• Sale of cars and bikes drove petrol and diesel consumption
• Aviation fuel, LPG and petrol sales drove overall consumption

According to the oil ministry's preliminary data release, fuel consumption in October grew 2.9% y/y, driven by increasing economic activity. India's manufacturing and services sector activity rose during the festive month driving increased demand. Furthermore, sale of cars and bikes appears to be another reason for increased consumption, in our view.

In more detail, petrol sales rose 8.6% y/y, while diesel sale grew minimally by 0.1% y/y. On the other hand, jet fuel consumption increased by a strong 9.4% y/y. The rise underscores seasonal travel demand in India during the festive season. Additionally, LPG consumption rose 9.3% y/y indicating increased commercial demand for cooking fuel.

Meanwhile, bitumen consumption fell 7.3% y/y highlighting a slowdown in construction activity. Bitumen is used primarily in road laying.

Exporters could face some heat, focus may shift to India growth story (Economic Times)

IMD issues heavy rain yellow alert across city and nearby 11 coastal districts in Tamil Nadu for next 48 hours (Economic Times)

Rupee hits new low; yet second best performer among Asian currencies (Business Standard)

Cabinet approves PM-Vidyalaxmi to provide aid to meritorious students (Business Standard)

Delhi's air quality remains 'very poor', AQI at 367 (Economic Times)

SBI economists see Q2 GDP growth slowing down to 6.5% this fiscal (Business Standard)

India to see uptick in imported inflation (Financial Express)

What Trump 2.0 means for India and South Asia (The Hindu)

Centre infuses equity of INR 107bn in Food Corporation of India (The Hindu)

India's vegetable oil imports seen lower in 2024-25, industry group says (Economic Times)

• Next Policy Meeting: Dec 4-6, 2024
• Current Policy Rate: 6.5%
• Last Decision: Hold (Oct 9)
• Our Forecast: Cut by 25bps
• Rationale: With inflation under control and indications of slowing growth, the RBI is expected to reduce rates to stimulate economic activity.

During the Monetary Policy Committee (MPC) meeting on October 9, the Reserve Bank of India (RBI) decided to maintain the repo rate at 6.5%. This meeting was notable for featuring a new group of external members, providing a fresh perspective on policy discussions. The committee voted 5-1 to keep the policy repo rate steady at 6.50%, while the standing deposit facility (SDF) was set at 6.25%, and both the marginal standing facility (MSF) and Bank Rate were established at 6.75%. This decision reflects a balanced approach, aiming to support economic growth while keeping inflation in check.

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The RBI continues to prioritize guiding inflation toward its medium-term target of 4%. Recent inflation data supports this cautious stance, as price pressures have shown volatility. The MPC has shifted its stance to neutral, indicating a potential for future rate cuts. Governor Das emphasized that inflation risks remain, and the trajectory over the next three months will be crucial for the RBI's December decisions. He pointed out that geopolitical tensions in the Middle East and fluctuations in global crude oil prices could impact inflation. The RBI aims to maintain the disinflationary progress achieved over the past two years, with a focus on stabilizing headline inflation at a sustainable 4%. Given expectations of manageable inflation, a rate cut is anticipated in December 2024 to foster growth.

Economic Growth

India's GDP grew by 6.8% y/y in Q1 FY25 (April-June), slightly below market expectations of 7%. This slowdown was primarily attributed to reduced government expenditure ahead of elections. Despite high inflation and elevated interest rates, consumer demand has remained robust, indicating resilience in domestic consumption.

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Looking forward, the RBI projects GDP growth of 7.2% for FY25, which is slightly above estimates from other institutions. The Asian Development Bank (ADB) anticipates a growth rate of 7% for FY25. Analysts are more conservative, predicting growth between 6.5% and 7.2%, as private consumption slows and investment recovery is hindered by high borrowing costs. Nevertheless, indicators suggest that both manufacturing and services sectors are expanding, with Purchasing Managers' Index (PMI) data reflecting increasing orders and positive sentiment.

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Rural demand, an essential component of the economy, is gradually improving, while urban consumption has moderated. There are speculations that the government may introduce stimulus measures to boost demand following recent electoral challenges faced by the ruling BJP. Potential policy actions could include increased cash transfers to farmers and tax reductions aimed at enhancing household income. Additionally, stronger global economic performance later in 2024 could further enhance growth prospects. Consequently, despite a high-interest-rate environment, the RBI is unlikely to prioritize demand reduction at this time.

Inflation

Data Download

While India's economic growth appears solid, inflation presents a more complex scenario. After rising to 5.1% y/y in June, inflation fell to 3.5% in July due to a favourable base effect but increased to 5.5% y/y in September as anticipated. This fluctuation indicates that inflation remains volatile and significantly influenced by domestic factors such as food supply dynamics. As favourable base effects dissipate, headline inflation is expected to rise further in Q4 2024. The government is introducing supply side measures such as sale of wheat flour and rice to ensure food inflation remains manageable. Meanwhile, rising food grain output bodes well for the economy. The MPC forecasts an average CPI inflation of 4.5% for 2024-25, with specific projections of 4.1% for Q2, 4.8% for Q3, and 4.2% for Q4. Despite this anticipated moderation, the committee acknowledges considerable risks including adverse weather patterns, escalating geopolitical tensions, and volatility in global commodity prices-particularly concerning international crude oil prices which have shown instability recently.

Financial and External Sector

India's financial sector remains strong, with commercial banks and non-banking financial companies exhibiting healthy capital ratios and asset quality. Credit growth averaged 18.8% year-on-year from January to August this year. On the external front, foreign exchange reserves reached a record high of USD 684.8bn as of October 25, 2024. However, India's current account deficit (CAD) widened to 1.1% of GDP in Q1 FY25 due primarily to an increasing trade deficit; nonetheless, robust service exports and strong remittance inflows are expected to keep the CAD within manageable limits.In terms of external financing dynamics, foreign portfolio investment (FPI) flows shifted from net outflows of USD 4.2bn in April-May 2024 to net inflows of USD19.2bn from June through early October (up until October 7). Foreign direct investment (FDI) flows also remain strong for FY25 with improvements noted in both gross and net FDI inflows from April to July this year. Overall, India's external sector shows resilience with key indicators reflecting reduced external vulnerability; thus, the RBI remains confident in its capacity to meet external financing needs comfortably.

