Far East/SE Asia May Report
Far East: Japan
MAN Diesel & Turbo Expands Mitsui Pact
This comprehensive agreement promises a unique product portfolio for these two firms, who are longstanding partners with multiple previous collaborations. They have now agreed to to extend their mutual activities initially to cover sales, production, R&D, and EPC (engineering, procurement, construction).
PSR Analysis: The collaboration between MAN Diesel, a giant in marine diesel engines, and Mitsui Zosen, the top player in Japan's low-speed diesel engine segment, goes back almost a century. This latest move could help both companies maintain the top position in the marine engines market in Japan. It could also help them expand FPSO related equipment (Floating Production Storage and Offloading System: floating marine oil and gas production Storage and loading facilities), steam turbines and various compressors and other fields. The downturn in the shipbuilding industry will continue for some time, so the demand for marine engines is extremely limited. PSR
Far East: South Korea
South Korea's New Leader Moon Jae-in Takes on Family-Owned Empires
SEOUL, South Korea — South Korea's new president is taking on a challenge that has defied all of his predecessors: reforming the big family-controlled conglomerates that dominate the economy.
While jobs are a top priority, strong public pressure following a corruption scandal that toppled his predecessor, Park Geun-hye, leaves him with little choice about going after the chaebol, as they are called. "As I promised during my campaign, I will take care of the employment issue first. At the same time, I will take the initiative in reforming chaebol," Moon Jae-in said in his inauguration address.
PSR Analysis: Korea is facing uncertainties in many areas. It is still unknown how the chaebol reform, which is one of his commitments, will develop. Last month in Seoul, 10,000 construction equipment operators struck and held a large-scale demonstration seeking better working conditions. Moon Jae-in cannot afford a honeymoon period while workers' dissatisfaction builds. South Korea, with its high dependence on external demand, will watch closely as the revival of manufacturing in the United States, Japan, and Southeast Asian countries develops. PSR
Southeast Asia: ASEAN
ASEAN PMI rises to 51.1 in April
The Nikkei ASEAN Manufacturing Purchasing Managers' Index, or PMI, rose to 51.1 in April from 50.9 in March. The rate of improvement was the quickest recorded in 33 months.
A reading above 50 indicates economic expansion, while a reading below 50 points toward contraction.
Latest PMI data showed that six of the seven countries covered by the survey saw growth across their manufacturing sectors. Vietnam, the Philippines and Myanmar remained the top three performers, although in three cases business conditions improved at a slower rate compared to March.
"The ASEAN manufacturing sector started the second quarter on a stronger footing, building on the growth momentum seen in the first quarter. Growth was modest but nevertheless the strongest in nearly three years," said Bernard Aw, economist at IHS Markit, which compiles the survey.
PSR Analysis: Recovery of exports in Southeast Asia has become clearer. The rapid recovery of external demand, mainly in China, is driving the improvement of business confidence among companies. ASEAN's new export order has surpassed the milestone for the first time in seven months and entered the expansion phase. Dollar appreciation and depreciation of the Asian currencies, which grew from expectations for US economic policy, gave a boost to exports. These positive signs can be read in the following reports:
Construction work of high-speed railroads in Indonesia is expected to begin in earnest in May. In the Philippines, it was reported that the government would start an economic policy centered on infrastructure development. New car sales in March of the six major ASEAN countries (Thailand, Indonesia, Philippines, Vietnam, Malaysia, Singapore) increased 31% to 317,736 units in March. During Q1 2017, it increased 11% to 825,545 units from the same period last year.
While economic activity still is vulnerable due to politics and external pressure, this activity in the Southeast Asia region is becoming more positive. If development of infrastructure continues, demand will be strongly increased. PSR