JPMorgan and Goldman pick top Southeast Asian markets for 2022

Indonesian stocks are among JPMorgan Asset Management and Goldman Sachs’ top options for 2022. In this photo from April 2019, a statue of a bull stands in the lobby of the Indonesian Stock Exchange (IDX) in Jakarta , Indonesian.

Dimas Ardian | Bloomberg via Getty Images

Geopolitical tensions around the world have been on the rise, but Southeast Asian markets can offer relative safety to investors, according to major investment banks.

As we enter the next quarter of 2022, CNBC asked analysts at Goldman Sachs and JPMorgan Asset Management which Southeast Asian markets were their top picks.

Southeast Asian stocks have underperformed and been “largely ignored by global investors for a decade,” said Timothy Moe, chief Asia Pacific equity strategist at Goldman.

Indonesia is one of the top Southeast Asian options for both Wall Street banks.

Indonesia: banking and commodity games

CNBC Pro Stock Picks & Investing Trends:

Global commodity prices have been on a rollercoaster ride since war broke out in Ukraine after Russia’s invasion in late February. Russia is a major oil producer while Ukraine is a major exporter of other basic products. like wheat and corn.

Since Monday morning in Asia, an international reference Brent Crude Futures They are up more than 30% so far this year.

Vietnam and Singapore

JPMorgan Asset Management also likes Vietnam, which Loh called “a stellar player in recent years” in economic resilience and growth. Vietnam is one of the few economies globally that has experienced positive economic growth during the pandemic, he added.

“To capitalize on growth, we are positioned in banks and high-quality consumer representatives,” he said, without naming specific actions.

Meanwhile, Singapore is the other Southeast Asia that Goldman Sachs likes.

There are three main reasons why the investment bank likes both Indonesia and Singapore, Moe said.

  1. Improving the economic and growth momentum of a region that is belatedly recovering from Covid-related setbacks.
  2. A banking sector that is heavily weighted in stock indices and will benefit from a move to tighter monetary policy and higher interest rates.
  3. The “gradual emergence” of digital economy companies being included in the Indonesian and Singaporean indices.

Indonesian Jakarta Composite has risen more than 7% this year, while Vietnam’s NV index is up about 1% in the same period. Singapore Strait Times Index has gained more than 9%.

By comparison, MSCI’s broader index of Asia-Pacific stocks outside of Japan is down 6%.

On Wall Street, the S&P 500 has dropped 4.6% so far this year, while the pan-European Stoxx 600 has dropped 6%.

In recent weeks, investors have been grappling with a host of concerns, from rising commodity prices triggered by the Russian invasion of Ukraine to a rising interest rate environment like major central banks like the US Federal Reserve They want to combat inflation.

Shelter from geopolitical tensions

An ‘exodus of departures’ is not expected

Global investors have been repositioning in recent weeks in anticipation of more aggressive moves by the Federal Reserve’s monetary tightening, but analysts expect the impact on Southeast Asia to be relatively minor compared to before.

In March, the Federal Reserve raised interest rates for the first time since 2018and Fed Chairman Jerome Powell subsequently pledged to crack down on inflation that is “too high”.

The prospect of more rate hikes by the Fed has raised concerns about capital outflows and currency depreciation in emerging markets in Southeast Asia, a phenomenon seen in 2013 during the “tantrum” that led to rising interest rates. bond yields after the Fed hinted that asset purchases could ease. .

“We do not expect an exodus of expenditures [from ASEAN] like we saw in the last tantrum,” Loh said, explaining that country-level balance sheets in Southeast Asia are “generally much healthier” now compared to a decade ago.

Most central banks in Southeast Asia, with the exception of singapore, they still have to tighten monetary policy. This is due in part to an inflation situation at the regional level that is relatively less severe compared to the developed economies of the West.

Southeast Asian economies are also more resilient compared to previous cycles, according to Moe, who cited external balance sheets that are in better shape as well as currencies that are attractive in value.

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