Southeast Asia's Record-Smashing Stocks Are Powering Toward 2018

  • MSCI Asean Index poised for biggest gain in seven years
  • Asean markets could see 10% returns next year: Morgan Stanley
Morgan Stanley’s Jonathan Garner discusses his outlook for emerging markets.

The end of the year isn’t ending the fervor for one of the global stock market’s hottest regions.

A rally across Southeast Asia has pushed the MSCI Asean Index up 24 percent to its highest level in more than two years, beating benchmark indexes in Europe and the U.S. Economies are expanding, governments are spending more and central banks have held benchmark interest rates steady.

Indonesian and Philippine stock markets have hit multiple records in 2017. Vietnam’s VN Index is poised to close with its biggest gain in eight years fueled by state-owned company sales and listings. Thailand has made a comeback in the second half of the year with double digit gains and even Malaysia -- Asia’s second worst performing stock market -- is getting a slight boost as foreigners resume stock purchases.

Morgan Stanley said in a report two weeks ago that Asean markets could see returns of up to 10 percent in 2018 compared with a base case of 3 percent for MSCI Emerging Markets, telling investors to focus on markets with accelerating earnings growth like the Philippines, Thailand and Singapore. In a separate note released Thursday, the firm said Philippine stocks are standouts in Asean.

Read more on where Southeast Asian stocks are headed in 2018

Even so, analysts are still expecting stronger profits from companies outside of the region. Earnings for companies in Southeast Asia are expected to grow by 8.9 percent in the next 12 months compared to about 13 percent on the MSCI Asia Pacific Index.

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