KUALA LUMPUR (Feb 20): Southeast Asian (SEA) stocks are likely to underperform this year compared to those in the rest of Asia and the Western markets given the absence of positive catalysts to attract more capital, according to Nomura Asset Management Malaysia.

“I can say that SEA stocks are still challenging and there are no catalysts yet.

“Indonesia is good in the short term, [but] after the general election we will have to see how stocks perform. Malaysia is still stuck in the middle income trap coupled with (the issue of) government stability; Thailand has zoning issues, while Singapore is seen as quite defensive,” said its managing director and country head Leslie Yap.

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“Also, investment opportunities in Southeast Asia are always about the potential for consumer growth to drive consumption. Consumption is not something that global investors see as important at this stage, so their allocation will tend to be slightly away from SEA,” he told The Edge after a lunchtime conference on Tuesday.

In 2023, the Vietnam Ho Chi Minh 30 Index (VN Index) was the biggest gainer in SEA with an impressive 12.56% climb, followed by the Jakarta Stock Exchange Composite Index (Jakarta SECI) with a 6.16% gain, while the benchmark indices in Malaysia, Singapore and Thailand dropped. The FBM KLCI registered a 2.7% decline, while the Singapore Straits Times Index (Singapore STI) slipped 0.34%; the Stock Exchange of Thailand's Index (Thai SET) declined the most, dropping 15.15%.

So far for 2024,  the VN Index continued to lead the pack with a 9.74% gain, followed by the FBM KLCI at 6.94% and the Jakarta SECI with 1.1%; Singapore STI saw a marginal 0.12% increase while the Thai SET declined 2.08%.

On the asset class that is expected to perform well this year, Nomura Asset Management Co Ltd's (NAM's) chief investment officer of active global investments Takahiro Nakayama pointed to global equities such as Nvidia, Tesla and Apple in the US, saying the potential for a productivity revolution driven by artificial intelligence (AI) presents appealing investment opportunities.

“But despite the anticipated long-term benefits from AI-driven productivity and lower interest rates in the US, the focus should be on structural growth factors, involving a key focus on elements such as profitability strength, financial health and other qualitative aspects of corporate earnings,” Nakayama said.

On global fixed income, bond yields have started to decline in anticipation of major central banks cutting their policy rates this year, said NAM's head of investment of global fixed income Yuji Maeda.

“The influence of inflation on monetary policy has been significant and continues to be so. The expected decline in inflation could prompt the US Fed and other major central banks to implement policy rate cuts, contributing to the overall decline in bond yields,” said Maeda.

https://www.theedgemarkets.com/node/701631