Continuing this month’s look back at global market trends during the first quarter of 2018, this week we switch to south-east Asia – which remains our preferred geographic region. It contains a good mix of developed, emerging and frontier markets to pick from, depending on investors’ attitudes to risk, politics and the economic outlook.
Of these, and one that readers may be unfamiliar with, is Indonesia, the region’s biggest economy. GDP growth is slower than the 7 per cent President Joko Widodo promised during his 2014 election campaign, yet at around 5 per cent compares favourably with that in developed markets. For this reason, Bank Indonesia is expected to keep its key interest rate at 4.25 per cent, above inflation which is running roughly at the mid-point of the target band set between 2.5 and 4.5 per cent annualised. On Friday, credit rating agency Moody’s upgraded its sovereign debt one notch to Baa2, praising prudent fiscal measures that have helped its capacity to respond to shocks.
The chart of Jakarta’s Stock Exchange Composite index has been resolutely bullish since 2003 when a secular rally started in earnest. It contains all stocks traded on the exchange and includes a good mix of agriculture, banks, consumer goods, energy and industrials. March’s retreat from February’s record high is big, but in line with previous pullbacks in 2013 and 2015; in fact, as a percentage this year’s correction is smaller than the previous ones. With a little luck trend-line support will steady the ship, and if not retracement support will keep it above 2015’s high.
Singapore’s Straits Times index is a very different beast, now clearly a developed market that relies heavily on international trade. Trashed in 2007-09, since then it has consolidated in large swings between 2500 and 3500. Technically, it looks as though the process has established a new floor to this index, and that it is just a matter of time before we retest the record high at 3900. The Monetary Authority of Singapore manages the Singapore dollar’s exchange rate against a basket of currencies and has an excellent track record avoiding excessive fluctuation.
Just across the water lies Malaysia, a nation many would classify as a developing market. A the general election looms on 9 May, PM Najib Razak warning members of his Barisan Nasional party to remain loyal; he’s likely to be up against wily old ex-PM Dr Mahatir Mohamad. The nation’s state development fund, 1MDB, has been mired in controversy for some time, dragging local politicians and foreign financial companies into a web of debt, deceit and scandal. Despite all the above, the chart of the Kuala Lumpur index of top 30 companies is looking very bullish at the moment, trading within a whisker of the record high and the psychological 2000 level. A measured target based on price action of the last decade targets 2400.
Travelling further south, we’ve been keeping an eye on a minnow for years: the Philippines Stock Exchange index, which is capitalisation weighted and contains a wide variety of sectors. As you can see it kept inside its straightjacket for over a decade until it broke free in 2010; India and Turkey did something similar a bit earlier. Despite last quarter’s small setback, the chart generally looks very positive over the medium and long term.
Charts for this piece: Jakarta, Singapore, Kuala Lumpur, Philippines.
