Sino-US Trade War Bruised Southeast Asian Economy

In this August, the escalation of Sino-US trade conflict, Federal Reserve interest rate cut and a hard Brexit continues to destabilize the global forex market and fuels into investors risk-hedging sentiments. As the RMB plunged, GBP tumbled downhill and US Treasury bonds showed inverted yield curve, the currencies of SE Asian countries were also affected and dropped drastically.

SE Asian economies suffered much from the collateral damages of the trade war between China and the US. Being the world‘s two largest economies, China and US not only bruised each other, but also hurt the economy of SE Asia by locking up in a tit-for-tat trade war. Since China is the largest trade partner of ASEAN countries, the high level of economic inter-dependency between them means ASEAN countries face greater pressure as China’s export decreased.

Statistics of SE Asian countries in the second quarter of 2019 showed signs of economic slowdown. Singapore‘s GDP in Q2 grew by 0.1% year-on-year, the lowest in a decade. Indonesia, Thailand and the Philippines also saw their growth in Q2 lower than that of Q1, besides Singapore. Although the central bank in Malaysia released more positive data, analysts in Malaysia warned that the accumulating global risks also post significant challenges to Malaysia’s economic outlook.

In addition, in the forex report of the first half of 2019, the US Treasury added Malaysia, Singapore and Vietnam to the watch list of currency manipulators, targeting the forex industry in SE Asia. US Treasury estimated in the report that in 2018, Singapore‘s net purchases of foreign currency reached at least 17 billion USD, which was equivalent to 4.6% of its GDP, while Malaysia’s central bank made net sales of foreign currency equivalent to 3.1% of its GDP; Meanwhile, Vietnam‘s current account balance gained a surplus of over 5 percent of GDP in the four quarters through June 2018. Although Monetary Authority of Singapore (MAS), Malaysia’s central bank and the Vietnamese government all dismissed accusations of currency manipulation, US may still impose sanctions over these countries, such as restricting US businesses from investing in SE Asia, or taking further measures such as imposing tariff penalties on certain SE Asian countries.

John Lee, CEO of the May Banks Singapore branch, pointed out during an interview with The Nikkei: “The US government wants more than targeting China. Ultimately, it aims to reverse the current trade imbalance with many countries, ASEAN countries could be the next targets if they continue to maintain a trade surplus against the US.”

Against the backdrop of an ever-changing global market, investors in SE Asia can follow forex news and market trends closely and adjust your investment accordingly to minimize your risks. You may also download the WikiFX App to conveniently check forex data, market news and broker information.