Southeast Asia gains investors’ favor over China: survey

By Kevin Plumberg

HONG KONG (BestGrowthStock) – Southeast Asian emerging markets are looking increasingly attractive to wealthy Asian investors as they grow less optimistic on prospects in Greater China, a survey showed on Thursday.

Thanks to streams of foreign investment from the West and other parts of Asia, Southeast Asia is home to some of the region’s best performing stock markets this year, shrugging off bouts of volatility which have dragged down far larger markets.

Shares in Shanghai, on the other hand, are among the worst performing in the world behind those of debt-laden Greece, losing nearly a quarter of their value this year and weighing heavily on stocks in Hong Kong.

The ING Investor Dashboard survey showed the Greater China sentiment index fell 14 percent to 127 in the second quarter from the first quarter, though it remained just within optimistic territory.

Sentiment on Southeast Asia rose 3 percent to 141 from the first quarter.

“The Asian investor is more attuned to what is happening in other Asian markets,” said Grant Bailey, regional general manager with ING Investment Management in Hong Kong.

“If you don’t have great returns coming out of the traditional G7 or G3 markets, you will go to where the returns are.”

Overall in Asia ex-Japan, sentiment slipped to 136 in the second quarter from 145 in the first quarter and was still in optimistic territory. A year ago, the index was at 124, having reflected continued optimism since then.

China’s credit tightening measures were mainly behind the slide in investor confidence there, though Bailey noted that shifts of political power were a theme running through the survey.

The biggest rise in optimism came from the Philippines, where last month Benigno Aquino III won a presidential election by the widest margin since 1986.

By contrast, the biggest drop in sentiment was in Australia, where former Prime Minister Kevin Rudd faced a dramatic slide in support because of a controversial mining tax that led to his ouster from power.

Besides Sri Lankan equities, Indonesia, the Philippines and Thailand are the only other Asian stock markets with double-digit returns this year.

Indonesian stocks were close to record highs on Thursday, while equities in the Philippines hit 2-1/2-year highs.

Foreign investors have also been strongly drawn to bonds issued by the two countries, as well as those from Malaysia, attracted by their strong growth prospects and expectations that their currencies will appreciate further.

Even with the steep rise in Southeast Asian stock markets, they still are not the most expensive in the region.

Among the countries represented in MSCI’s benchmark Asia Pacific ex-Japan index, India and Hong Kong are the first and second-most expensive markets purely on the basis of prices to 12-month forward earnings expectations, Thomson Reuters I/B/E/S showed.

The Philippines, Malaysia and Singapore are No 3, 4 and 5, suggesting there more may be more value in those markets.

The ING survey also showed that Asian investors planned in third quarter to gain more exposure to energy, financial services, resources, technology and consumer stocks.

However, their top choice of asset for the third quarter was gold, reflecting concerns about accelerating inflation across Asia.

The ING survey was conducted in June 2010 and had responses from 3,792 affluent investors across 12 Asia Pacific markets.

Southeast Asia gains investors’ favor over China: survey