WRAPUP 1-Southeast Asia consumers more confident despite global woes
BANGKOK/JAKARTA, July 4
BANGKOK/JAKARTA, July 4 (Reuters) - Consumer confidence in Thailand and Indonesia climbed in June while Malaysian imports in May smashed forecasts, highlighting Southeast Asia's resilience to the global economic downdraft as strong domestic demand helps offset weaker exports.
Encouraged by lower oil prices, an increase in the local minimum wage and a cooling in domestic political tensions, Thai consumers were the most confident in June since devastating floods hit the country late last year.
Consumer confidence rose to 68.5 from 67.1 in May, data showed on Wednesday.
"Southeast Asia is the darling of Asia and the darling of investors this year," said Paul Joseph Garcia, chief investment officer at BPI Asset Management in Manila, which manages $17.2 billion in assets.
"If you look at Indonesia, Philippines, Thailand, Malaysia and to a certain extent Vietnam these are domestic-driven economies," he said.
Thailand's economy could pick up even further in coming months, as most industries hit by the disaster, many of whom are big exporters, are expected to return to full production in the third quarter. Despite global problems, the central bank believes the economy should still grow close to its forecast of 6 percent this year, far ahead of most developed countries.
"There seem to be more funds flowing into the economy, despite concerns raised by the euro zone debt crisis. That helped people to be less concerned and more confident," said Saowanee Thairungroj, president of the University of the Thai Chamber of Commerce, which publishes the confidence data.
In Indonesia, Southeast Asia's largest economy, the consumer confidence index climbed to a five-month high in June, though food prices are expected to soar ahead of the Eid al-Fitr festival in August.
Bank Indonesia's consumer confidence index in June rose to 114.4 from 109.0 in May, with respondents believing that more jobs will be created as government projects come on stream.
In just one highly visible sign that the economy is racing ahead of both its developed and emerging market peers, there is a six-month waiting list in Jakarta for Lamborghini sports cars, which carry price tags of up to $1.2 million.
"These economies have very young demographics, and they have a rising middle class brought about by above-average GDP growth over the years. Of course the turmoil in Europe and slowdowns in the U.S. and China will have an effect, but they are more insulated than other emerging market economies" due to strong domestic demand, Garcia of BPI Asset Management said.
DEEP POCKETS, POLICY FLEXIBILITY A BIG ADVANTAGE
Unlike their cash-strapped peers in the West, most Asian governments also have bulging coffers and relatively low levels of debt, giving them far more room to stimulate their economies if growth shows signs of flagging, noted Chua Hak Bin, an economist at Bank of America-Merrill Lynch in Singapore.
Central banks in the region have also been able to maintain an accomodative stance, and can ease policy further if needed, again unlike many of their developed nation counterparts, which have cut interest rates to near zero and are running out of ways to revive business activity.
Such policy flexibility was evident in Malaysia' trade data released earlier on Wednesday, which showed May imports rose 16.2 percent from a year earlier, nearly twice economists' forecasts.
The jump reflected strong demand for capital goods after the government announced a slew of mega-projects in the oil and gas as well as transportation sectors, including a 36.5 billion ringgit mass rapid rail project.
Indeed, domestic demand in Malaysia has been so strong that policymakers are now worrying more about the risks of growing household debt than the weak global economy. With that in mind, the country's central bank is widely expected to keep interest rates unchanged at a meeting on Thursday.
Local and foreign investors obviously like what they see.
After years of complaining about the listless and government-dominated Malaysian stock market, many fund managers are taking a new look at the country, which is poised to become Asia's top IPO destination for 2012 while other markets globally are floundering.
Malaysia on Tuesday launched a $2 billion initial public offering of state-backed hospital operator IHH Healthcare, which will be the third biggest listing of the year globally after local palm oil producer Felda Global Ventures and Facebook.
The issue, one of few available plays on the healthcare sector in Asia, will be dual listed in Malaysia and Singapore.
To be sure, the region and its markets have not been totally immune to global market turmoil.
Motor racing firm Formula One decided last month to send its near $3 billion flotation in Singapore back to the pits as Europe's debt crisis deepened, prompting investors to dump riskier assets worldwide.
STOCKS POWER AHEAD
But with Europe's recent agreement on ways to help the region's stricken banks, global and regional markets have shown some signs of stabilising and Southeast Asian stocks are again powering ahead.
For the year to date, shares in Manila have surged more than 22 percent to all-time highs, while Thailand's benchmark index is up more than 16 percent and Singapore has gained more than 11 percent. Malaysian shares also hit a record higher on Wednesday, taking its gains for 2012 to more than 5 percent.
The Philippines, once known as the "sick man of Asia", took a highly symbolic step this week in a bid to put decades of sub-par economic growth behind it. For the first time in history, Manila is about to jail a tax evader, puncturing a culture of impunity that has discouraged many foreign investors.
And the region's stock markets may remain attractive in the long term, too.
Morgan Stanley said in a recent research report that there is a growing probability ASEAN may witness a sharp rebound in its investment cycle, driven by a combination of private investment in capacity creation, foreign direct investment and private and public investment in infrastructure over the next two to three years.
"Our economics team is forecasting the average investment percentage of GDP (for Indonesia, Thailand and Malaysia) to rise from 22.7 percent in 2011 to 23.2 percent and 23.6 percent in 2012 and 2013, respectively.
"We believe that there could be upside risk to the outlook for consensus investment growth for ASEAN, if the current trend persists."
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