on foreign labour. Most foreign workers are unskilled and paid poorly. The Department of Statistics estimates that there are 3.3m foreigners in Malaysia, about 10.7 per cent of the total population, though the true foreign population may be even bigger. Malaysia, Thailand and Singapore are the favourite destinations of migrants in the region as the richest Asean economies (along with Brunei) with the best employment
opportunities. According to the Malaysian home ministry’s database, there were 2.1m legal aliens in the country last year, with an additional 1.4m-1.7m undocumented. Other sources claim there are as many as 4m illegal immigrants in the country. Malaysia’s borders are generally porous and Asean citizens – apart from Burmese – can enter the country without visas. The construction sector accounted for the largest share of documented foreign workers, as
of the end of 2015. About 35 per cent of legal aliens participated in construction, with the rest roughly evenly distributed between agriculture, manufacturing and services (see chart). Official statistics show that 39.2 per cent of these workers came from Indonesia, largely due to its proximity, but in the past ten years, more and more Nepalese, Bangladeshis and Burmese have migrated to Malaysia. These newer immigrants collectively comprised 43.5 per cent of the legal migrant population in 2015.
LEGALLY REGISTERED FOREIGN WORKERS IN MALAYSIA, BY SECTOR 745,000
CONSTRUCTION
AGRICULTURE
MANUFACTURING
SERVICES
498,000 450,000
3.3m
442,000
No. of foreigners in Malaysia, about 10.7% of the total population
BY ORIGIN (%) NEPAL: 24
INDONESIA: 39
BANGLADESH: 13 Source: Ministry of Home Affairs
MYANMAR: 7
INDIA: 7
PHILIPPINES: PAKISTAN: 3 3
OTHER: 4
19
Macro | ASEAN
SEP 12 2016
Thailand: New charter reduces short-term political risk, longer term unclear •
The referendum result approving a new draft constitution reduces short-term political risk and is positive for the Thai economy. Approval of the constitution means an election may be held in mid-2017, as promised, though we caution that delays remain likely.
•
The new charter does not address Thailand’s long-term political divide. By strengthening the military’s political influence, the constitution may incite protests in future if the electorate feels its voices are not being heard.
T
he outcome of Sunday’s referendum is good news for the Thai economy, at least for now. With a constitution in place – albeit a flawed one – Thailand can move toward a return to civilian government. The charter will weaken the ability of the Thakin Shinawatra-backed Puea Thai party to win an outright majority in parliament, but it will still most likely lead the next government. Although the charter will not help to resolve the country’s deep political divisions, factions that oppose the junta are unlikely to take to the streets with an election on the horizon. For a country that has lagged its Asean peers in GDP growth and overall economic progress during a decade of political turmoil, we view any movement towards stability as positive. Consumers and investors alike will now breathe a small sigh of relief. Rating agency Standard & Poor’s left Thailand’s sovereign rating unchanged but said the outcome is a net positive.
Consumer sentiment to rebound
We expect consumer sentiment, currently at its weakest level since the post-coup honeymoon period (Asean Jul 13, Macro), to rebound a little in the remaining months of 2016. However, confidence will not greatly improve until after the next election, assuming the global economy takes no sharp turns. FT Confidential Research’s Economic Sentiment Index for Thailand fell to 51.1 in the second quarter, from 52.1 in the first (see chart). The reading remained above 50, indicating expected improvement, but this largely reflects a low base effect. Only 6.9 per cent of our respondents held positive views of the current economic situation, while 58 per cent were negative. Political and economic sentiment have correlated strongly since the military coup in 2013.
Democracy seen as the problem
FIRST PUBLISHED ON AUG 8
Since King Prajahipok was ousted in 1932 as Thailand’s last absolute monarch, there have been 12 successful coups, seven failed ones, and 21 constitutions including temporary charters. In Thailand, the leaders of a successful coup prefer to tear up an existing charter and replace it with one that pardons them and aims to correct the perceived problems that led to the coup. For the latest two coups, this problem has been democracy. Despite open criticism of the draft charter by Abhisit Vejajjiva, head of the Democrat party, Thaksin Shinawatra and leaders of the Puea Thai party – not to mention many prominent activists – the constitution was approved by 61.5 per cent of voters, according
SEP 12 2016
20
Macro | ASEAN
Thailand: New charter reduces shortterm political risk, longer term unclear FTCR economic and political indicators for Thailand Economic Sentiment Index
Political Sentiment Index
100
50=no change
80 60 40 20
Q313
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
Q415
Q116
Q216
Q: How will the economic climate change in the next six months? Q: How will the domestic political climate change in the next six months? Note: Any index reading above 50 indicates positive sentiment, any reading below 50 indicates negative sentiment Source: FT Confidential Research
to initial tallies. However, only approximately 55 per cent of those eligible voted, lower than the 57 per cent turnout for the referendum after the 2006 coup, and far below the turnout in recent general elections. The low turnout points to the severe political fatigue felt by the public and the climate of fear created by the junta’s crackdown on public criticism and debate over the constitution. Notably, just 51 per cent voted against the constitution in the north-east, a bastion of support for Mr Shinawatra and Puea Thai, down from 62 per cent in 2007. South and central regions, including Bangkok, voted heavily in favour of the charter, with the margin much narrower in the north.
