ASEAN Market Watch: Renaming of MSCI Indexes, Growth in the Philippines, and Construction Boom in Cambodia

MSCI South East Asia Index Offerings renamed MSCI ASEAN Indexes

MSCI, a US-based provider of equity, fixed income, and hedge fund stock market indexes has renamed its MSCI South East Asia Indexes to MSCI ASEAN Indexes. In addition, MSCI also added new indexes to represent the developed, emerging, and frontier markets in the ASEAN region. While MSCI ASEAN represents all the markets, MSCI EM ASEAN focuses on emerging markets, and MSCI EFM ASEAN represents emerging and frontier markets. The MSCI AC ASEAN index covers large and mid-cap equities across Singapore and four emerging markets, namely, Indonesia, Malaysia, Philippines, and Thailand.

MSCI was granted the right to use the ASEAN designation for their index offering from the ASEAN Secretariat. The members of the ASEAN exchanges include seven exchanges across Singapore, Indonesia, Malaysia, Philippines, Thailand, and Vietnam. The rebranding of the indexes reflects the development of ASEAN members as a region of sustained growth and economic development. The change will offer global investors a deeper understanding of the various investment opportunities in the region and allows the member countries to promote their capital markets.

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Philippines economy projected to grow 6.8 percent from 2017 to 2019

The Philippines’ GDP is forecast to grow at 6.8 percent on average from 2017 to 2019, according to a recent World Bank (WB) report. The report predicts that growth will be 6.9 percent in 2017, seven percent in 2018, and 6.7 percent in 2019. These growth projections will be supported by infrastructure projects, domestic consumption, service exports revenue, and inflows of remittances. The World Bank estimates the Philippines’ 2016 GDP growth to be 6.8 percent, mainly driven by manufacturing, consumption, domestic, and foreign investments. The Philippine government will release the official GDP numbers by the end of the month.

The WB report suggests that the Philippines will need to address the current infrastructure gap as the country continues to rank low for quality of infrastructure, especially seaports and airports. Removal of trade barriers will also bolster investments. In addition, S&P Global ratings predicts above six percent growth for the Philippines in 2018. They have assessed the country’s investment-grade at “BBB”, which is stable based on the fact that it is a lower middle-income economy with rising foreign exchange reserves and declining external debt. S&P proposed fiscal and policymaking improvements to increase investments and growth to upgrade their investment rankings.

Cambodia’s construction industry grows in 2016

Cambodia’s construction industry witnessed huge growth in 2016, with total investments doubling to US$8.5 billion for 2,636 projects, according to the Ministry of Land Management, Urban Planning and Construction. Most of the approved projects include condominiums, apartments, hotels, office buildings, borey units, and commercial centers. In 2015, 2,305 projects were approved with a total investment of US$3.3 billion. In spite of the growth, leading institutions such as the World Bank and Asian Development Bank warn of a credit bubble because of huge construction and real estate loans.

Revenues collected on construction services and property fell to US$72 million in 2016 from US$90 million in 2015, which contradicts the value of investments in the sector. Only 15 percent of the 2016 revenues were from construction services while the remaining were sourced from taxes on property transfers. Private sector credit almost doubled in four years to 60 percent of the GDP with the banks exposed to huge outstanding loans in construction, real estate, and mortgages. The central bank implemented reforms to increase minimum capital requirements to ensure that banks operate safely and maintain financial stability. Investors believe that for overall economic growth, investments ought to be directed towards infrastructure development rather than real estate.

Managing ASEAN Expansion from Singapore
In this issue of ASEAN Briefing Magazine, we look at the benefits of using Singapore a hub for the management of regional operations throughout ASEAN. We firstly focus on the position of Singapore relative to its competitors, such as the Netherlands and Hong Kong. We then provide step-by-step instructions on corporate establishment, and provide expert insight on maximizing returns through the reduction respective tax burdens. 

Human Resources in ASEAN
In this issue of ASEAN Briefing, we discuss the prevailing structure of ASEAN’s labor markets and outline key considerations regarding wages and compliance at all levels of the value chain. We highlight comparative sentiment on labor markets within the region, showcase differences in cost and compliance between markets, and provide insight on the state of statutory social insurance obligations throughout the bloc.

The Guide to Manufacturing in Indonesia
Choosing if, where, and how to establish foreign manufacturing operations in Indonesia can be a significant challenge. While the archipelago’s vast diversity may initially seem daunting, a number of options are available which will allow entry and operations to be conducted in a seamless manner. In this issue of ASEAN Briefing, we discuss Indonesia as a hub for manufacturing within Southeast Asia, and provide guidance on how to select and establish operations within the country.

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