After lagging behind the wider region since 2013’s taper tantrum, Southeast Asian stocks are poised to start outperforming their peers.
That’s the view from Morgan Stanley and Nomura Holdings Inc. in research notes released Thursday and Friday respectively.
A completion of cyclical gains in earnings of technology and commodity companies, only modest dollar strength versus Asian currencies and a small deterioration in sentiment in China will benefit ASEAN markets over the next few months, according to Japan’s biggest brokerage. The “dovish tightening” by the Federal Reserve is supportive of emerging-market currencies in general, providing a reprieve to Southeast Asian equities, the US bank said.
“Structurally, ASEAN’s economies do appear better placed to deliver on growth than those in North Asia,” Mixo Das, an equity strategist at Nomura in Singapore, wrote in the note. “A further rotation into emerging markets from development markets and a long-term compression of the EM vs DM valuation gap should also prove supportive.”
The MSCI ASEAN index has rallied 9.7 percent this year, trailing a 12 percent advance in the MSCI AC Asia Pacific Excluding Japan Index. The Asean gauge fell 22 percent over the four years through the end of 2016, compared with an 8.5 percent decline in the wider Asian measure.