Thai to Indonesia Stocks Fall the Most Since 2001

Stocks in Southeast Asia are tumbling at the fastest pace in 12 years relative to global equities, sending the regional benchmark index into a bear market as foreign investors cut holdings for a third month.

The MSCI Southeast Asia Index has dropped 11 percent this month and is down 21 percent from this year’s peak on May 8. The gauge’s August retreat is 9.1 percentage points bigger than that of the MSCI All-Country World Index, the widest gap since April 2001. The Asian measure is valued at 1.8 times net assets, falling below the global index’s multiple of 1.9 for the first time since at least 2009, data compiled by Bloomberg show.

Foreign investors have sold a net $2.2 billion of Thai, Indonesian and Philippine shares this month amid signs of slowing regional economic growth and speculation that the U.S. Federal Reserve will soon cut stimulus. While the retreat has spurred state pension funds in Indonesia and Thailand to boost stock holdings, Bank Julius Baer & Co. and Societe Generale SA say it’s too early to buy. The MSCI Southeast Asia gauge has posted average losses of 44 percent in bear markets since 1995.

“Investors have a mentality of take money out first, ask questions later,” David Poh, the regional head of portfolio-management solutions at Societe Generale’s private bank, which oversees about $113 billion, said by phone from Singapore. “We are not entering the market in the near future.”

Biggest Losers

The Philippine Stock Exchange Index lost 14 percent this month through yesterday, while the Jakarta Composite Index dropped 13 percent and the Thai SET Index fell 10 percent to the lowest level since November. Singapore’s Straits Times Index sank 6.8 percent and the FTSE Bursa Malaysia KLCI Index dropped 4.9 percent.

The MSCI Southeast Asia gauge advanced 1.2 percent as of 10:59 a.m. in Singapore, poised for the biggest gain since July 11. The Philippine index rose 2.1 percent after data showed economic growth in the second quarter topped estimates.

SM Investments Corp., owner of the largest Philippine shopping-mall operator and biggest grocery chain, and PT Bank Mandiri, a Jakarta-based lender, were among the biggest losers in the MSCI Southeast Asia index, with declines of at least 22 percent this month.

The MSCI gauge, which includes shares with a total market value of about $1.2 trillion, has had eight bear markets since Bloomberg began compiling the data in 1995, with an average duration of 298 calendar days. The current retreat has lasted 112 days.

Pensions Buying

“We are three months into a bear market,” said Mark Matthews, the Singapore-based head of Asia research at Bank Julius Baer, which had about $331 billion of client assets as of June 2013. “It’s not a good time to start buying.”

State investment funds added to equity holdings after valuations fell. Thailand’s Government Pension Fund, which manages about $19 billion, has increased positions in shares of some of the nation’s biggest companies and plans to buy more, Chief Investment Officer Yingyong Nilasena said in an interview, declining to name specific companies.

The SET index trades at 11 times estimated earnings for the next 12 months, the lowest level in more than a year, according to data compiled by Bloomberg. That compares with 13 times for the MSCI All-Country index.

“The best time to buy is when there is blood on the streets,” Kittiratt Na-Ranong, Thailand’s finance minister, said at a conference in Bangkok yesterday. “This correction presents an opportunity to increase investments in Thailand and the region.”

‘Staying Calm’

PT Jamsostek, Indonesia’s biggest pension fund, entered the stock market yesterday, President Director Elvyn Masassya said in a text-message without elaborating. Masassya said on Aug. 20 that the $13 billion fund is increasing purchases of local shares. The Jakarta Composite rallied 1.5 percent yesterday, erasing an earlier retreat of 3.3 percent.

“We are staying calm, doing lots of research as always and seeing where we can take advantage of the market correction,” said Abdul Jalil Abdul Rasheed, a Singapore-based investment director at Invesco Asset Management Ltd.

International investors have been net sellers of regional shares this month, according to exchange data compiled by Bloomberg. Outflows in Thailand were $1.3 billion through yesterday, while Indonesia had $570 million of withdrawals this month and the Philippines had $347 million.

Indonesia Rates

Thailand’s gross domestic product unexpectedly shrank 0.3 percent in the three months through June from the previous quarter, when it contracted a revised 1.7 percent, the National Economic & Social Development Board said on Aug. 19. The state agency cut its full-year expansion forecast to as little as 3.8 percent from a previous estimate of 4.2 percent. It lowered its export growth target to 5 percent from 7.6 percent.

Indonesia’s quickest inflation in four years, the weakest rupiah since 2009 and the nation’s record current-account deficit are fueling speculation that the central bank will tighten monetary policy further after it raised the benchmark interest rate in June and July. The monetary authority will convene for an extra meeting today to look at various policies including interest rates and the exchange rate, Deputy Governor Perry Warjiyo said yesterday.

In the Philippines, protests in Manila over the misuse of discretionary government budgets have spurred concern about a slowdown in state spending, which accounted for 8.1 percent of the economy in the fourth quarter of 2012.

Bottom Picking

“People are finding excuses to sell,” said Patrick Chang, the Kuala Lumpur-based head of Asean equities at BNP Paribas SA. “There’s a bit of a shift of money from emerging markets.”

The outcome of the Fed’s Sept. 18 policy meeting may determine the short-term outlook for Southeast Asian shares, according to Alan Richardson, whose Samsung Asean Equity Fund outperformed 96 percent of peers tracked by Bloomberg during the past three years.

The Fed will probably cut its $85 billion in monthly bond purchases next month, according to 65 percent of economists surveyed by Bloomberg from Aug. 9-13. Fed policy makers were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying if the economy improves, with a few saying tapering might be needed soon, minutes of their last meeting showed.

Thailand, the Philippines and Indonesia led the four-year rally in global shares through May as Fed stimulus spurred international investors to seek higher-yielding assets.

“It may be risky to attempt to catch a bottom because it rarely works,” Richardson said. “It is more prudent to take a wait-and-see approach.”

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