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This year, investors should look for countries and sectors characterised by either local macroeconomic strength or global exports. In Asia, these include, for example, the domestically orientated markets of Indonesia and the Philippines, which are likely to be less affected by a slowdown in global growth, a recent market analysis by Lombard Odier Investment Managers (LOIM) points out.
For Indonesia, LOIM is optimistic that economic growth will remain steady at around 5% this year. “Earlier in the year, all eyes were on the presidential elections. The outcome positively surprised the market with a convincing win by the Prabowo-Gibran ticket,” says June Chua, Portfolio Manager Asian Equities at Lombard Odier Investment Managers.
“Given the outcome, we are more confident that policy continuity will encourage corporates to refocus on investment plans. We expect developments like moving up the manufacturing value chain, Indonesia becoming an EV battery materials powerhouse and the move to the new capital, Nusantara, to continue,” opines Chua.
Furthermore, LOIM anticipates that additional policies pledged during the election campaign, including affordable housing and rural development, will begin to materialise, further bolstering the investment case for Indonesia.
South-East Asia investment opportunities – Philippines worth a second look
“The impression many investors have of the Philippines is that it is a small, illiquid equity market. This is true, of course – it has a market cap of only USD 274 bn and accounts for less than 1% of the MSCI Asia ex Japan,” says Chua.
However, LOIM believes that the largely domestic-driven economy has a strong year ahead, with 5.8% GDP growth estimates. “Inflation has also been easing, and consensus expects inflation to slow to 3% in 2024, well within the range of the central bank”, Chua points out.
This setup, therefore, creates a favourable environment for the Filipino central bank to initiate rate cuts. “Historically, in times of rate cuts the Philippines would see renewed optimism for private and corporate spending. We would expect the same this time, particularly given the cheap valuations and high economic growth profile vs Asian peers in 2024,” Chua concludes.
From an investment perspective, the asset manager highlights banks and consumption in Indonesia as promising sectors and banks and property in the Philippines.