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Outlook

The FY25 budget underscores the government's commitment to infrastructure investment and economic stimulus through measures such as income tax reductions aimed at enhancing domestic consumption; however, these initiatives may not fully counteract the dampening effects of high interest rates. The RBI is likely to adopt a cautious stance in the upcoming quarter but is expected to implement a rate cut in December-projecting a reduction of around 25 basis points if inflation remains stable and external factors do not escalate headline inflation pressures significantly.

Further Reading

Monetary Policy Meeting Statement, October 2024

Reserve Bank of India Consumer Confidence Survey, Oct 2024

Reserve Bank of India Household Expectations Survey, Oct 2024

Minutes of the Monetary Policy Committee Meeting, Oct 2024

• Sales showed strong recovery
• Two-wheeler and three-wheeler sales drove growth
• Commercial vehicles saw modest growth

According to the data released by The Federation of Automobile Dealers Associations (FADA), India's retail vehicle sales rose 36.3% y/y to 2.83mn units in October. This follows a 9.3% y/y decline in September, reflecting the lean season for discretionary spending in India. Passenger vehicle retail sales grew 32.3% y/y to 483,159 as the festive demand kicked in. The recovery was anticipated by manufacturers as demand for automobiles is higher during the October-November season.

The retail sales boost was driven primarily by two-wheeler and three-wheeler sales underscoring strengthening rural demand. The 2W segment recorded a strong 36% y/y and 71% m/m increase, spurred by a confluence of major festivals that encouraged consumer spending. Dealers noted that festive offers, discounts, and new model launches were key to attracting buyers.

In the commercial vehicle segment, growth was more moderate at 6% y/y, supported by robust agricultural markets and significant bulk purchases, especially for container transport.

Looking ahead, the wedding season is expected to sustain strong sales momentum in the two wheeler and passenger vehicle categories. While dealers remain optimistic, they are cautious about factors that could slow this momentum toward year-end.

• Govt, trade unions agree on formula, but not on coefficient used for GDP growth
• We expect govt to proceed with its own proposal

The government and trade unions clashed over the new formula for calculating the minimum wage increases, CNBC Indonesia reported. The two sides agree over the general formula, but not over the coefficient used for economic growth. The formula is as follows:

Minimum wage hike = Average CPI rate + a * GDP growth rate

The government wants to set the "a" coefficient to 0.2-0.5 for labour-intensive industries and 0.2-0.8 for capital-intensive industries. On the other hand, trade unions want no distinction between industries and "a" coefficient between 1.0-1.2.

Judging from past experience, the government is likely to move on with its own proposal as there is little scope for concessions. Moreover, the general agreement over the formula would suggest little further unrest among workers regarding the minimum provincial wage (UMP). We remind that trade unions traditionally demand a double-digit increase, with the government always going for a single-digit increase.

• FX reserves rose by USD 1.1bn m/m
• Valuation of gold reserves increased as gold prices continue to climb

The official reserve assets rose by 0.9% m/m to a record high of USD 151.2bn at end-October, according to Bank Indonesia's data. The increase was driven predominantly by forex reserves, which were up by USD 1.1bn m/m, while the valuation of the BI's gold reserves also rose by USD 331.2mn as gold prices continued their climb.

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Since the beginning of the year, the official reserves have increased by USD 4.9bn, both on the back of higher FX reserves and gold prices. In annual terms, their growth remains in the double digits at 13.6% y/y.

Overall, official reserves have been on an upward trend since May, after declining in the first four months of the year. Looking forward, we expect reserves to continue to increase as export growth picks up, though there could be some volatility based on the gold price movements after the US election.

Prabowo Congratulates Donald Trump, Sees Potential in Indonesia-U.S. Partnership (Tempo)

Indonesia's New Manpower Minister Ensures Minimum Wage to Increase in 2025 (Tempo)

Prabowo to Embark on Two-Week Trip to the Americas, UK, and China (Jakarta Globe)

Prabowo, Wong usher in stronger bilateral ties (The Jakarta Post)

Indonesia, Singapore discuss cooperation in five sectors (Antara News)

Fed Rate Cut Pace Predicted to Slow After Trump Becomes US President (Bisnis)

Attorney General Says Corruption in Indonesia is Worrying, Rampant from Village Level (Republica)

Government Ensures Focus on Encouraging Labor-Intensive Industry (Media Indonesia)

• Demand was strong; cut-off rentals declined

The government on Wednesday raised PKR 331.7bn from the sale of fixed and floating rate Sukuk, according to a press release from the Pakistan Stock Exchange. The borrowing exceeded the target of PKR 300bn. Bids totalled PKR 875.2bn, indicating strong demand, especially for the floating rate Islamic bonds, which attracted bids worth PKR 548.7bn. The bid-to-cover ratio was 2.6. Meanwhile, borrowing costs decreased, with cut-off rentals falling by up to 104bps compared to the previous auction.

It is noteworthy that the government has shifted Sukuk auctions to the Pakistan Stock Exchange from the State Bank of Pakistan in a bid to lower financing costs by tapping the ample liquidity in the stock market. The first such auction was conducted in Dec 2023.

Schools, colleges closed across 18 districts as smog reigns in Punjab (Dawn)

PM Shehbaz looks forward to working with new US admin (Dawn)

Power companies' inefficiency costs users Rs60bn (Dawn)

KP makes first honey shipment to Malaysia (Dawn)

Consumers set to pay Rs8.7b for idle IPPs (Express Tribune)

PM Shehbaz visits Chinese embassy, condemns attack on Chinese nationals in Karachi (Express Tribune)

IMF team due on 11th for talks on programme performance (The News)

PM announces 100MW power supply for GB, Rs1bn endowment fund (The News)

• The renegotiation of contracts aimed at reducing electricity tariff
• Last month, agreements with five IPPs were prematurely terminated

The government is in talks with 18 other independent power producers (IPPs) to renegotiate the terms of power purchase agreements, Prime Minister's Special Assistant Muhammad Ali told a parliamentary committee on Tuesday. The discussions are likely to be concluded in the next four to six months, he said.

Following the termination of contracts with five of the oldest IPPs last month, the government has opened discussions with more IPPs to revise agreements as it seeks to cut electricity tariffs by reducing capacity payments. The move has hurt business confidence in the country, for instance, the government's failure to privatize the loss-making Pakistan International Airlines has been partly blamed on its premature cancellation of sovereign contracts with the IPPs.

