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Southeast Asia markets are poised for a comeback with valuations at ‘bargain basement,’ Maybank says


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A woman (R) adjusts the Philippines flag before the 51st Association of Southeast Asian Nations (ASEAN)- Republic of Korea Ministerial Meeting in Singapore on August 3, 2018.

Mohd Rasfan | Afp | Getty Images

Southeast Asia markets could see a turnaround in 2024 on the back of cheap valuations and potentially high economic growth, after losing some steam last year, according to Maybank.

Improving growth, rising exports, a pick up in manufacturing and a better-than-expected outlook by Taiwan Semiconductor Manufacturing Company last week all mean that Southeast Asia markets are poised for a better year, said Thilan Wickramasinghe, head of research for Singapore at Maybank Investment Banking Group.

Southeast Asia really is a bargain basement of markets, when it comes to valuations,” Wickramasinghe told CNBC’s “Street Signs Asia.”

A U.S. recession alone wouldn't 'dampen the story' of Southeast Asia, Maybank says

The MSCI Southeast Asia index fell a little over 3% in 2023, compared with a more than 20% rise in the broader MSCI World index, whose top five constituents are U.S.-listed technology giants including Apple and Microsoft.

The MSCI’s Southeast Asia index was trading at about 13.21x its 12-month forward price-to-earnings ratio, according to data from MSCI, as of Dec. 29, compared with a 16.57x forward P/E for the MSCI World index.

Forward P/E captures the value of an index based on its constituents’ earnings.

U.S. recession won’t hurt ASEAN

Maybank’s Wickramasinghe said even a potential U.S. recession will not dampen optimism for Southeast Asian markets, especially for Indonesia, Malaysia and Thailand, which are strongly driven by domestic consumption.

Other markets in the region are also placed to benefit from their growing presence in the chips and electric vehicle industries.

“That is because the pie is actually getting bigger and a lot of Chinese capacity will actually start to see a transmission back down to Southeast Asia … especially with the AI race and with the EV race … If you take the AI race alone, that’s going to drive a significant demand for chips.”

Wickramasinghe noted that Southeast Asia nations already have an infrastructure in place to benefit from the growing demand for chips compared with a country like India, which may need time to catch up.

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