Fundamental issues remain
35%
Of our 1,000 Thai respondents supported the draft charter
The new charter does nothing to resolve Thailand’s deeper identity crisis as a country pulled between modern democracy and oligarchy. The most controversial elements of the constitution legalise greater political influence for the military and reduce the ability of a popular party to form a government on its own. If the charter proves overly effective in either of these areas, Thais may again take to the streets. The senate, or upper house, which holds important veto powers, will now be fully appointed by the junta. It will also join the lower house in electing a new prime minster in the event of a vote of no confidence in the incumbent. At the same time, the rules for elections for the lower house of parliament have been rejigged to make it easier for smaller parties to gain seats, thereby making it more difficult – but not impossible – for any single party to gain a majority. In 2001, Mr Shinawatra’s Thai Rak Thai party and its affiliates took a majority of lower house seats and formed the first elected government in Thai history that was not a fractious mix of smaller parties. The 2005, 2006 (which was later nullified), 2008 and 2011 elections produced similar results. In FTCR’s June consumer survey, just 35 per cent of our 1,000 Thai respondents supported the draft charter, while 14.9 per cent opposed it. A full 50.1 per cent did not wish to answer (Asean Jul 20, Macro). We believed that a majority of the latter group would vote “no” in the referendum, but most appear to have stayed home. The result of the referendum makes it significantly more likely that the junta will hold an election in mid-2017 as promised. However, the poll could potentially still slip to late-2017 or 2018 – or even later given the precarious health of the king. If the monarch dies before a planned election, the junta will most likely delay the poll several months at least, and may exert greater control over the next civilian government than it otherwise would. n
21
Metrics | ASEAN ASEAN CONSUMER INDICES
GOING UP
$111.4bn
8.3%
7.0%
Indonesia: foreign reserves in July, up from $109.8bn in June
Malaysia: YoY imports in June, up from 3.1% in May
Philippines: YoY GDP in Q216, up from 6.9% in Q116
GOING DOWN
3.4%
Indonesia: YoY house price index in Q216, down from 4.2% in Q116
savings 0.98% Malaysia: interest rate in July, down from 1.07% in June
5.0%
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Thailand: YoY total loans in June, down from 6.1% in May
Asean 5 Indonesia Malaysia Philippines Thailand Vietnam FTCR Asean Economic Sentiment Index 3Q15 59.0 68.3 29.5 41.9 52.9 66.3 4Q15 63.0 74.5 24.2 48.4 53.9 66.7 1Q16 60.3 66.6 30.2 54.2 52.1 65.4 2Q16 66.8 75.2 35.7 66.9 51.1 65.5 FTCR Asean Political Sentiment Index 3Q15 55.9 62.2 29.1 38.3 62.0 62.2 4Q15 56.3 63.8 24.8 39.2 59.2 62.3 1Q16 59.5 66.6 23.1 51.7 57.1 62.2 2Q16 60.6 64.1 30.9 61.7 56.5 62.4 FTCR Asean Household Income Index 3Q15 74.2 80.2 72.4 66.0 