Thailand
Philippines: Banks not seen gaining from China’s reopening
JUST a few banking systems in the Asia-Pacific — the Philippines not included — will benefit from China’s reopening, Moody’s Investor Service said in a report.
The economies and subsequently the banks of Hong Kong, Macao, Mongolia and Thailand will gain the most, the debt watcher said, “given their close economic ties to China through shared borders or tourism.”
Multinational banks such as DBS Bank Ltd. Oversea-Chinese Banking Corp. Ltd., United Overseas Bank Ltd., Standard Chartered Plc and HSBC Holdings Plc will also benefit given their sizable exposures to Hong Kong and mainland China.
“However, benefits will be smaller for banks in other parts of the region because China’s economic recovery will be led by domestically oriented services and consumption,” Moody’s said.
In addition, “the global economic slowdown and the effects of elevated inflation and higher interest rates in most APAC (Asia-Pacific) will loom large,” it added.
“Growth across Asia-Pacific, except for Hong Kong, Macao and Thailand, will moderate,” Moody’s continued.
The change in the Philippine’s gross domestic product (GDP) growth rate between 2022 and this year was pegged at just under minus 2 percent in line with official expectations of a 2023 slowdown.
The government is targeting GDP growth of 6.0 to 7.0 percent this year, down from last year’s above-target 7.6 percent, given heightened global uncertainties and the impact of inflation-fighting efforts.
Moody’s said that economies such as the Philippines, Bangladesh, India, Japan, Korea, Malaysia, Pakistan, Taiwan, China and Vietnam will still see some benefits from trade and travel, banking exposure and trade but these would be small.
As a percentage of GDP, Philippine exports to China account for less than 5 percent, it noted.
“A broader recovery of domestic consumption in China that can lead to greater demand for imports from other economies will be more gradual,” Moody’s continued.
“This is because the Chinese consumers remain cautious on spending due to concerns on their income stability and the country’s weakening exports.”
Moody’s pointed out that Beijing had set a relatively low growth target of 5 percent for this year and also announced small increases in its deficit and infrastructure spending.
“The relatively low growth target and fiscal expansion also reflect the government’s focus on consumption rather than investment to drive the economic recovery,” it said.
A weak property sector and the slowdown in infrastructure investment will constrain demand for hard commodities while a more gradual recovery in Chinese consumer sentiment will also limit the rise in demand for farm goods.
For major commodity-producing economies such as Australia, Indonesia and Thailand, “this means China’s reopening will provide little upside for banks in those countries…,” Moody’s said.
As for hopes of a surge in Chinese tourists, the debt watcher said that apart from Hong Kong, Macao and Thailand, “the region as a whole does not rely on Chinese visitors or tourism significantly for economic growth.”
Source: https://www.manilatimes.net/2023/04/19/business/top-business/banks-not-seen-gaining-from-chinas-reopening/1887718