S’pore, M’sia not attractive, Indonesia is

In Indonesia, Malaysia on 05/10/2014 at 4:37 am

In a late Sept report, FT reported that the Barings Fund mgr managing an Asean fund is cautious about topping up his exposure to Singapore and Malaysia due to fears about their economic growth prospects.
Mr Lim has large underweight positions in both countries via his $592.4m Asean Frontiers fund, which targets members of the Association of Southeast Asian Nations.

Singapore makes up almost 30 per cent of the portfolio, compared with 33.7 per cent within the benchmark MSCI South East Asia index. The manager has just over 19 per cent in Malaysia, against the index’s 26.5 per cent.
In July, data showed the Singaporean economy had contracted on a quarterly basis for the first time in two years, while Malaysia is going through a process of budget deficit reduction and may miss its 2014 target.

“Singapore and Malaysia are more developed than the rest of the Asean countries … This makes them more expensive and in the long term they don’t have as good growth potential.

“In terms of size, Malaysia is much smaller than the countries we favour, such as Indonesia, so it is less likely to expand rapidly.”
Mr Lim said he can still find selective opportunities in Malaysia, but ones which do not necessarily rely on the domestic economy. Tune Insurance, an online travel-insurance provider based in the country, is one of the latest additions to his portfolio.

“Tune allows us to access the tourism market without investing in airlines, which have to deal with a lot of regulation and are [involved] in price wars,” he said.

In general, he finds growth companies in Indonesia and the Philippines more enticing.

Baring ASEAN frontiers … holds a 3 per cent overweight position in Indonesia. He is confident 2015 will be a strong year for the country, given that the macroeconomic environment has improved.

Investors had been wary of Indonesia as they awaited the results of presidential elections in July. However, as Joko Widodo has been elected and interest rates are expected to rise next year, Mr Lim said there is now a positive outlook.

… had mixed feelings about Thailand, which makes up 15.1 per cent of his portfolio. This is in line with the benchmark.
“Thailand has a higher risk than the rest of the countries in the region, as there remains a lot of political uncertainty around the constitution,” …

In July, Thailand adopted an interim constitution ahead of the October 2015 elections. This constitution preserves the military-led government, called the National Council for Peace and Order.

  1. ‘Investors had been wary of Indonesia as they awaited the results of presidential elections in July. However, as Joko Widodo has been elected and interest rates are expected to rise next year, Mr Lim said there is now a positive outlook.’
    What a “uncynical” look at Indonesia Markets I presume!
    Here’s why: Joko Widodo is elected to the Presidency on the platform of economic reform to support strong growth, however he is facing two major challenges before he even takes office:
    1. Hostile Parliamentary House where a coalition of Parties led by losing Presidential Candidate Prabowo Subianto’s Gerindra Party holds around 60% of the Legislative Seats, whereas Jokowi’s Coalition led by his PDI-P Party only holds around 40% of those seats, which sets up a potential confrontation of passing bills unfavourable to the opposition to ensure that the measures that support the people who voted for him a difficult task.
    2. The latest passing of the abolishment of direct elections of local-level officials could prove a problem in carrying out reforms at the local levels as this paves the way, and ground open for gerrymandering and cronyism to fester in that level, even forcing the outgoing President Susilo Bambang Yodhoyono to use his Presidential Rights to try and halt this bill, potentially reversing the good work done by the same Legislators in finally ratifying the “Trans-Boundary Haze Agreement” which compels governments to take action in curbing the haze as a result of forest fires in Indonesian Territories that have affected primarily Singapore and West Malaysia annually.
    Indonesia’s attractiveness to investors now could very well be completely reversed in the next 3-6 months after Jokowi takes office due to the potential gridlock over economic and governance reforms required to ensure its own growth momentum is not dragged back by Parliament infighting and systemic corruption issues.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: