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After a highly challenging year, global markets are now dealing with a wave of deglobalisation and rising inflation. However, ASEAN outlook for 2023 looks much better placed. Here is what investment experts have to say.
“Looking ahead, we remain optimistic about the ASEAN region, especially countries that we believe are better placed to generate domestic demand alpha. These include Indonesia and Vietnam, which are expected to be among the top 10 global consumer markets by 2030,” as per Mirae Asset Global Investments.
A lot of the interest in ASEAN is arising from the deglobalisation trend, and it seems there will be both winners and losers from deglobalisation. “Net-net, the impact on Asia ex-Japan may be fairly small in the short term, with the negative to China offset by positive spillovers to ASEAN countries like Vietnam, Malaysia, and Indonesia,” says T.Rowe Price.
But how do the inflows in the ASEAN region impact global markets and especially China?
“Crucially, a large share of the FDI flows to ASEAN comes from China, which accounts for 40% of the total now as compared to only 10% a few years ago. This actually strengthens the supply-chain integration between ASEAN and China rather than weakening it,” writes BNP Paribas Asset Management.
Meanwhile, on a regional level Indonesia is likely to enjoy strong investment growth and robust private consumption should, as per Mirae Asset Global Investments.
“Looking ahead, we continue to favor Vietnam as an off-benchmark play as economic fundamentals remain strong. The country is well-positioned to grow as a manufacturing hub within Asia to capture the shift in manufacturing capacity away from China,” adds Mirae Asset Global Investments.
The Vietnamese equity market was among the worst-performing in Asia in 2022, largely due to the anti-corruption drive by the government and fears of a global recession.
“We believe that these government actions created much pain in the short term but are very important and beneficial for the long-term development of the Vietnamese stock market…If the Vietnamese stock market, as we expect, is now coming back to normality, there is a good chance that the currently depressed valuations will finally catch up with regional peers, and hence we should see higher index levels soon,” as per Hong Kong-based Asia Frontier Capital.
With an impending recession, and steep interest rate hikes, what is the ASEAN outlook going into 2023?
“Slowdown in developed market (DM) economies and China, coupled with tightening global monetary conditions, have created headwinds for the economic recovery in Asia in 2022. However, commodity exporters such as Indonesia and Malaysia should still benefit from elevated energy and raw material prices,” as per AXA Investment Managers.
Indonesia has benefitted from rising commodity prices and has registered growth even as other ASEAN economies have faltered.
“Indonesia is a net energy exporter and is one of a few countries to benefit from increased energy prices, which should persist into 2023,” writes Fidelity International.
