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In 2023, global monetary tightening and the remarkable strength of the dollar were notable, serving as significant obstacles for many emerging markets, including those in ASEAN. Faced with this, what is the ASEAN outlook for 2024? Here is what investment experts have to say.
ASEAN outlook for economies
“Growth in ASEAN should improve from 2023’s projection in 2024, amplified by lower interest rates, easing inflation and rebounding exports. However, China’s downbeat recovery and the El Niño weather phenomenon will weigh on growth across ASEAN,” says FocusEconomics.
On the other hand, the IMF, in October 2023, projected a 4.6% growth for ASEAN economies in 2024, marking a 0.3% point downward revision compared to their World Economic Outlook published in April. “The downgrade reflects not only weaker growth outturns and external demand but also more lacklustre domestic demand because of waning revenge consumption and monetary policy tightening,” informs the global lender.
Apart from the IMF, the Asian Development Bank (ADB) has also lowered its economic growth forecast for Southeast Asia. It now projects economic growth in the region at 4.7% for 2024, down from a previous estimate of 4.8%, citing downward revisions for Malaysia, Thailand, and Vietnam.
However, the bank maintains its positive outlook on Indonesia and the Philippines. “Higher public investment will lift growth in these economies in 2024, as will rising consumer spending, especially on hotels/restaurants and tourism activities, which comes amid a strong recovery of international tourism across Southeast Asia,” asserts ADB.
ASEAN equities outlook
As for the ASEAN outlook for equities, Nikko Asset Management observes that the region’s valuations appear appealing, as ASEAN markets are trading at 12 times price to forward earnings, approximately one standard deviation below the historical mean.
“We see valuations in 2024 remaining attractive and expect improving economic prospects to support corporate earnings growth in ASEAN. With the prospect of peak rates, ASEAN’s corporate earnings could also be primed for upward revisions,” says the asset manager.
Separately, Premia Partners suggests that Emerging ASEAN equities stand to gain from a devalued US Dollar and reduced energy costs. “The cyclical advantages are also supported by a secular uptrend driven by supply chain diversification; youthful demographics; urbanisation; high rates of capital formation; income convergence; middle-class consumerism; and digitisation of the economy,” writes Alex Chu, Director and Portfolio Manager at Premia.
Meanwhile, Global X ETF remains optimistic about prospects in Indonesia this year. According to the ETF provider, domestically oriented sectors, such as financials and consumer goods, could outperform. “In particular, we are optimistic on Indonesian banks, as the sector’s ability to defend earnings, maintain profitability, and grow balance sheets could be key in generating alpha amidst an uncertain global macro environment,” suggests Global X.
Among other nations in Southeast Asia, the ETF provider notes that the prospects for Philippine equities seem restrained, given the ongoing challenges of persistent inflation, a stringent monetary policy, and macroeconomic uncertainties in the market.