• Next policy meeting: 16 Dec, 2024
• Current policy rate: 15.0%
• Last decision: Cut by 250bps (Nov 4)
• Our forecast: Cut by 100-150bps
• Rationale: Bening inflation outlook and improved external position to prompt the central bank to cut key rate

The State Bank of Pakistan (SBP) on Nov 4 cut the policy rate by 250bps, exceeding market forecasts, citing lower-than-expected inflation for the aggressive decision. A stable external sector further bolstered the SBP's confidence. The benchmark interest rate now stands at 15.0%, the lowest since Oct 2022, down from an all-time high of 22.0% in early June, which will aid economic growth besides lowering borrowing costs, thereby reducing the government's debt servicing costs and helping accelerate its fiscal consolidation efforts. The real interest rate is still significantly positive, on both a spot and forward-looking basis. Therefore, the monetary policy stance is considered restrictive, which is in line with the conditions set by the IMF under its USD 7bn Extended Fund Facility. Having said that, we anticipate more rate cuts.

Inflation environment

Inflation has been modest for the last few months, averaging 8.7% y/y in the first four months (Jul-Oct) of FY25. In October, it clocked in at 7.2% y/y, edging up from a 44-month low of 6.9% y/y in September. The SBP attributed the slowdown to muted demand, better farm supplies, lower global oil prices and favourable base effect. Moreover, a stable currency has also kept the cost of imports in check. Subsequently, the central bank became more confident that average inflation is likely to be much lower than its previous forecast range of 11.5%-13.5%, down from 23.4% in FY24.

SBP governor Jameel Ahmed in a post-policy media briefing said that the central bank will release its updated inflation estimate in January. To note, the IMF forecasts inflation at 9.5% in this fiscal year. Higher gas tariff, expiry of power subsidy and likely spillover from taxation measures announced in the FY25 budget may pose upside risks to inflation.

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External sector

Pakistan's external position has strengthened considerably, anchored by the IMF bailout package, which the SBP said has improved the prospects for realization of planned external inflows. Further, the current account remained in surplus for the second month in a row in September, which kept the current account deficit contained at USD 98mn in the first quarter (Jul-Sep) of FY25. Ahmed said that the current account would continue to post a surplus in October on the back of healthy workers' remittances, which he said crossed the USD 3bn mark last month. The central bank sees the CAD in the range of 0-1% of GDP in this fiscal year as the pick-up in imports is expected to be offset by higher workers' remittances and exports.

Supported by loan inflows from IMF and other multilateral agencies, SBP forex purchases from the interbank market and bilateral debt rollovers, the central bank's foreign exchange reserves rose to USD 11.7bn as of Oct 25. The central bank expects USD 500mn from the Asian Development Bank this week, Ahmed said, adding forex reserves are likely to reach USD 13bn by June 2025.

It is noteworthy that the IMF pegs Pakistan's external financing requirement in FY25 at a multi-year low of USD 18.8bn, including USD 3.6bn CAD and USD 13.7bn in debt amortization. The SBP governor revealed that the country's debt-related outflows, i.e., both principal and interest payments, amount to USD 12bn in the ongoing fiscal year, of which USD 5.7bn has already been repaid. This is lower than USD 13.5bn external debt servicing recorded in FY24.

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GDP growth

The SBP assessed that economic activity has picked up due to better-than-anticipated production of rice and sugarcane and higher factory output, particularly in the textile, food, automobile and allied industries. It maintained its GDP growth forecast at 2.5%-3.5% for FY25. The IMF forecast growth to expand by 3.2% in this fiscal year, recovering from 2.4% growth in FY24.

The economy expanded at a quicker-than-expected rate of 3.1% y/y in the Apr-Jun quarter of 2024, led by bumper crops and robust activity in the services sector. It was also the fastest pace of growth in two years.

Data Download

Conclusion

We expect the SBP's rate-cutting cycle to continue but at a much slower pace. There is room to slash the policy rate by another 250-300bps. Further reduction would be discouraged by the IMF, which has urged the central bank to "pursue a tight monetary policy stance".

• GDP rises by 1.7% q/q
• Agriculture contracts y/y, industry and services expand
• GDP climbs 5.8% y/y in Jan-Sep

The GDP increased by 5.2% y/y in Q3, slowing down from revised 6.4% y/y in Q2, the statistics office said on Thursday. The latest reading is below the 5.7% growth expected in a Reuters poll. In seasonally adjusted terms, the GDP increased by 1.7% q/q in Q3, after rising by 0.7% q/q in Q2. In cumulative terms, the GDP rose by 5.8% y/y in Jan-Sep. The government targets economic growth in the range of 6-7% for 2024.

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On the supply side, the statistics office said that the main contributors to the third-quarter GDP growth included wholesale and retail trade, repair of motor vehicles and motorcycles (up 5.2% y/y); financial and insurance activities (up 8.8% y/y); and construction (up 9.0% y/y).

The y/y decline in agriculture, forestry and fishing widened to 2.8% in Q3 from 2.3% in Q2. The positive annual growth decelerated in industry (5.0% from 7.9%) and services (6.3% from 6.8%). Still, all industry and services subsectors increased y/y in Q3. Within the former, growth slowed down across all subsectors. Manufacturing decelerated to 2.8% y/y in Q3 from 3.9% y/y in Q2. Within services, annual growth slowed down in six subsectors and accelerated in five.

On the expenditure side, household final consumption expenditure rose by 5.1% y/y in Q3, speeding up from 4.7% y/y in Q2. The y/y growth of government final consumption expenditure decelerated to 5.0% from 11.9%. Gross capital formation rose by 13.1% y/y, after expanding by 11.6% y/y in Q2. However, the growth of gross fixed capital formation slowed down to 7.5% from 9.7%.

Exports of goods and services fell by 1.0% y/y in Q3, reversing a 4.2% y/y increase in Q2. Exports of goods declined by 3.5% y/y in Q3, whereas exports of services rose by 2.8%. In Q2, these two types of exports increased by 0.2% y/y and 8.1% y/y respectively. At the same time, imports of goods and services rose by 6.4% y/y in Q3, speeding up from 5.3% y/y in Q2. The acceleration was driven by imports of goods.

The slower-than-expected GDP growth in Q3 is a strong argument in favour of continued monetary policy easing by the BSP. On the other hand, the peso has been depreciating against the US dollar recently. Nonetheless, we think that a 25bp policy rate cut is the most likely decision at the next meeting of BSP's Monetary Board (MB) on Dec 19.

