Southeast Asian leaders to meet in shadow of Trump's trade war

[SINGAPORE] The leaders of Southeast Asia's economies are set to gather in Thailand this weekend as the shadow of President Donald Trump's trade war keeps the region on edge.

The summit of the Association of Southeast Asian Nations comes two weeks after Group of 20 finance ministers faced similar challenges: wobbling demand and bleeding business and investor sentiment as the US and China feud. The weakening electronics cycle is particularly bad news for Asian exporters.

Aside from slowing growth, the 10-nation summit in Bangkok is expected to focus on sustainability, ways of knitting the region's markets together and efforts to foster digital innovation without compromising privacy and security.

The 34th Asean leaders' summit is the first since Indonesian President Joko Widodo won re-election and Thailand's Prayuth Chan-Ocha returned as premier this year. Midterms in the Philippines strengthened President Rodrigo Duterte's grip on power.

Here's a look at some top challenges Asean will be tackling this weekend:

QUIET FACTORIES

Another month, another slew of weak Asia purchasing manager index readings. While Indonesia and the Philippines saw production edge upward in May, much of Asean failed to improve, taking its cue from China. Sub-50 readings signal contraction. Singapore's electronics PMI sub-index has been below that level for seven consecutive months.

TRADE DRAMAS

Investors breathed a collective sigh of relief when the US lifted a tariff threat on Mexico and Mr Trump said he would meet Chinese President Xi Jinping in Japan. But some analysts continue to worry given Mr Trump's penchant for applying duties to help achieve his political goals.

Asean nations find themselves caught in the middle of the US-China tussle. While China is the biggest trading partner for most of them, they also can't afford to offend the US. Expect the eventual communique to avoid taking sides while promoting the need for cooperation.

ECONOMIC GROWTH

Standard Chartered sees Vietnam, Philippines, and Myanmar as part of an exclusive club that can achieve a critical 7 per cent growth pace through the 2020s. But in the nearer term, they are being buffeted by global headwinds, and some Asia-Pacific central banks are already cutting interest rates.

POLITICAL RISK

Regional political risk climbed with elections and remains elevated in coup-prone Thailand, a Bloomberg gauge shows. Junta leader Prayuth was picked by lawmakers to return as premier after March's disputed poll, but has only a slim majority in the lower house.

BLOOMBERG