Economic rebalancing has mixed impact on ASEAN

SINGAPORE - As the biggest trading partner of the Association of Southeast Asian Nations (ASEAN), China's economic rebalancing and policy re-orientation will have an adverse effect upon ASEAN economies in the short term but will benefit the region in the long term, research institutions have said.

The latest figures from China's State Council Information Office showed China is now the ASEAN's biggest trade partner, with trade volume valued at $210 billion in the first half of 2013, which is nearly four times more than that in 2002.

ASEAN is also China's fourth most important destination of foreign direct investment, worth $30 billion.

As China's economy has slowed in nine of the past 10 quarters and the government said it will tolerate slower growth to push reform aimed at reducing its reliance on the massive investment in favor of more services- and consumption-led growth, there are concerns about the impact of China's slowdown upon ASEAN economies.

Nomura Global Markets Research said under the "China slowdown" scenario, the impact on ASEAN equity markets overall will likely be smaller than in the rest of the Asia-Pacific region, excluding Japan.

The impact on direct earnings in Thailand, the Philippines and Indonesia is likely to be limited as over 90 percent of revenues for listed companies of these three markets are derived domestically.

On the other hand, the impact on equity markets of Malaysia and Singapore may be more visible, with the chemicals, energy and gaming sectors likely to be affected in Malaysia, and tourism and, in particular, property sectors most vulnerable in Singapore.