Philippines' GDP growth slows to 5.2% in Q3 (Philstar)

Q2 GDP growth reading revised upwards to 6.4% (BusinessWorld)

Agricultural output slumps in Q3 (BusinessWorld)

September trade deficit widest in 20 months (BusinessWorld)

Factory output contracts by 6.3% in September (BusinessWorld)

Yields on term deposits drop before Fed decision (BusinessWorld)

House OKs Meralco franchise renewal on final reading (BusinessWorld)

National rice inventory up 5.4% as of Oct. 1 (BusinessWorld)

Office vacancy rate hits 20-year high (Philstar)

PBBM to skip APEC summit, taps DTI chief as PH representative (Philippine News Agency)

DOJ creates task force to review EJK cases (Philippine News Agency)

• Major contributions come from manufacturing; accommodation and food service activities; real estate and ownership of dwellings sectors

The statistics office said on Wednesday it has revised upward the GDP growth rate for Q2 to 6.4% y/y from the preliminary estimate of 6.3% y/y. The major contributions to the upward revision came from manufacturing (to 3.9% y/y from 3.6% y/y); accommodation and food service activities (to 12.1% y/y from 10.4% y/y); and real estate and ownership of dwellings (to 7.6% y/y from 7.2% y/y). The GDP growth is now reported at 6.1% y/y in H1, which compares with 6.0% y/y previously.

The second-quarter y/y increase in the GNI was revised to 8.1% from 7.9%. The annual growth of net primary income from the rest of the world was revised upward as well, to 25.7% from 24.7%.

The GDP data for Q3 will be released on Thursday. A BusinessWorld poll of 12 economists and analysts produced a median forecast of a 5.7% y/y increase in GDP in Q3. The poll was conducted last week, and the newspaper reported its results on Monday.

The development budget coordination committee (DBCC) expects that the country's GDP growth will be in the range 6.0-7.0% in 2024.

• The production value index drops by 7.6% y/y
• The producer price index falls by 1.4% y/y

The volume of manufacturing production dropped by 6.3% y/y in September, reversing a revised increase by 1.2% y/y in August, the statistics office said on Wednesday. The output rose by 1.0% y/y in Jan-Sep. The average capacity utilization rate for total manufacturing was 75.3% in September, which compares with 75.4% in August and 74.4% in Sep 2023. Some 29.9% of the establishments operated at full capacity (90-100%), whereas 29.1% operated at below 70% capacity.

Data Download

In September, output fell y/y in 10 industry divisions and rose in 12. The manufacturing of coke and refined petroleum products decreased by 12.8% y/y in September, reversing a 13.6% y/y increase in August. The production of beverages dropped by 8.5% y/y, after rising by 12.4% y/y. The y/y decline in the manufacturing of basic metals widened to 35.1% in September from 18.4% in August. These three sectors were the primary drivers of the shift to negative annual growth of the headline index, the statistics office said.

With regard to other indicators about the manufacturing sector's performance in September, the production value index decreased by 7.6% y/y. The producer price index fell by 1.4% y/y, after dropping by 1.1% y/y in August. In September, the value and the volume of the net sales index fell by 5.5% y/y and 4.1% y/y respectively.

We calculate that the volume of manufacturing production index rose by 0.3% y/y in Q3, decelerating from 4.5% y/y growth in Q2. The annual growth of the country's second-quarter GDP was revised to 6.4% from a preliminary estimate of 6.3%, the statistics office said on Wednesday. Manufacturing was among the major contributors to the revision, with its growth changed to 3.9% from 3.6%, according to the GDP data. The statistics office will release the GDP data for Q3 on Thursday.

• Exports fall by 7.6% y/y, imports rise by 9.9% y/y
• Exports of electronic products drop by 23.1% y/y
• Foreign trade deficit flat y/y in Jan-Sep

The merchandise trade deficit increased by 43.4% y/y to USD 5.1bn in September, the statistics office said on Wednesday. Exports fell by 7.6% y/y to USD 6.3bn in September, after edging up by 0.3% y/y in August. Imports rose by 9.9% y/y to USD 11.3bn, accelerating from a revised 2.9% y/y growth in August.

Data Download

The foreign trade deficit was virtually flat y/y at USD 39.4bn in Jan-Sep. Exports rose by 1.1% y/y to USD 55.7bn, and imports increased by 0.6% y/y to USD 95.1bn.

Exports of electronic products decreased by 23.1% y/y to USD 3.1bn and accounted for 50.3% of total exports in September. Exports fell y/y in five of the top 10 commodity groups. The biggest negative contributions came from the exports of electronic products; copper concentrates (not in the top 10 groups, down 37.8% y/y); and cathodes and sections of cathodes, of refined copper (down 14.5% y/y). The largest positive contribution came from the exports of other manufactured goods (up 73.7% y/y).

With regard to imports, electronic products were again the single largest commodity group, amounting to USD 2.4bn or 21.2% of the September total. Imports of electronic products rose by 8.9% y/y. Imports increased y/y in seven of the top 10 commodity groups. The largest positive contributions came from the imports of metalliferous ores and metal scrap (up 2.1 times y/y); electronic products; and other food and live animals (up 34.0% y/y). The largest y/y decline was reported for the imports of mineral fuels, lubricants and related materials (down 11.4% y/y).

While the imports of mineral fuels, lubricants and related materials fell y/y, imports increased across the other types of goods, including capital goods (up 1.4%); raw materials and intermediate goods (up 19.5%); and consumer goods (up 20.6%).

The US bought USD 1.1bn of Philippine exports in September, followed by Hong Kong (USD 867.4mn), Japan (USD 847.5mn) and China (USD 830.4mn). China supplied USD 2.8bn of the country's imports and was followed by Indonesia (USD1.1bn), Japan (837.8mn) and South Korea (USD 784.7mn). Asia-Pacific Economic Cooperation (APEC) member countries bought 83.6% of Philippine exports in September and supplied 84.2% of the country's imports.

The need to diversify the country's exports is perhaps the most important issue illustrated by the latest foreign trade data, in our view.

• Sharp increase in motor fuel and household equipment was offset by moderation in sales growth in non-specialized stores
• Overall domestic trade volume rose at weakest pace since March

Retail sales in volume terms grew by 3.8% y/y in September, decelerating for the fifth month in a row from 4.0% y/y in August, according to data released by the Department of Statistics Malaysia. The print is the lowest since April 2024. The downtrend, which indicates relatively tepid consumer spending, is rather surprising amid the tight labour market, robust wage growth, low inflation and rise in foreign tourist arrivals, which are seen driving household expenditure. In value terms, retail sales amounted to MYR 64.4bn in September, up by 5.5% y/y, which too was the weakest in five months.

Data Download

Retail sales growth in non-specialized stores, which account for a third of total sales and mainly includes food, softened to a five-month low of 4.9% y/y in September. Sales of information and communication equipment and cultural and recreation goods also expanded at a slower pace. On the other hand, retail sales of automotive fuel and other household equipment rebounded during the month.

