After the "Black Monday" on August 5th, major stock indexes in the Asia-Pacific region rebounded significantly, with the performance of Southeast Asian stock markets particularly eye-catching. As one of the most favored investment targets by fund managers amidst the shift in Fed policy, Southeast Asian stock markets have lived up to expectations and consolidated their position.

Among the top 5 performing Asian stock indices this month, 4 are from Southeast Asia, with Thailand leading the way. As of yesterday's close, the Thailand SET Index (SETI) has seen a cumulative increase of over 11% since August 6, and the Indonesia Jakarta Composite Index (JKSE) has risen by about 10%.The weather is good today The weather is good today.rising over 9%, the Philippine Stock Exchange Index (PSI) has increased by about 8%, $FTSE Bursa Malaysia KLCI Index (.KLSE.MY)$ has risen by nearly 7%. Meanwhile, several ETFs tracking the stock markets of Southeast Asian countries have also performed well.

Amidst this buying frenzy, overseas funds have been flowing in for the fifth consecutive week, and Morgan Stanley Capital International's ASEAN index (MSCI Asean Index) is currently approaching its highest level since April 2022.

The factors that have sparked investors' enthusiasm for markets such as Indonesia and Malaysia include relatively low positions held by foreign investors, supportive local policies, and attractive valuations. These advantages have created opportunities for Asia to tap into global investors shifting from larger economies.

Foreign funds have relatively small positions in this market, allowing room for expansion. The valuations also appear highly attractive, with Morgan Stanley's MSCI Asean index having a 12-month forecasted price-to-earnings ratio of 13.6 times, compared to a five-year average of 14.7 times.

In the second quarter of 2024, Southeast Asian economies have shown resilience and stable economic performance. A report by McKinsey, a global management consulting firm, shows that Vietnam, Malaysia, the Philippines, and Thailand have recorded the highest annual growth rates in the past four quarters. Vietnam and the Philippines continue to be the two fastest-growing economies in the region, with growth rates of 6.9% and 6.3% respectively, while Malaysia ranks third with a growth rate of 5.9%.

Furthermore, as the US election approaches, the global stock market may face volatility, prompting investors to shift from traditional markets to emerging markets. According to research by Macquarie, Malaysia and Singapore stocks are viewed favorably in Southeast Asian markets for their resilience against market downturns.

Jaden Vandergeest, the Head of Macquarie's ASEAN Equities Research, pointed out in a report that the implementation of clear reforms and the boost from a higher market liquidity are expected to enable Malaysia's stock market to withstand market volatility. As for the Singapore stock market, during the past two US presidential election periods, the Singapore Exchange's derivatives and stocks have shown stable growth, indicating its resilience and ability to benefit from market fluctuations.

The rise of Southeast Asian stock markets is also supported by expectations of a rate cut by the Federal Reserve in September. In recent years, Southeast Asian countries have been grappling with global inflation and a strong US dollar. Inflation has weighed on domestic demand, while currency depreciation has increased the burden of US dollar-denominated debt. Economic slowdowns and weak currencies have resulted in capital outflows from the region, but the situation has started to change as inflation stabilizes and regional currencies appreciate.

Currently, the interest rate differential between the US and Southeast Asian countries has narrowed, and the currencies in the region have strengthened against the US dollar. Due to the combined impact of rising stock prices and strengthening Southeast Asian currencies, MSCI's ASEAN index, denominated in US dollars, has risen over 7% since August, while the S&P 500 index has gained less than 2%.

Chun Hong Lee, portfolio manager at Xin An Asset Management, said, "If the interest rate cut continues without an economic recession, this round of rebound may continue until the end of 2025."

How to invest in the Southeast Asian market

Southeast Asian stock markets as a whole have high growth potential. However, for investors, direct investment in local stock markets may face certain barriers. relatively speaking, choosing the corresponding region or country's ETF is a more convenient investment method.

$Global X Funds Global X Southeast Asia Etf (ASEA.US)$An ETF that provides investors with a wide range of investment opportunities in Southeast Asia, including Singapore, Malaysia, Indonesia, Thailand, and the Philippines. Since August, this ETF has been continuously rising, with a gain of more than 11%; it has risen by more than 16% since the beginning of the year.

It should be noted that the market environment and risk factors vary between different countries. Investors can choose the corresponding country or region's ETF based on their own preferences.

In the past two months, several Southeast Asian countries' ETFs have performed well, with the Thailand ETF having the largest increase.$iShares MSCI Thailand ETF (THD.US)$Since August, the cumulative increase has been nearly 14%; Philippines ETF$Ishares Trust Msci Philippines Etf (EPHE.US)$and Indonesia ETF$Ishares Trust Msci Indonesia Etf (EIDO.US)$followed closely with an increase of about 10%; Singapore ETF$iShares MSCI Singapore ETF (EWS.US)$rose nearly 8%; Malaysia ETF $iShares MSCI Malaysia ETF (EWM.US)$ Although it ranks low in terms of growth, its performance this year is impressive, with a cumulative increase of 22% from the beginning of the year to the present; the Vietnam ETF has performed poorly, with an increase of less than 3% and even a decrease since the beginning of the year. $GLOBAL X MSCI VIETNAM ETF (VNAM.US)$ The increase is less than 3%, and it has even declined since the beginning of the year.

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Editor / jayden