As we enter the first quarter of 2026, Southeast Asian equity markets present a mixed but broadly constructive outlook. Regional economies continue to demonstrate resilience, supported by robust domestic consumption, improving trade balances, and ongoing infrastructure investment.
Regional Overview
The ASEAN-5 economies — Indonesia, Malaysia, Thailand, the Philippines, and Vietnam — are expected to deliver aggregate GDP growth of approximately 5.2% in 2026, modestly above the 2025 figure. This growth is underpinned by favourable demographics, expanding middle-class consumption, and the continued diversification of supply chains into the region.
Currency stability has improved relative to the volatility experienced in late 2024, with most regional currencies trading within narrower bands against the US dollar. Central banks across the region have largely paused their tightening cycles, with some beginning to signal potential easing in the second half of the year.
Sector Analysis
The technology sector remains a key area of interest, particularly companies involved in semiconductor manufacturing and data centre infrastructure. Malaysia's positioning as a beneficiary of the global chip supply chain diversification continues to attract investment, with several major expansion announcements in recent months.
Financial services also present opportunities, with banks across the region reporting healthy loan growth and improving net interest margins. The insurance sector, driven by still-low penetration rates and rising awareness, offers structural growth potential.
Risks and Considerations
Investors should remain mindful of several risks, including potential US policy changes that could affect trade flows, geopolitical tensions in the South China Sea, and the possibility of a sharper-than-expected slowdown in China. Commodity price volatility, particularly in palm oil and energy, also warrants close monitoring given the region's exposure.
Our Positioning
We maintain a constructive view on Southeast Asian equities for the quarter ahead, with a preference for quality companies with strong balance sheets, sustainable dividend yields, and exposure to structural growth themes. Selectivity will be important, and we continue to favour active management approaches in what remains a heterogeneous market environment.