Overall, domestic trade volume advanced at the weakest rate in six months at 3.5% y/y in September, with wholesale trade expanding by 4.8% y/y whereas the highly volatile motor vehicle sales declined by 2.4% y/y.

• Amir said it would take 14-18 months to implement GST
• Government focusing on expanding the existing Sales and Services Tax to meet fiscal targets

The reintroduction of Goods and Services Tax (GST) will hurt the government revenue as it will take 14-18 months for the system to be rolled out, Second FinMin Amir Hamzah Azizan told a gathering on Wednesday. Although acknowledging that the GST is a stronger tax system, he stressed that the government could not afford such as lengthy process as it has to achieve the targets outlined in the Fiscal Responsibility Act. Therefore, the government decided to focus on expanding the existing Sales and Services Tax (SST), as it would allow for quicker institutionalisation, Amir said.

The government has time and again said that it has no plans to reintroduce the GST. Last month, PM Anwar Ibrahim while presenting the budget for 2025 announced that the scope of SST will be widened from May next year. It will be imposed on non-essential items, including imported premium items such as salmon and avocado. Further, fee-based financial services will also be brought into the tax net. Revenue from SST is projected to rise by 14.2% y/y to MYR 46.7bn in 2025, accounting for two-third of indirect tax collection.

Earlier this year, the government hiked the service tax under the SST from 6% to 8% on various services. Sales tax on goods have been maintained at 5%-10%.

Under the Fiscal Responsibility Act, the government targets to reduce the fiscal deficit to below 3% of GDP by 2028. It is on track the meet the target as the gap has been pegged at 3.8% in 2025, down from 4.3% this year.

Gobind: Malaysia keen to collab with Barcelona Supercomputing Center (The Edge Malaysia)

Blocking unlicensed social media platforms is 'last resort', says Fahmi (The Edge Malaysia)

Anwar continues intensive schedule in Beijing, to begin with business meeting with CICC (The Edge Malaysia)

Targeted RON95 subsidy to be implemented via two-tier pricing to curb inflation - Rafizi (The Edge Malaysia)

US to remain Malaysia's top trading partner, largest investor - Zafrul (The Edge Malaysia)

Dec 11 ruling if '1MDB funds' held in UK can be preserved (Free Malaysia Today)

Asean must collaborate to resolve South China Sea dispute, says Anwar (Free Malaysia Today)

PAC to probe RM43.9m Khazanah, PNB losses in FashionValet investments (Malay Mail)

Fitch unit: Dual 5G networks could force Malaysia's telcos to blow investment projections (Malay Mail)

KL records RM49.5bil worth of exports in first 9 months of 2024 (New Straits Times)

Near-term volatility in currency market following Trump win (New Straits Times)

• Move to address firms' overreliance on cheap foreign labour that suppresses local wages
• It will be implemented in phases from next year
• Industry players say the policy would increase labour cost

The government's decision to introduce mandatory Employees Provident Fund (EPF) contribution for foreign workers aims to disincentivize employers to rely on cheap foreign labour, second FinMin Amir Hamzah Azizan said at an event on Wednesday. He said the existing labour market is unfavourable towards Malaysian employees, adding the move will help equalise the treatment of foreign and local labour besides supporting wage growth. Moreover, mandatory EPF contribution will also improve the welfare of foreign workers and ensure they have adequate savings for their future, Amir added.

Announced as part of the budget 2025 to provide fair treatment to all workers regardless of nationality, the decision, which will be implemented in phases, will benefit some 2.5mn foreign workers in Malaysia, working mostly in the plantation and construction sectors. At present, they can voluntarily opt to contribute to the EPF. Amir said details of the implementation will be released next year.

The new foreign labour policy has attracted criticism from some industry players, who argue it could increase firms' labour cost, considering the government has also raised minimum wage to MYR 1,700 per month from MYR 1,500, effective from February next year. The Federation of Malaysian Manufacturers has asked the government to delay the implementation of compulsory EPF contribution by two years to allow businesses sufficient time to plan and adapt.

• Buyerstakewait-and-see approach due to new loan regulations
• Cooling apartment prices bodes well for policy normalization by the BOK

The growth in weekly apartment prices in Seoul eased for the third consecutive week to 0.07% w/w in the week ending Nov 4 from 0.08% w/w in the preceding week, according to data released by the Korean Real Estate Board (REB). Apartment prices nationwide increased by 0.01% w/w at the same pace as in the previous week, whereas apartment prices in provinces (outside of the metropolitan area) fell by 0.02% w/w compared to 0.03% w/w in the previous week.

REB noted that many buyers in the capital Seoul are currently taking a wait-and-see approach due to loan regulations. That said, the upward trend remainsintactand demand for properties is mainly concentratedin someredevelopment complexes and other preferred complexes.

With respect to weekly apartment jeonse (lease) prices, growth also slowed down to 0.04% w/w nationwide and to 0.06% w/w in Seoul. Jeonse prices are still rising due to shortage of properties in preferred areas near subway stations and schools, REB stated.

Overall, the increase in apartment prices continues to ease which bodes well for the prospects of policy normalization by the BOK. To note, BOK continues to monitor closely developments in the real estate market particularly in the capital area where prices surged in August, fuelled by an increase in household debt.

• Revenue collection needs to pick-up dramatically in Q4 to reach government's revised target

The government might miss its original tax revenue target by KRW 34.5tn (USD 25bn) instead of the government-projected KRW 29.6tn shortfall, according to a studyconducted by the Seoul-based think tank Fiscal Reform Institute (FRI). FRI cited finance ministry's data that tax revenues declined by 4.3% y/y in the first nine months of the year. At the same time, the progress rate on tax revenue collection stood at 69.5%, lower than the average of 78.3% for the past five years. Tax revenues thus need to recover "in a dramatic manner" in the last quarter of the year for the government to reach its downwardly-adjusted revenue target, the think tank said.

The main reason for underperformance of tax revenues remains the falling corporate profitability as operating profits of companies listed on KOSPI fell by 45% in 2023. As a result, corporate income tax revenues fell by24.2% y/y which more than offset the increases in personal income tax revenues by 0.5% y/y, in inheritance tax revenues by 5.9% y/y and in VAT revenues by 10.3% y/y recorded in the Jan-Sep period. In our view, tax revenues are likely to come under incraesed pressure in Q4 due to a slowdown in economic activity.

