Southeast Asia could become one of the hotspots for investor funds this year and over the next few years. The advantage: Southeast Asia has been relatively unaffected by global tensions and geostrategic conflicts. The markets in Singapore and Indonesia in particular could become popular destinations for investors. Also enticing for investors is that Southeast Asian markets have been largely ignored in recent years, meaning the opportunity is there to get in before a major player potentially enters the market.
Analysts at the major U.S. investment banks agree. Above all, the low impact of geopolitical conflicts is the main reason why the Southeast Asian markets are particularly attractive. The Russia-Ukraine conflict is not a major issue here, as exports to these countries are very low at around 1%. In addition, countries in this region are benefiting from the rising demand for raw materials and increased demand. Indonesia, for example, is the largest exporter of coal. Recently, the import of coal from Russia to the EU was banned, forcing EU buyers to look elsewhere. Other raw materials such as tin or nickel are being mined extensively in southeast Asia.
Timothy Moe, the chief Asia-Pacific strategist at Goldman, told CNBC that Southeast Asian markets have been “largely ignored by global investors for a decade.”
Addresses that are on Goldman’s list are Singapore and Indonesia, he said. The dynamics of the economy and its growth are better in the region, which is gradually reopening. In addition, the banking sector is weighted in the equity indices, which could benefit from a transition to tighter monetary policy and rising interest rates. Digitalization is also slowly making its way into the markets in Indonesia and Singapore. This means there is plenty of growth potential in the markets.
JP Morgan, on the other hand, sees Indonesia and Vietnam as great opportunities. In Indonesia, especially banks are interesting investment opportunities. Vietnam is interesting because it was one of the few economies that had positive growth during the COVID pandemic.
The capital inflow into the Southeast Asian markets can already be observed since the beginning of the year.
- Singapore’s STI index is up 8.31% YTD.
- Indonesia’s IDX Composite Index is up 8.18% YTD.
- The FTSE Bursa Malaysia KLCI is up 2.5% YTD.
- SET Thailand’s index is up 1.71% YTD.
- On the ETF side, there is the Global X FTSE Southeast Asia ETF (ASEA) which is up 6.86% YTD.