Worldwide investors see South East Asian stock markets as the best places to park their money amid Fed hikes, growing inflation and Covid-19 lockdowns in China.
The region’s economic reopening and attractions have become an alternative to deal with high commodity prices. Consequently, the MSCI Asean Index has started getting off a three-year relative downtrend against other worldwide indexes.
Also, data compiled by Bloomberg showed that foreign funds had bought net South East Asian shares every month since January 2022, accounting for $10 billion in inflows so far this year.
According to Alexander Treves, head of investment specialists for Asia Pacific equities at JP Morgan Asset Management, a “pickup in interest” has been logged as ASEAN emerges from a turbulent Covid-19 period.
Indonesia, ASEAN’s largest economy, has become a world-class export market for commodities and resumed trading as pandemic restrictions are lifted.
Moreover, the tourism revival driven by China’s and Japan’s borders reopening has supported Southeast Asia economies. Thailand, Malaysia and Indonesia have contributed to the rise in ticket bookings through their quarantine-free travel programs for vaccinated tourists.
Singapore has also lifted lockdown measures and border restrictions, hoping to return the nation to its pre-pandemic life. Other countries in the region have reopened with very few travel controls, representing an opportunity to boost tourism activity, which contributed 12% of Southeast Asia’s gross domestic product in 2019.
David Chao, a global market strategist for Invesco Ltd in Hong Kong, said: “Southeast Asian risk assets look more attractive than North Asian equities.”
Investors see Southeast Asia as a hedge against inflation. Oil-exporting countries like Malaysia and coal or natural gas exporters like Indonesia can help fuel gains in related stocks after the war in Ukraine sent global commodity prices soaring.
Asia was its best performer in the Jakarta Composite Index, posting a 10% rise near an all-time high.
The region has reported such outperformance despite the Federal Reserve’s aggressive interest rate hike, prompting investors to trust in local central bankers’ abilities to successfully manage a tighter monetary policy that has hit assets in the past despite the increasing inflation.
Buyers also think South East Asian stocks may be a safe haven against US stocks, which have risen sharply in price on growing rates, European stocks affected by Russia’s invasion of Ukraine, and Chinese stocks, slowing due to Covid-Zero strategies.
