Trump’s Visit Spurs Hopes for Least-Loved Emerging Market Region

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Trump and Malaysia’s Prime Minister Anwar Ibrahim signed a trade agreement and critical minerals pact Sunday, as the US leader looked to boost trade across Southeast Asia and respond to China’s tightening of access to rare earths. Anwar called the deals — which come after Trump set a 19% tariff on Malaysia in August — “a significant milestone” that would improve the relationship between the nations beyond trade.

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The US president also announced Sunday a broad trade agreement with Cambodia, as well as a framework trade deal and critical minerals memorandum of understanding with Thailand. 

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Meanwhile, Canada is advancing longer-term negotiations with the bloc, and the European Union is targeting an agreement with Asean by 2027.

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Still, trade firmly remains a headwind. US tariffs on the bloc are among the highest globally, and ongoing tensions between Washington and Beijing continue to cloud the outlook. 

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Liquidity constraints in the markets persist. Central banks across the region also remain cautious on further easing, hampered by currency volatility concerns. 

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Meanwhile, China’s manufacturing dominance, despite mounting US pressure, continues to pose competitive threats to Southeast Asian producers. 

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“In order to find long-term capital being deployed in Asean, we would need to see more growth, trade tariff rates changing substantially and a significant currency appreciation,” said Mixo Das, Asia equity and quant strategist at JPMorgan Chase & Co. “I think the bigger risk is that nothing changes and the status quo continues, rather than something that materially worsens from here.”

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Insulated

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Even so, some investors see opportunity in Asean’s relative insulation from AI-driven rallies elsewhere. With concerns over a potential bubble in the sector, the region’s limited exposure may prove to be a strength. 

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Easing political uncertainties in Thailand and Indonesia also offer a measure of reassurance to investors. In Thailand, the government is signaling more populist spending ahead of upcoming elections, while officials work to counter the effects of a strong baht, a key pressure point for manufacturers and tourism. 

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Thai stocks may get a boost after Prime Minister Anutin Charnvirakul and his Cambodian counterpart, Hun Manet, signed an agreement Sunday to manage a border dispute that had escalated into deadly clashes earlier this year. The deal was signed at a ceremonial event in Malaysia, which helped facilitate talks between the Southeast Asian neighbors. 

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Indonesia has seen a shift in sentiment after new Finance Minister Purbaya Yudhi Sadewa injected $12 billion into state banks to spur lending. The country’s stock benchmark is expected to offer around 5% dividend yield, according to Bloomberg-compiled data, an attractive draw for income-focused investors. 

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Banks, healthcare and consumer stocks in Indonesia, Singapore and Thailand offer value, said Vikas Pershad, an Asian equities portfolio manager at M&G Investments. 

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As multinationals expand their presence in the region, “Southeast Asia offers compelling long-term opportunities,” he added.

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What to Watch

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