KUALA LUMPUR: Asean has been a net beneficiary in the rechanneling of trade and investment, and the deepening of supply chains due to United States-China tensions, said Malayan Banking Bhd
(Maybank) group president and CEO Datuk Khairussaleh Ramli.
Speaking at Maybank's Invest Asean 2023 entitled Asean Reboot: Reimagining the Future, Khairussaleh said Invest Asean affirms Maybank’s long-standing commitment to pre-eminence in thought leadership on the Asean Opportunity.
He added that the bank believes in the resilience of the region and is committed to supporting clients in the evolution of their businesses.
"As part of our M25+ strategy, we are investing up to RM4.5bil (S$1.3bil) over five years to accelerate the development of new capabilities in technology and talent, including regionalising digital platforms, all underscored by customer-centricity and sustainability-first practices," said Khairussaleh.
However, he noted that the region is not immune to the rising risks of global fragmentation and geopolitical conflicts.
"Businesses must be prepared to manage vulnerabilities and respond swiftly to new opportunities," he added.
Khairussaleh said during his briefing that high foreign direct investment (FDI) inflows is a trend that is being seen in Asean now, including in Singapore and Indonesia.
“Singapore saw US$99bil (RM459.16bil) in foreign investment in 2021, while Indonesia recorded some US$43bil (RM199.43bil) in foreign investment in 2022, the highest in the country’s history,” he said in his opening speech at the conference.
“The term ‘trade war’ is no longer complete without including technology, which is now at the centre of the conflict between the United States and China.
“This ‘tech war’ is expected to continue with restrictions on bilateral trade and investments over related industries such as semiconductors, batteries and key minerals and materials,” he said.
Khairussaleh said the impact of this “tech war” on Asean is two-pronged as the United States and China are the largest export destinations for most Asean countries and therefore, there are far–reaching regional supply chain implications.
“On the other hand, Asean nations stand to benefit from the movement of certain production and investment away from China,” he said.
In addition, he noted that growth in the six main Asean countries comprising Malaysia, Singapore, Thailand, Indonesia, the Philippines and Vietnam is expected to outperform the global gross domestic product (GDP) growth estimates.
“Our Maybank research team projects that the Asean-6 economies will grow at 4.2% in 2023, outpacing the projected global GDP growth of 2%,” Khairussaleh said.
“Supply chain disruption and the ongoing US-China standoff have turned into a silver lining for our region.
“Asean states have benefited from the increasing popularity of the so-called ‘China+1’ approach to global procurement,” he said.
Khairussaleh said there could be big opportunities from the digitalisation of the region’s economy, particularly in the financial services sector.
“The digital economy currently accounts for only 7% of Asean’s GDP compared to 35% in the United States and 16% in China. We still have a lot of room to grow,” he said.
Meanwhile, Maybank has progressed further in its sustainability commitment.
“Under Commitment 1, our goal is to mobilise US$17bil (RM79bil) in sustainable finance by 2025.
“As at March 2023, I am pleased to say that we have mobilised a total of US$8.4bil (RM39bil) to support low-carbon transition initiatives and sustainable development outcomes,” Khairussaleh said.
Meanwhile, Khairussaleh said banks are expected to face more difficulties to grow loans amid the rising interest rate environment.
This situation, however, may benefit other ways of capital financing including the equity markets such as via initial public offerings (IPOs), he said.
“This (difficulty to grow loans) seems apparent across the global banking space presently,” he added.
Citing Malaysia, Khairussaleh said there are many clients now preferring to go to the capital market. There is a differential between the interest rate of the debt market and loan market.
“But here we are, trying to be present on all sides (of the financing categories), depending on what the customers want,” he told a briefing at Maybank’s Invest Asean 2023 conference titled Asean Reboot: Reimagining the Future.
“Given the environment, this is what the customers prefer now.
“Generally, this is the trend we are seeing now as it is not easy to grow loans, especially on the global banking front facing interest rate hikes and also, the differentials between the debt and loan market,” explained Khairussaleh.
He said this was also the case in Singapore where the differentials between interest rates to treasury bills yields are big.
According to Khairussaleh, the competition for deposits and pricier loans will likely lead to a further compression in net interest margins (NIMs) for Maybank.
“While interest rates have been increasing in the last 18 months or so, we still expect a NIM compression primarily due to these reasons.
“We do expect NIMs to see compression for the year of between five and eight basis points as per our earlier guidance,” he said.
Commenting on the measures announced by the government to boost the capital markets earlier in the week, Khairussaleh said policymakers may want to continue to do more on this front.
“It is about trying to attract investment activities. We believe there would be continuous thinking of what else needs to be done to promote Malaysia as an investment centre,” he said.
Maybank Investment Banking Group chief executive officer Michael Oh-Lau said the recently announced measures would help remove some friction from doing or making deals in the country.
“I believe these measures are a precursor of more developments to come and it is something that is quite exciting for us to look into,” Lau added.
On a related matter, Lau said recent data from deals transactions across Asean appears to be encouraging, as the valuations are comfortable for both buyers and sellers to take part in.
“It has reached an exciting point where sponsors and investors are willing to take action – also for merger and acquisition (M&A) activities coming into play.
“We have seen quite a fair bit of IPO activity, for example, in Indonesia there is activity in the electric vehicle (EV) supply chain.
“Meanwhile, in the rest of Asean, we are seeing a resurgence in consumer staples coming back to the market,” Lau noted.
He also expects the increased deal making activity would continue into the second half of this year and the pipeline for deals would continue to grow as more companies coming to the market.
“It is a good time for M&As,” Lau pointed out.