• Yoon talks for 140 minutes in an apology to the public
• Yoon denies any wrongdoing regarding association with power broker Myung

President Yoon gave a public apology regarding the controversies surrounding first lady Kim Keon Heeand expressed regret for causing concern to the people, local media reported. Yoon held a press conference for 140 minutes in which he also took an extended Q&A session. Yoon also bowed his head and admitted his "lack of virtue"thathas caused concern to the people. The offering of public apologyhadbeenearlierrequested by the leader ruling People Power Party (PPP) Han Dong-hoon who has clashed repeatedly with Yoon overthe allegations made against the first lady.

In essence, Yoon repeated his earlier position that the first lady will refrain from external activities, while he will also do a reshuffle of presidential office personnel to meet public expectations. Yoon also said that he will establish a special office dedicated to supporting the first lady's work.

Importantly,Yoon also ruled out the creation of a special counsel to investigate the allegations made against the first lady, which has been requested repeatedly by the opposition party. He stated that the special counsel is based on "political propaganda" and called it "unconstitutional."

At the same time, Yoon also brushed off allegations that he had inappropriate connection with the self-proclaimed power broker Myung Tae-Kyun who is at the centre ofa newly-emergingelection meddling scandal. Yoon reportedly tried to influence the 2022 parliamentary by-election by seeking Myung's help, while the first lady Kim allegedly told Myung to conduct public opinion surveys favouring Yoon before the 2022 presidential election.

Overall, we still think that Yoon did very little to alleviate public concerns about the long-standing scandals revolving the first lady such as theacceptance of a luxury handbag, stock manipulation and involvement in government affairs. In addition, hedid very little to diffuse tensions regarding the new allegations involving power broker Myung. Thus, the rift between Yoon's administrationand the opposition DP, which presses ahead with a third bill to conduct special investigation into the first lady's affairs, is likely to remain wide.

• Trump tells Yoon he is looking to continue trilateral cooperation between Japan, US and Korea
• Shipbuilding industry comes in focus as Trump highlights intent to cooperate with Korean shipbuilders

President Yoon congratulated US President-elect Donald Trump for his election victory on Thursday and the two of them agreed to hold a meeting in person at an early date, the Presidential office announced. Yoon and Trump had a phone call lasting about 12 minutes in which they discussed security issues, the economy, North Korea's missile launches and troop deployment to Russia, and they agreed to set a date and location for an in-person meeting. Trump said he is looking to continue the trilateral cooperative relationship between Japan, US and Korea, while Yoon told that he had laid the groundwork for developing the trilateral cooperation during his first term.

Trump stated that he is looking to work with South Korea in the shipbuilding industry, particularly in naval shipbuilding and he mentioned the necessity of Korea's support for the US shipbuilding industry. Trump said that he is aware of Korea's world-class ability to build naval and commercial ships and mentioned the need for close cooperation with Korea in maintenance, repair and overhaul of ships. He added that he is looking to start in-depth talks with Yoon regarding the matter.

Overall, we don't think that the first Trump-Yoon call has given signs that the security situation in the Korean peninsula will change as Trump has reaffirmed his commitment to the trilateral Japan-Korea-US cooperation. In our view, Korea remains important partner for the US and will not be abandoned regardless of Trump's earlier comments that Korea needs to pay much more for defence cost sharing.

• Strong export growth continues to underpin improvement in current account surplus
• Widening primary income surplus, falling services trade deficit also help
• Financial account net outflows increase almost three-fold y/y to USD 12.6bn

The current account surplus rose by 83% y/y to USD 11.1bn in September from USD 6.1bn in Sep 2023, according to data released by the central bank BOK. In addition, the seasonally-adjusted current account surplus rose strongly by 23.6% m/m to USD 8.2bn, but it still didn't exceed the value in Jul 2024 when it stood at USD 8.2bn. The main driver of the improvement was export growth as exports rose by 9.9% y/y in September, accelerating from 6.9% y/y in August, on the back of strong exports of semiconductors. On the other hand, imports rose at a stable rate by 4.9% y/y on the back of the subdued domestic demand. The goods trade surplus thus rose by 42.5% y/y or USD 3.2bn y/y. In addition, the services deficit fell by 30.1% y/y or USD 966mn y/y in September, whereas the primary income surplus rose by 41.6% y/y or USD 906mn y/y, which also contributed to the growth in the CA surplus.

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The financial account net outflows increased sharply by more than three fold y/y to USD 12.7bn from USD 4.4bn in Sep 2023. For instance, portfolio investment net outflows rose strongly by USD 3.7bn y/y to USD 8.8bn on the back of both rising portfolio investment assets and falling liabilities as foreign stocks and bonds became relatively more attractive. At the same time, the other investment outflows posted net outflows worth USD 1.2bn, improving significantly from USD 2.3bn net inflows a year ago. In particular, there was a very strong increase in other investment assets by USD 6.5bn in September led by the increase in other accounts receivables and deposits. At the same time, other investment liabilities rose by USD 5.3bn in September mainly due to accumulation of short-term loans by financial institutions. It should be also noted that net FDI outflows halved y/y to USD 1.0bn, while reserve assets increased by USD 2.3bn during the month.

The 12-month rolling current account surplus rose to USD 83.4bn in September, which is the highest since the 12 months ending Dec 2021. Overall, we expect the growth in the CA surplus to remain substantial in Q4 2024 and early 2025 as domestic demand remains constrained. However, growth will certainly slow down thanks to base effects related to semiconductor exports. In addition, Trump's election victory casts doubts about external demand in 2025 if his administration indeed pushes with high tariffs on imports.

Foreign Affairs Yoon and Trump Highlight Strategic Alliance in Phone Conversation (Business Korea )

Current Account Surplus Reaches $11.12 Billion in September (Business Korea )

North Korea's nuclear issue may take a backseat in Trump's second term (Chosun)

Andy Kim makes history as first Korean American elected to U.S. Senate (Chosun)

KOSPI looks to November for gains, with US election trend in its favor (Chosun)

Baek Jong-won's Theborn Korea soars 60% on IPO day, defying market slump (Chosun)

Trump wins US election, foreshadows policy shift (Korea Herald)

North Korean leader may seek another summit with Trump, but chances for deal seen as slimmer (Korea Herald)

Yoon offers apology amid growing controversies surrounding first lady (Korea Herald)

Yoon, Trump, agree to hold meeting at early date (Korea Herald)

South Korea vows not to repatriate North Koreans against will (Korea Times)

Tax shortfall could reach $25 bil.: study (Korea Times)

Korean industries brace for uncertainties under Trump 2.0 (Pulse)

• Widening interest rate spread undermines central bank's rate cut, FSS says
• FSS asks banks to ensure the effects of monetary easing are "felt immediately"

Bank should narrow their loan-deposit interes rate spread as they have moved recently to increase lending costs, while at the same time lowered interest payments for deposits, the head of the Financial Supervisory Service Leek Bok-huyun said during a meeting on Tuesday. As we reported last week, the average interest rate on new loans picked up, sending the interest rate spread on new loans and deposits to 1.22pps, the highest in 5 months. Banks of Korea's rate cut is being undermined by the widening of the interest rate spread, Lee said. In addition, he urged banks to ensure the effects of monetary easing are being felt "without delay."

