A new capital spending cycle is set to boost Asian exports Malaysia: political realignments raise uncertainty over electoral outcomes

Highlights from the CAA Weekly Table:

Asian political risks:

• Even if the US falters in a Ukraine crisis, China will not be emboldened to attack Taiwan as
  some fear. China will move only when sure of victory, which is decidedly not the case now. But China is likely to ramp up military, economic and diplomatic pressure on Taiwan.
• In the Philippines, Marcos Jr has fended off court challenges to his candidacy for the presidency. He will have to up his act if he is to maintain his current lead in the polls.

Asian economic prospects:

• Supply chain woes are evident in Asia as infections rise but they are likely to remain limited.
• China’s monetary easing is pushing on a string given weak credit demand. Fiscal policy
  needs to be stepped up.
• Incoming inflation data and central banks statements point to monetary policy in Indonesia,
  Malaysia and Singapore being further tightened.

A new capital spending cycle is set to boost Asian exports

• The hard data on capital goods orders is beginning to support this view. Announcements by
  companies on capital spending plans also provide support.
• Within Asia, Singapore, Taiwan, South Korea, and Malaysia are particularly likely to benefit
  from the capital spending upturn.

Malaysia: political realignments raise uncertainty over electoral outcomes

• Malaysia is entering a period of greater political tumult. New parties are forming and new
  alliances taking shape. A big loser from this appears to be the Pakatan Harapan coalition led by Opposition Leader Anwar Ibrahim.
• Adding to the uncertainty is the lowering of the voting age to 18: together with natural
  growth in the population, this means a 40% rise in the number of voters.
• The current government’s image has taken a beating because of poor management of the
  terrible floods in December. Allegations of corruption against the head of the anti-corruption agency have also increased voter dissatisfaction.
• In the coming months, incumbent political parties will hold their annual meetings, offering
  a chance for leadership renewal which might revive their fortunes. Elections for the state assembly in Johor will also provide some clarity on where things could stand.
• We believe that the most likely scenario is that the once-dominant UMNO party is likely to
  return to power at the head of an unwieldy alliance once a general election is called, probably in July.

Read more: CAA-Weekly-240122.pdf