Part II: Investing In ASEAN – Indonesia And The Philippines

Money Matters / Investing in Asia

Part II: Investing In ASEAN – Indonesia And The Philippines

In the second of a three-part series, Chief Investment Officer Lee Kai Yang of RHB Asset Management highlights two key ASEAN markets

Written by WEALTH Team on 15 February 2017

In contrast to rising anti-globalisation sentiments in some parts of the world, ASEAN’s regional economic integration is putting it in good stead with investors. Establishment of the ASEAN Economic Community (AEC) in 2015 – for example – was a major milestone driving this agenda. Several key developments in the region will also continue to contribute to its robust growth.

“In terms of economic growth, ASEAN will still be growing at a higher rate compared to the rest of the world – we forecast its economy to grow at a rate of 4% this year,” says Lee Kai Yang, RHB Asset Management’s chief investment officer.

Lee notes that the AEC offers investment opportunities in the form of a huge market of USD2.6 trillion and over 622 million people. According to the AEC website, the AEC was collectively the third largest economy in Asia and the seventh largest in the world in 2014.

Lee says the AEC will better integrate ASEAN’s economies and boost intra-regional trade and investments over time. “A single market across 10 ASEAN countries will strengthen trade and investment opportunities in the region,” he adds.

To help investors who are mulling over investment opportunities in ASEAN, Lee hand-picked two key markets that could generate good returns as he explains why Singapore will continue to have the slowest economic growth in ASEAN.

Invest in Indonesia

Indonesia’s economy should see the highest acceleration this year thanks to higher coal and crude palm oil prices, a revival of private investment and a boost in government revenues following the tax amnesty law introduced last year – according to Lee. “Household consumption is expected to increase along with the recovery in commodity prices,” he adds.

Lee points out that private investments in the country dipped last year, following a period of uncertainty after the tax amnesty law was passed. But for this year, he expects foreign investments to kick in as the outlook becomes clearer.

“Indonesia also eased its monetary policy in 2016 – resulting in an interest rate cut,” Lee says, adding that the Indonesian government loosened the property market by easing the loan-to-valuation ratio. “So, we should see a rebound in investors’ interest in Indonesia,” he predicts.

lee kai yang RHB Asset Management

Lee Kai Yang – RHB Asset Management’s chief investment officer

Invest in the Philippines

Lee expects the Philippines to maintain an economic growth rate of 6% in 2017. According to him, the key economic drivers are infrastructure development projects and consumer-related investments.

“Since President Rodrigo Duterte took office last year, he has pushed for the development of infrastructure projects – but these are not mega projects such as the construction of MRT lines,” Lee points out. Instead, these projects comprise airport upgrades around the country. “They may lead to improvements such as enabling direct flights from Singapore to Boracay, which is a popular tourist destination,” he says.

Consumer-related investment is also a key theme for investors as 70% of Philippines’s economy is driven by consumer-related businesses, according to Lee. “With a relatively young population, its ability to consume goods and services is high,” he explains. He foresees consumption to increase as more millennials enter the workforce and start contributing to household income.

Slowing (but still growing) market

Lee predicts that Singapore will continue to have the slowest economic growth in the ASEAN region – although he stresses “it is an attractive place for investment as a whole, so there are no markets to avoid”. He points out that the city state’s economy is highly dependent on trade, so it will be affected by the slowdown in global trade. Apart from that, he believes consumption-related growth will be limited due to the country’s small domestic market.

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