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South East Asia

Many of South East Asia’s major currencie came under pressure in 2022 as the US Federal Reserve began raising its benchmark interest rate to slow inflation in the USA. When the Federal Reserve does this, other currencies tend to lose value against the dollar and, in past cycles, emerging markets - particularly those running current account deficits - have been hit the hardest. However, almost all of them ended 2022 considerably strengthened against the dollar. This is particularly important to South East Asia given its export-oriented economies. With the Fed signalling that it will ease off aggressive rate hikes in 2023, regional currencies may have weathered the worst of the storm and there is a good chance they will experience more stability this year.

The entire South East Asian region remains focused on China’s overall economic well-being, especially the countries in the table below, which shows the percentages of their overall trade conducted with China. These figures clearly demonstrate China’s huge influence on the region.

  Exports to China
(2021-2022)
Imports from China
(2021-2022)

Malaysia

15%

23%

Thailand

14%

24%

Indonesia

23%

28%

Singapore

15%

14%

Cambodia

9%

33%

Vietnam

17%

32%

Laos

31%

22%

With the withdrawal of China’s zero-COVID policy and the reopening of the international borders of many Asian-Pacific countries with China, the region remains hopeful that the momentum will continue through 2023.

Last year ended with copper scrap in tight supply. Discounts for No. 1 and No. 2 narrowed considerably in the final months of 2022 as many of China’s copper producers competed for red metal units for their year-end. As expected, this supply shortage has carried over to the South East Asia region. Demand for copper-bearing scrap is still quite brisk even while the terminal copper market has seen an increase of nearly US$ 1000 per tonne since the start of 2023.