To note, the recent increase in lending rates has been justified by banks as a way to limit household loan growth, but the government remains unhappy with such developments. In that vein, authorities want to limit household loan growth, which conflicts with the ongoing monetary easing by the BOK. The government hopes to restrict household lending mainly through macro prudential measures such as tightening of the stressed debt service ratio, which was implemented in September.

• FinMin Choi says government needs to double up efforts for trade diplomacy
• Trump's America First policy to negatively impact companies in steel, automobile, but could be a boon for the chip sector
• Trump expected to drive a hard bargain, but Korea-US alliance unlikely to be weakened

The government is preparing for an "immediate and direct impact" on finance and the market under the new US administration, FinMin Choi Sang-mok said on Wednesday while Donald Trump was already projected to win the US presidential election. Despite the strong US-Korea alliance, the government needs to double up efforts on trade diplomacy and other issues given the competition between the US and China, Choi was quoted as saying. President Yoon also congratulated Trump on Wednesday and said that the US-Korea alliance will "shine brighter" under Trump's "strong leadership." Meanwhile, the Ministry of Trade, Industry and Energy convened an emergency meeting on Wednesday to review and analyse the possible impacts of the US election on major industries and will hold another meeting on Thursday to discuss potential strategies. These preparations have been prompted by Trump's pre-election pledge to impose a 20% tariff on all goods imported into the US.

The sector that is expected to be impacted the most by Trump's victory is most likely the steel sector as Trump has pledged to impose 25% tariff on steel to revive the American steel industry. The industry ministry has set a priority to maintain the existing steel export quota if Donald Trump wins the elections, which is much more beneficial for Korean steelmakers than the 25% tarifff. Meanwhile, the government is also preparing for the abolition of the Inflation Reduction Act, which Trump has promised to do. The scrapping of the IRA act would significantly impact exports of hybrid vehicles and EVs to the US as the IRA currently provides tax credits for environmentally-friendly cars that have components that are manufactured in the US.

At the same time, the semicondcutor sector could actually benefit from Trump's presidency as he might impose tougher restrictions on Chinese memory chip manufacturers mass-producing DRAM that are undercutting Korean chipmakers. Hence, such restrictions would benefit Korea's top two chipmakers Samsung and SK Hynix. At the same time, the two Korean chipmakers may have to revisit their investment plans in the US if Trump also repeals Biden's CHIPS act, while their investments into their Chinese plants may be also put on hold if Trump removes exemptions for Korean companies to deliver cutting-edge equipment to their Chinese subsidiaries.

Overall, we expect Trump to drive a hard bargain as he recently called South Korea a "money machine" in a an interview in mid-October. For instance, Trump is widely expected to demand a greater contribution from Korea on military spending and he will likely seek a heavy revision of the recent agreement between Korea and the US on defence cost sharing. That said, we do not expect the alliance between the US and South Korea to change dramatically as South Korea remains a key partner for the United States in its rivalry against China. In turn, Trump is widely expected to accelerate the US pivot to Asia, so he will need partners like South Korea.

On North Korea, Trump's presidency brings new opportunity to diffuse tensions as he is expected to be much more ideologically flexible in negotiating with non-democratic regimes. However, we do not expect that the same kind of breakthrough as in his first term given that North Korea has clearly committed to develop and possess nuclear weapons, while it has also decided to sign an effective alliance treaty with Russia. In our view, the US-North Korea relations will be impacted greatly by any developments in US-Russia relations. In our view, Trump's strategy in Asia would be to distance China from its key allies in the region, including North Korea and Russia, so he will likely seek better ties with both of them.

SLAF earns $130 Million through Peacekeeping missions (Daily Mirror)

CID launches probe into false health rumor targeting President (Daily Mirror)

Export goals to face hurdles amid changing market dynamics: EDB Chief (Daily FT)

Cabinet nod to build nearly 2,000 low-income housing units with Chinese grant (Daily FT)

Rice shortage, price surge fueled by increased beer production? (Ada Derana)

General Election campaigning ends on Monday (Ada Derana)

Govt. goes strict on Galle Face (Daily Mirror)

• Placement was in line with target
• Majority of debt issued through 3-month T-bills
• Yields were up 2bps from Oct 29 auction

The government placed LKR 175.0bn T-bills at a scheduled auction today, according to an official press release by the CBSL. The placement met the government's target, though again not all maturities met their respective issuance targets. The auction was oversubscribed as the bid-to-cover ratio reached 2.05.

In more detail, the government again opted to fulfil the bulk of the debt issuance through the short-term 3-month T-bills, issuing LKR 92.3bn of them, almost 54% above the target. The 6-month T-bill issuance was about 60% of the target, worth LKR 58.7bn, while the 12-month T-bill issuance fell significantly short of the target.

The 3-month and 6-month yields were up marginally compared to the previous auction on Oct 29, while the 12-month yield remained flat. Still, the very low issuance of 12-month T-bills suggests the yield there could be quite volatile.

• Next Policy Meeting: Nov 27
• Current Policy Rate: Standing Deposit Facility Rate (SDFR) at 8.25%, Standing Lending Facility Rate (SLFR) at 9.25%
• Previous Decision: Hold (Sep 26)
• Our Forecast: Cut, 25bps
• Rationale: With inflation now in negative territory, the CBSL is anticipated to further reduce rates to encourage investment.

At the last Monetary Policy Committee (MPC) meeting on September 26, the Monetary Policy Board opted to maintain the SDFR and SLFR at 8.25% and 9.25%, respectively, after a thorough assessment of the macroeconomic landscape and associated risks. The Board's objective is to stabilise inflation around the 5% target in the medium term while promoting the nation's economic growth potential. The CBSL has noted a significant easing in inflation, with expectations that headline inflation will remain below the 5% target in the near term. Recent declines in fuel, electricity, and gas prices, coupled with a moderation in food costs, have bolstered this trend. Core inflation, indicative of underlying demand pressures, has also slowed down, albeit at a more gradual pace. Although inflation may decrease further in the short term, it is projected to stabilise around the 5% mark in the medium term.

