I have been saying that the current international monetary environment will prompt for a deluge of (direct and portfolio) investments (euphemism for capital flight) towards ASEAN, mainly from Japan, as well as from Western Countries.
As I previously noted
Japan’s investments in ASEAN do not seem to be country specific, but more of a regional dynamic. Or that the Japanese probably hedge their ASEAN exposure by spreading their investments throughout the region…
We are getting some signs of confirmation.
Japan has reported intensifying direct investment flows to:
Indonesia. As per the account of Kenichi Amaki of Matthews Asia,
The Japanese are pursuing opportunities beyond just the auto industry in Indonesia. A local operator for a major convenience store chain talked to us about the intense quality control training they receive from their Japanese partner. This operator plans to significantly accelerate store openings over the next several years.
The investment push into Indonesia makes sense from a return perspective. According to Japan's Balance of Payments statistics, return on direct investment into Indonesia has averaged 10.7% in the decade up to 2010. In contrast, investment returns from North America and China have averaged only 5.4% and 8.1%, respectively, during the same period. As growth in China moderates, Southeast Asian nations such as Indonesia are emerging as a new source of growth for Japan Inc.
Economic growth seems to be a secondary factor or a rationalization to the real cause: Japan’s domestic financial repression mainly through inflationism as political recourse to her ballooning debt woes.
Malaysia. From the Malaysian Trade Industry
There has been no let-up in interest among Japanese investors in Malaysia's main industrial pillar - the electrical and electronics (E&E) sector, said International Trade and Industry Minister Datuk Seri Mustapa Mohamed.
"There continues to be interest either by way of reinvestments or interest by those companies (from within and out of Japan) to relocate their businesses here," the minister said at a media briefing after the 2012 Panasonic Scholarship Award ceremony at the ministry yesterday.
He said there was no slowdown in the trend of Japanese interest in the E&E sector which last year accounted for 34 per cent of the total employment in the manufacturing sector.
For the first seven months of this year, Japanese investors poured in some US$824 million (RM2.6 billion) into 48 projects, almost double the US$400 million (RM1.2 billion) invested in 26 projects in 2010.
Malaysia saw a 76 per cent jump in foreign direct investments (FDIs) in the first half of the year with RM21.3 billion versus RM12.1 billion in the same period last year. Some 52 per cent of these FDIs valued at RM15 billion were in the manufacturing sector.
Japan led the foreign investment pack, in the first seven months of the year, with RM3.4 billion worth of investments followed by the US (RM2.3 billion) and Singapore (RM1.4 billion).
Thailand. As reported by the Organization of Asia Pacific News Agencies
Thai Industry Minister M.R. Pongsvas Svasti has acknowledged that foreign direct investment (FDI) in Thailand has kept steadily growing, with FDI from Japan alone doubling in the first five months of this year, compared with the corresponding period of last year.
Let me repeat what I wrote
But since (inward) capital flows into ASEAN will reflect on global central bank activities, this dynamic would not be limited to Japan but would likely include western economies as well.
And under the political climate that induces yield chasing dynamics, YES we should expect these flows to translate to a vastly higher Phisix and ASEAN bourses overtime, largely depending on the degree of inflows. This will be further augmented by the response of local investors to such dynamic as well as to local policies.
Although NO the Philippines will not decouple from events abroad and the pace of FDIs and investment flows will largely be grounded on the general liquidity environment.
Japan’s deepening capital flows will likely be a medium to long term trend and has been conditioned or will be significantly influenced by evolving global dynamics.
Yet all these seems as an eerie reminiscent of the Asian Crisis of 1997.
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