Southeast Asian shares fell on Friday as investors' confidence chilled in light of fresh turmoil from the Chinese property market, amid fears of a further slowdown in the second largest economy that could weigh on the region's trade and tourism.
China's Evergrande Group's filing for bankruptcy in New York on Thursday led to fears of other potential bankruptcies of real estate developers, including the country's largest Country Garden Holdings, which is going through a liquidity crisis and missed payments on two international bonds.
Singapore's Straits Times Index ended 0.7% lower at 3,173.93, with 23 of 30 constituents ending lower today. China-related stocks like developer Hongkong Land fell 1.9%, while REITs like CapitaLand Investment and Mapletree Logistics Trust ended 1.3% and 0.6% lower, respectively, both of which have around 20% revenue from the Chinese market.
"If the Chinese economy slows down even sharper, then it will not only affect global growth, but it will also affect some of the Singapore listed companies that have exposure in China," said Paul Chew, head of research at Phillip Securities Research Singapore.
Meanwhile, Vietnam's benchmark VN Index fell 4.5%, while the Jakarta Exchange Composite Index and Thailand's SET index both fell 0.6%. The Bursa Malaysia KLCI index lost 0.1%.
On Tuesday, China's central bank unexpectedly cut key policy rates for the second time in three months, in an effort to ramp up monetary easing efforts to boost a slowing economy. But investors consider China's rate cuts to be small and will only help modestly.
"There is a general level of skepticism about official efforts to talk up the economy," a Singapore-based fund manager told Nikkei Asia.
Aninda Mitra, head of Asia macro and investment strategy at BNY Mellon Investment Management, said China's slowdown is starting to rein in external demand more broadly with regional exports starting to surprise to the downside in recent weeks.
This comes amid the ongoing slowdown in Europe, and the unexpected resilience in the U.S. economy so far this year is also poised to wane, he said. "This context leaves highly open economies most vulnerable to any further downside surprises from China," Mitra told Nikkei Asia.
Singapore, which counts China as the largest trading partner, on Thursday found its non-oil domestic exports for July plunged 20.2% from a year ago, the tenth straight month of year-on-year decline. This was worse than the 14.4% contraction forecast in a Reuters poll of economists.
Moreover, weaker Chinese demand could send international energy and food prices sliding, along with commodity-rich Southeast Asia. "Malaysia and Indonesia's commodity markets should be points of caution, with downward pressure on their prices, as demand from China is the largest," a Singapore-based ASEAN fund manager said.
In a note to clients on Friday, Barclays said the collapse in China's property sector is hurting domestic growth, but also "weighing on commodity prices through falling demand for construction materials, increasing the number of defaults among developers, and reducing consumption."
Domestically oriented economies like Indonesia "should mitigate but not offset" the growth slowdown in China, Barclays said.
The ASEAN+3 Macroeconomic Research Office (AMRO), an international organization that monitors the Association of Southeast Asian Nations, as well as China, Japan and South Korea, projects the Southeast Asian bloc to grow by 4.5%, a downward revision from the earlier 4.9% projection in April.
Amid weak global demand, it was hoped that the steady return of Chinese visitors would boost services exports, particularly the tourism sector, which comprise over 10% of ASEAN's gross domestic product.
But China's slower-than-expected economic recovery has weakened such expectations. Inbound arrivals from China to Thailand could drop slightly below 5 million, far below the 7 million expected by the Thai government, RHB Bank's Barnabas Gan wrote in a note in June.
Barclays noted that ASEAN continues to benefit from inbound tourist inflows from China, "albeit at a more measured pace" and "with a smaller but still positive beta to consumption growth in these key tourist heavy economies."
"A further slowdown in light of the property turmoil could crimp demand and impact domestic consumption," a Singapore-based fund manager said.
Source: Nikkei Asia
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