67.5 71.9 4Q15 76.8 83.2 71.3 70.5 69.0 73.3 1Q16 80.3 86.2 73.5 75.1 68.9 80.2 2Q16 75.4 79.6 73.2 71.9 67.1 74.6 FTCR Asean Discretionary Spending Index 3Q15 74.4 81.4 74.8 60.0 66.6 76.2 4Q15 77.4 85.3 72.6 65.0 68.3 77.3 1Q16 73.5 78.3 75.8 64.2 63.9 76.8 2Q16 72.9 76.9 78.7 65.1 63.7 75.3 FTCR Asean Average Cost of Living Change YoY (%) 3Q15 30.2 32.3 37.9 24.9 25.5 30.9 4Q15 29.8 32.1 38.5 24.9 22.4 31.8 1Q16 26.5 28.8 32.8 23.7 20.3 25.8 2Q16 26.9 28.7 31.5 24.5 21.9 27.0 FTCR Asean Consumer Borrowing Index 3Q15 67.1 72.8 67.8 62.7 57.1 63.2 4Q15 67.2 73.1 67.3 62.0 60.1 61.4 1Q16 69.2 76.6 68.4 62.8 59.3 63.1 2Q16 66.4 69.6 68.1 64.9 62.4 61.4 FTCR Asean Future Consumer Borrowing Index 3Q15 56.4 51.2 67.4 56.8 58.3 65.4 4Q15 58.5 54.8 66.4 61.2 58.2 63.6 1Q16 59.2 55.6 67.9 59.6 59.3 65.8 2Q16 56.1 50.2 65.7 58.9 60.2 63.2 FTCR Asean Motorbike Purchase Index 3Q15 28.4 31.3 18.8 22.5 21.2 35.7 4Q15 30.1 37.9 13.9 13.7 24.0 36.4 1Q16 32.9 43.0 16.0 18.4 19.8 36.0 2Q16 24.9 31.9 10.9 15.7 15.8 26.6 FTCR Asean Car Purchase Index 3Q15 23.1 26.9 22.5 22.1 25.9 11.5 4Q15 26.4 31.8 24.0 22.9 27.9 15.0 1Q16 30.0 36.5 22.9 27.5 24.5 20.7 2Q16 28.5 36.6 16.0 25.1 28.3 14.2 FTCR Asean Property Purchase Index 3Q15 46.3 52.8 44.2 46.8 37.0 35.6 4Q15 51.0 62.3 44.7 42.7 39.9 39.0 1Q16 51.3 61.9 42.2 45.6 34.1 44.2 2Q16 49.4 58.8 46.9 44.6 37.9 37.8 FTCR Asean Property Buying Sentiment Index 3Q15 45.7 40.1 28.0 66.8 30.2 55.2 4Q15 53.9 55.1 31.8 63.9 39.2 58.1 1Q16 56.7 60.5 33.6 67.4 33.4 59.8 2Q16 52.6 53.0 39.6 64.1 31.7 58.9 FTCR Asean Property Price Expectation Index 3Q15 80.6 81.3 79.9 85.8 75.6 76.8 4Q15 81.5 82.4 76.2 84.9 78.4 79.4 1Q16 83.8 85.6 76.2 87.0 81.1 79.9 2Q16 82.3 83.2 77.5 83.9 79.6 81.7
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22
Metrics | ASEAN MONEY AND BANKING Indonesia Malaysia Philippines Thailand M1 (YoY change %) Apr-16 13.5 -0.9 18.2 6.8 May-16 14.1 1.2 17.4 4.6 Jun-16 13.9 0.9 17.2 7.5 Jul-16 – 2.0 – 6.7 M2 (YoY change %) Apr-16 7.2 1.4 12.8 4.2 May-16 7.6 2.1 13.6 3.7 Jun-16 8.7 1.8 13.9 4.3 Jul-16 – 2.0 – 4.1 Total loans (YoY change %) Apr-16 7.7 6.3 14.9 4.5 May-16 8.1 6.2 17.3 6.1 Jun-16 8.7 5.6 16.2 5.0 Jul-16 – 5.1 – – Total deposits (YoY change %) Apr-16 6.0 -1.3 – 2.8 May-16 6.3 -0.4 – 2.8 Jun-16 5.5 -0.8 – 3.0 Jul-16 – 1.0 – – Interest rate on savings (%) Apr-16 1.24 1.02 0.72 0.50 May-16 1.25 1.03 0.74 0.50 Jun-16 1.25 1.07 0.69 0.50 Jul-16 – 0.98 – 0.50 Interest rate on loans (%) Apr-16 13.24 4.60 5.59 6.99 May-16 13.32 4.55 5.63 6.97 Jun-16 13.22 4.61 5.55 6.97 Jul-16 – 4.52 5.51 6.97 Foreign reserves ($bn) Mar-16 107.5 97.0 83.0 175.1 May-16 103.6 97.3 82.9 175.5 Jun-16 109.8 97.2 85.3 178.7 Jul-16 111.4 97.3 85.5 180.2 Benchmark rate (%) May-16 6.75 3.25 4.00 1.50 Jun-16 6.75 3.25 3.00 1.50 Jul-16 6.50 3.00 3.00 1.50 Aug-16 6.50 3.00 3.00 1.50
GOVERNMENT Indonesia Malaysia Philippines Thailand Revenue (YoY change %) May-16 5.2 3.4 -17.6 24.2 Jun-16 2.8 -30.6 7.3 -8.0 Jul-16 – -14.4 -4.6 52.2 Expenditure (YoY change %) May-16 33.1 17.6 24.1 8.8 Jun-16 -6.6 9.5 -6.5 24.1 Jul-16 – -9.9 4.9 9.2 Government debt (YoY change %) 3Q15 2.9 9.5 3.7 3.6 4Q15 11.3 8.2 3.8 10.7 1Q16 14.3 5.0 1.9 8.3 2Q16 18.4 4.5 2.3 7.7
