Trump’s ASEAN visit sparks investor optimism as Southeast Asian markets rebound

Donald Trump’s current visit to Southeast Asia for the ASEAN summit in Kuala Lumpur has flipped the regional market mood overnight.

After more than a year of steep outflows and weak performance, investors are starting to circle back to a region that looked like a lost cause just weeks ago, according to Bloomberg.

Global investors pulled nearly $900 million from the region’s markets this month in yet another round of exits in a streak that’s lasted almost a full year. While money poured into Taiwan, South Korea, and China, where tech shares have rallied hard, Southeast Asian equities were left behind.

Even so, traders now see an opening as valuations drop, political tensions cool, and supply chains drift further away from China. “Any sign of a more durable and favorable US-Asean trade framework would be positive for the region,” said Homin Lee, macro strategist at Lombard Odier in Singapore.

Investors eye the rebound as valuations hit record lows

The MSCI has surged by 10% year-to-date, a far cry from the 29% rally across broader emerging markets, its weakest relative showing since 2020, per Bloomberg’s data.

The region’s stocks are trading at about 14 times forward earnings, compared with 19 times for the MSCI All Country World Index.

That discount has attracted bargain hunters looking for value as global valuations stretch to their highest levels in four years. “We’re getting a bit more cautious on the global rally,” said Shay Pang, senior portfolio manager at Amova Asset Management in Singapore. “If you are an Asia-Pacific portfolio manager, I would rotate out of China and move into more defensive countries such as India and ASEAN.”

Local governments are also moving fast to capitalize. Vietnam is pushing for 10% annual growth over the next five years, helped by high-end manufacturing moving from China.

Earlier this month, it finally secured its long-awaited upgrade to emerging-market status from FTSE Russell, a shift expected to draw billions in new capital.

Malaysia is chasing growth through AI-driven data centers and wants to position itself as a key rare earth metals processor for Australia. These projects are pulling fresh investor attention toward the region after months of stagnation.

Trump signs new trade and minerals deals as ASEAN regains momentum

Trump’s first stop in Kuala Lumpur wasn’t just for photo ops. He and Malaysia’s Prime Minister Anwar Ibrahim signed a trade agreement and a critical minerals pact on Sunday.

The deal came just two months after Trump’s 19% tariff on Malaysian goods, a move that initially soured relations.

Anwar described the new agreements as “a significant milestone” that would “improve the relationship between the nations beyond trade.”

From there, Trump moved to finalize a broad trade deal with Cambodia, along with a framework agreement and a critical minerals memorandum of understanding with Thailand. These moves underscore Washington’s renewed interest in Southeast Asian economies amid ongoing friction with Beijing.

Outside the U.S., Canada is still negotiating long-term trade ties with the bloc, while the European Union is targeting a full ASEAN trade pact by 2027. Yet challenges remain. U.S. tariffs on regional goods are still among the highest globally, and tensions between Washington and Beijing continue to cast a shadow over exports.

“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 strategist at JPMorgan Chase & Co. “The bigger risk is that nothing changes and the status quo continues, rather than something that materially worsens.”

Even with those risks, the shift away from AI-driven rallies elsewhere could benefit Southeast Asian markets. The region’s limited exposure to tech speculation may act as a cushion if global equities stumble.

Political developments are also helping. In Thailand, the government led by Anutin Charnvirakul is promising populist spending ahead of elections and working to offset a strong baht that’s pressuring exporters.

Anutin and Cambodian Prime Minister Hun Manet signed an agreement in Malaysia to manage their border dispute, which had earlier turned violent. Malaysia hosted the signing, acting as a neutral facilitator between the neighbors.

In Indonesia, sentiment improved after Finance Minister Purbaya Yudhi Sadewa injected $12 billion into state banks to expand lending. The country’s stock index now offers a 5% dividend yield, attracting global funds seeking stable returns.

Investment managers say banks, healthcare, and consumer stocks in Indonesia, Thailand, and Singapore are showing strong value potential.

Vikas Pershad, portfolio manager at M&G Investments, said that as multinational companies expand their operations across the region, “Southeast Asia offers compelling long-term opportunities.”

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