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This rate hold follows a previous 25bps cut in July aimed at aligning medium-term inflation with the target while supporting economic growth. However, it appears that the CBSL is now focused on enhancing lending in the private sector and stimulating overall economic activity. Recent trends indicate a shift to negative price growth, with the Colombo Consumer Price Index (CCPI) falling to -0.8% y/y in October.

Economic Growth

Sri Lanka's real GDP recorded a growth of 4.7% y/y in Q2, slightly lower than the 5% y/y growth observed in Q1, marking four consecutive quarters of growth following five quarters of contraction. The robust performance of the industrial sector propelled this figure, with industrial output increasing by 10.9% y/y, supported by utilities, basic metals, wood, and chemicals. Agriculture experienced a surge of 1.7% y/y, driven by seasonal factors, while construction expanded by 11.9% y/y. The services sector saw a slight deceleration to 2.5% y/y growth, with significant advancements in insurance and accommodation reflecting improved tourism dynamics.

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Economic activity is gaining momentum due to ongoing reforms and support from the IMF. The latest PMI data also points towards improving activity levels. Furthermore, with the tourist season kicking in services sector is expected to see a boost in the coming quarter.

Inflation Dynamics

Following successful inflation management by late 2023, the Central Bank of Sri Lanka shifted its focus from price stability to fostering economic growth. This strategic pivot has enabled the CBSL to manage inflationary pressures more effectively. However, inflation remains volatile in Sri Lanka. During Q1 2024, inflation continued its downward trend, allowing for a rate cut in March; this positive trajectory reversed in April when CCPI indicated a year-on-year increase. By July, CCPI increased to 2.4% y/y, before entering deflation of 0.8% in October. Contributing factors include cuts in electricity tariffs and fuel prices; with further reductions anticipated for September, low inflation is expected to persist.

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External Sector

On an external note, Sri Lanka's merchandise trade deficit widened during the first eight months of 2024 due to rising imports. However, improvements in tourism revenues and remittances have strengthened the current account position. The Sri Lankan rupee has appreciated by over 7% against the US dollar this year, with gross official reserves reaching USD 6bn by August's end. Ongoing support from the IMF and progress in debt restructuring are anticipated to enhance external sector stability. The export sector is expected to gain traction in H2 2024 alongside a global trade recovery; however, risks stemming from geopolitical tensions and upcoming US elections could hinder this recovery timeline. Nonetheless, optimism remains regarding tourism as arrivals exceeded 1.6 million from January to October, reflecting a 25% y/y increase just for October alone. In recent developments, Sri Lanka successfully reached an agreement with bondholders regarding its debt restructuring efforts, which was an essential move for stabilising national finances and restoring investor confidence ahead of parliamentary elections where economic recovery will be pivotal for voters.

Data Download

Outlook

Currently, the Central Bank of Sri Lanka seems poised to prioritize economic growth over strict inflation control measures. With subdued inflation levels providing ample room for further rate cuts, CBSL underscores that market lending rates must accurately reflect earlier reductions made by the central bank; it considers current market rates as elevated and acknowledges that past rate cuts have yet to fully transmit through the economy. In light of these factors and recent trends indicating negative price growth alongside easing inflationary pressures, further rate cuts are anticipated during November's meeting as part of efforts to invigorate domestic economic activity.

• SET Index climbs 1.2% m/m at end-October

The average daily trading value of the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (mai) increased by 16.0% y/y to THB 54.75bn in October, the SET said in its monthly market report. At the same time, the October reading is 12.4% lower m/m. The average daily trading value fell by 14.5% y/y to THB 47.33bn in Jan-Oct.

The SET Index increased by 1.2% m/m at end-October, after rising by 6.6% m/m at end-September. The index increased by 3.5% ytd. In the year-to-date comparison, the Technology group emerged as the sole industry group outperforming the SET Index.

In October, a new factor that supported the Thai bourse was the decision of BOT's Monetary Policy Committee (MPC) to cut the policy interest rate by 25bps to 2.25%. Domestic institutional buying hence rebounded to its highest level since Mar 2020.

PM gives top priority to food security (Bangkok Post)

PM signs off on Isoc integrity project banning 'gifts' (Bangkok Post)

Thailand targets 8 million European tourists in 2025 (Bangkok Post)

Banks preparing to suspend interest fees (Bangkok Post)

Ministry to ease blow of subsidy ending (Bangkok Post)

Record Loy Krathong spending won't offset economic problems: UTCC (The Nation)

Thai Airways union, creditors push back against proposed govt control (The Nation)

Digital economy seen growing 19% in 2024 (Bangkok Post)

14.1 million tourists visit Việt Nam in first 10 months, up over 40% yoy (Vietnam news)

Vietnam posts $23.3 bln trade surplus in Jan-Oct, FDI sector $42.9 bln (The investor)

Vietnam's Jan-Oct industrial production grows 8.3% (The investor)

Industrial production index rises 8.3 per cent in ten months (Cong thuong)

Hanoi attracts 5.1 million visitors in ten months (Vietnam plus)

SBV injects liquidity into market, interbank interest rates pressure eases (Vietnam finance)

Prices surge leads to weakened gold demands (Thoi bao tai chinh)

Real estate sector attracts USD 5.23bn FDI capital (Tap chi tai chinh)

• Investors show limited interest in the long-end bonds
• Bond issuances increase by 11.1% y/y so far this year

The government sold VND 6.1tn of 5-, 10- and 30-year bonds at an auction on the Hanoi Stock Exchange on Wednesday, according to information available on the bourse's website. The funds raised fell short of the target of VND 10tn as investors showed little interest for the 15- and 20-year bonds. Notably, VND 1tn worth of 5-year bonds were sold at a yield of 1.9%, VND 5tn worth of 10-year bonds were sold at a yield of 2.66 and VND 98.5bn worth of 30-year bonds were sold at a yield of 3.1%. Yields are unchanged compared to the auction last week. After weeks of stable conditions, the interbank interest rates and foreign exchange rates showed signs of concern recently with both exchange rate and interbank interest rate rising. However, market has cooled down this week as the SBV sells FX to intervene the market.

The government has issued bonds worth 308.3tn YTD, up from VND 277.7tn in the same period last year. The government plans to borrow a maximum of VND 676tn and repay debts of about VND 454tn this year.