Asian markets: Traders find haven from global stock gloom in Southeast Asian markets

South East Asia’s growth outlook is making the region an investor favourite, as global equities struggle after the Federal Reserve’s latest scathing rhetoric.

Man Group Plc,

SA and Credit Suisse Group AG are among those talking about the resilience of the sector following a worldwide sell-off over the past week following commentary at Jackson Hole. The benchmark MSCI ASEAN index has outperformed the broader MSCI Asia Pacific Index and is set to outperform a gauge of global stocks for the third straight quarter.

A rapidly growing chorus points to a reopening of Southeast Asia that is bringing back flocks of tourists, as well as accelerating domestic demand that is helping it survive a global recession. And with a tailwind from commodity exports, the sector’s earnings outlook looks more promising, while much of the market remains squeezed by slower consumption and rising costs.


“We have a lot of demand here,” said Joshua Crabb, Head of Asia Pacific Equities at Robeco Hong Kong Ltd. “FDI is happening, openings are ongoing and the long-term structural story is pretty positive. The market has been incredibly resilient, generally resulting in dramatic selloff. That’s a real vote of confidence to me.”

Most of the region’s largest economies are expected to grow at least 5% this year, according to estimates compiled by Bloomberg, with pandemic-era restrictions offering a major boost.

Malaysia has more than doubled its annual target for tourists in recent months, while Thailand is expected to generate $11 billion in foreign visitors growth in the second half.

Low on Tech, High on Banks

The revival is in stark contrast to China, where a lockdown in megacity Chengdu has thrown even more gloom on its economy and North Asian markets that rely on exports.

Manishi Raychaudhuri, Head of Asia Pacific Equity Research, BNP Paribas, said on Bloomberg TV, “We are focusing on markets in India and Southeast Asia.” “These are not only growing in terms of economic revival post-Covid, but also growing strongly in terms of earnings projections.”

Such views are echoed by Credit Suisse strategists, who said in a note last week that they place more weight on ASEAN, their preferred market being Thailand. His biggest underweights are South Korea and Taiwan.

The composition of Southeast Asia’s equity benchmark – low technical weight and a relatively high proportion of bank stocks – is also favorable in a rising global interest rate environment.


To be sure, the sector cannot be free from global risks from a supercharged dollar hurtling corporate profits and the Fed’s driving away capital from emerging markets.

However, many market watchers say that this timing will be different from the foreign-fund exodus seen in 2013, given the strong infrastructure of the economies. Data compiled by Bloomberg showed global funds invested a net $2.4 billion in the sector, excluding Singapore quarter-to-date, in which Thailand had a share.

And while most global central banks have been forced to tighten policy as they face sharp inflation driven partly by years of pandemic stimulus, the problem has been less acute in Southeast Asia. Indonesia, whose stock market is one of the world’s best performers this year, began raising rates only in August.

Forward earnings estimates for MSCI’s Southeast Asia gauge rose nearly 4% from the start of the quarter, compared to a 1.5% decline for the world index.

“The governments in the region haven’t used their financial leverage, they haven’t used monetary leniency, the real rates are still fair compared to many other places,” said Crabbe at Robeco. “We’ve seen earnings from places like Indonesia have been very flexible.”


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