23
Metrics | ASEAN TRADE Indonesia Malaysia Philippines Thailand Exports (YoY change %) Apr-16 -12.4 1.6 -2.8 -8.0 May-16 -9.3 -0.9 -3.8 -4.4 Jun-16 -3.9 3.4 -11.4 -0.1 Jul-16 – – – -6.5 Imports (YoY change %) Apr-16 -14.4 -2.3 39.2 -14.9 May-16 -4.1 3.1 53.4 0.4 Jun-16 -6.8 8.3 15.8 -10.2 Jul-16 – – – -7.2 Exports to Brunei (YoY change %) Apr-16 -44.7 -32.7 202.2 -18.8 May-16 14.9 -13.7 – -5.9 Jun-16 -63.6 -38.6 – -26.5 Jul-16 – – – 2.3 Exports to Cambodia (YoY change %) Apr-16 -10.8 23.4 271.0 -27.2 May-16 -10.1 2.9 – 4.5 Jun-16 1.3 61.8 – -19.4 Jul-16 – – – -20.0 Exports to Indonesia (YoY change %) Apr-16 – -10.1 94.4 5.7 May-16 – -5.8 – -10.6 Jun-16 – -27.2 – -16.6 Jul-16 – – – 10.8 Exports to Laos (YoY change %) Apr-16 -48.1 229.0 – -1.4 May-16 -47.1 77.4 – -10.7 Jun-16 149.7 10.1 – -4.9 Jul-16 – – – -15.8 Exports to Malaysia (YoY change %) Apr-16 -15.0 – 157.4 -9.1 May-16 -18.0 – – -16.1 Jun-16 -13.0 – – -12.8 Jul-16 – – – -14.0 Exports to Myanmar (YoY change %) Apr-16 37.8 3.1 -4.3 4.5 May-16 29.3 2.6 – 2.8 Jun-16 34.7 19.1 – 7.7 Jul-16 – – – 11.6 Exports to Philippines (YoY change %) Apr-16 21.3 14.4 – 17.7 May-16 62.2 6.9 – 2.6 Jun-16 27.9 7.5 – 21.5 Jul-16 – – – -0.6 Exports to Singapore (YoY change %) Apr-16 -11.4 15.4 168.7 -22.9 May-16 -18.5 -4.1 – -26.3 Jun-16 -11.1 12.7 – -49.7 Jul-16 – – – -9.6 Exports to Thailand (YoY change %) Apr-16 -9.9 -12.4 113.0 – May-16 -8.6 -5.9 – – Jun-16 -10.2 -1.4 – – Jul-16 – – – – Exports to Vietnam (YoY change %) Apr-16 3.6 44.7 112.9 2.1 May-16 8.4 52.6 – 5.1 Jun-16 24.9 76.7 – -6.8 Jul-16 – – – -4.7
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24
Metrics | ASEAN MACRO Indonesia Malaysia Philippines Thailand GDP (YoY change %) 1Q16 4.9 4.2 6.9 3.2 2Q16 5.2 4.0 7.0 3.5 Unemployment rate (%) Feb-16 5.5 3.4 5.8 0.9 Mar-16 – 3.5 5.8 1.0 Apr-16 – 3.5 6.1 1.0 May-16 – 3.4 – 1.2 Jun-16 – 3.4 – 1.0
CONSUMER Indonesia Malaysia Philippines Thailand Car sales, unit (YoY change %) Mar-16 -5.5 -27.5 16.8 -2.0 Apr-16 3.8 -6.7 30.3 1.7 May-16 11.5 -12.8 31.0 16.0 Jun-16 11.3 -0.1 36.4 9.5 Jul-16 – -27.6 22.0 -0.4
PRICES Indonesia Malaysia Philippines Thailand CPI (YoY change %) May-16 3.3 2.0 1.6 0.5 Jun-16 3.5 1.6 1.9 0.4 Jul-16 3.2 1.1 1.9 0.1 Aug-16 2.8 – – 0.3 PPI (YoY change %) May-16 7.6 -2.1 0.3 -1.4 Jun-16 11.8 -1.3 0.3 -1.3 Jul-16 8.7 -11.0 – -0.8 Aug-16 11.5 – – -0.4
REAL ESTATE Indonesia Malaysia Philippines* Thailand House price index (YoY change %) 4Q15 4.6 5.8 – 1.1 1Q16 4.2 – – -0.1 2Q16 3.4 – – 4.7 *House price index for the Philippines is expected to be released in 2016
INDUSTRIAL Indonesia Malaysia Philippines Thailand Industrial production index (YoY change %) Apr-16 2.5 3.0 10.7 1.0 May-16 7.5 2.8 7.3 3.7 Jun-16 9.1 5.2 8.5 1.9 Manufacturing capacity utilisation (%) 4Q15 75.2 83.6 83.5 66.5 1Q16 75.8 82.0 83.4 65.7 2Q16 77.0 81.0 83.5 65.5