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OPINION

Scanning Southeast Asia

Scanning Southeast Asia
May 18, 2017
Scanning Southeast Asia

The Republic of Singapore, also known as Temasek, is an island city-state which gained independence in 1963 and hasn't looked back. In fact, in terms of financial services, some suggest that London and the City should follow its example. Very much a trading nation since Stamford Raffles arrived in 1819, the FTSE Straits Times index has been going strong since 1966, today covering the top 30 companies, many of which are offshore ones because this has Asia's most international listings. Familiar names include Hutchinson and Jardine Matheson Holdings, Singapore Airlines and United Overseas Bank.

 

Strait Times Index

 

The chart of the index has seen some strong gains since January last year and is now trading towards the upper reaches of the broad band that's been holding for six years (2550 to 3500). Price moves over this period are very different to those leading to 2007's record high and underline that this market has got used to these higher levels - and that gains are therefore likely to be sustainable. Managing to break and hold above 3500 targets new record highs.

Next we turn to Kuala Lumpur's Composite index, also of top 30 shares, with a strong domestic presence. The PETRONAS group of companies - of the twin towers fame - includes chemical and gas operations; Hong Leong Financial Group probably the biggest in the area (bar the troubled 1MDB state investment fund); Sime Darby, the diversified multinational harking back to its plantation origins. The index, up steadily for possibly a sixth consecutive month, is now within spitting distance of 2014's record high and worth 28 per cent more than it was in 2007. Well worth watching.

 

Kuala Lumpur composite

 

The Stock Exchange of Thailand Index has been continuously listed since 1975, coinciding with the freeing up of global financial markets. Siam Cement and Commercial Bank, plus many other banks dominate. It's an impressive 77 per cent higher than in 2007, but still below 1994's ridiculous spike fuelled by massive speculation in the country - and eventually the Asian crisis of 1997-98. We expect a re-test of this.

 

Thailand SET

 

Finally a relative newcomer, originally created in 1982, the Jakarta Stock Exchange Composite index of all modified capitalisation-weighted shares. Again banks dominate though large fast-moving consumer goods manufacturers such as Unilever Indonesia are here. Rather like India, shares did nothing for a decade or more before the start of this millennium. Then bang! Catch-up time - with some massive swings along the way - and a brand-new record high this month. Price action since 2012 can be seen as a very big bout of consolidation at these much higher levels, suggesting that this recent break is likely to have legs.

 

Jakarta composite

 

Remember, all these indices are denominated in local currency (Singapore dollars, ringgits, baht, and rupiahs) which will impact on the value of the shares and their indices and may need hedging if you are a foreign investor.