KUALA LUMPUR: Malaysia, Indonesia and Thailand are likely to attract more foreign investments as companies look to “deconcentrate risk away from China,” said Moody’s Analytics.
This move is driven by the shifting of global demand from China towards North America, prompting other Asian nations to seek fresh investment opportunities.
The Asia-Pacific (Apac) economy, it said, is experiencing a slowdown due to various factors.
They include sluggish global trade, uncertainties surrounding China’s post-pandemic economic recovery, elevated interest rates, and certain fiscal policy adjustments.
“The greatest impact upon the rest of Asia from the economic malaise in China is via trade.
“However, Asia will avoid recession, but a new period of robust growth won’t likely commence until mid-2024,” the research firm said in a note.
Moody’s highlighted that the most significant factor holding back the Chinese economy is high debt and lack of demand within the property development industry.
“With sales volume down by over 50% from the peak, property developers sit deeply in debt and cannot raise additional funds in the bond market.
“And as much of the market had been driven by presales, developers have lost the ability to complete projects, leading to mortgage strikes by buyers.” it added.
The property sector slump has capped household wealth, reduced consumer confidence and limited demand for construction materials in domestic and overseas markets.
It has also limited employment opportunities in construction and related industries, said Moody’s.
Spending has also been negatively affected due to lack of incentives among households and a decrease in risk appetite among businesses.
The firm highlighted that one factor that would revitalise the Apac economy would be a rapid return of high-spending tourists from China. So far, it noted that their return “has been incomplete”.
None of the top five Southeast Asian economies has seen tourist arrivals returning to pre-pandemic levels, it noted.
Nevertheless, some improvement is expected over the coming year as China has just recently allowed group travel arrangements for overseas travel to all of Asia.
However, Moody’s stated that it is still uncertain whether the inclination of Chinese consumers to travel and spend abroad will rebound in the future.