Southeast Asia Market Insights: A Deep Dive into Sentiment, Valuation, and Forward Returns Across the Region
June 20, 2025 Edition
Reassessing Southeast Asia Through the Eyes of Investors and Analysts
In recent years, Southeast Asia has reemerged as a region of interest for global investors searching for growth beyond the traditional giants of the U.S., China, and Europe. Against a backdrop of post-pandemic recovery, rising consumption, tariffs, shifting supply chains, and the Israel-Iran war, The International Investor’s Southeast Asia Index offers an important barometer of sentiment toward the region. This index, launched on December 31, 2024, is composed of seven exchange-traded funds (ETFs) representing the major Southeast Asian economies — Singapore, Vietnam, the Philippines, Malaysia, Indonesia, Thailand, and a composite fund tracking the region’s top 40 companies. All ETFs in the index are listed and traded in the U.S., allowing global investors easy access to this dynamic region.
This report takes a closer look at what this index tells us — not just about recent performance, but about broader market sentiment, valuations, expected earnings and dividend growth, and what this means for forward-looking returns. For general readers and seasoned investors alike, this analysis translates financial data into investment insight.
Current Performance: Lukewarm Returns Mask Diverging Stories
As of June 20, 2025, just under six months since its inception, the Southeast Asia Index has posted a total return of +1.9%. This figure is composed of a modest +0.4% in unrealized price gains and a respectable +1.4% in dividend income. Annualized, this return equates to approximately +4.0% — underwhelming by most standards, especially when compared to the broader U.S. equity market, which delivered a +1.1% return over the same period.
However, this average conceals significant disparities among the index’s country components:
Singapore has led the pack with a strong +17.0% return, supported by robust performance in real estate and financials.
Vietnam followed at +11.6%, continuing to benefit from long-term growth themes like manufacturing relocation and domestic consumption.
The Philippines delivered a solid +7.2%, bolstered by resilient consumer spending and a young demographic.
Malaysia and Indonesia, however, both posted negative returns at -2.5% and -4.4%, respectively.
Thailand emerged as the laggard, sharply underperforming with a -17.3% return, reflecting both political uncertainty and sluggish economic momentum.
The composite ASEAN Top 40 ETF came in at +1.6%, closely mirroring the overall index.
These numbers offer a glimpse into investor sentiment — clearly more bullish on Singapore and Vietnam, and cautious, if not outright pessimistic, on Thailand and Indonesia. But as legendary investors like Warren Buffett would remind us, price is what you pay; value is what you get. The key lies in understanding the underlying business performance.
Forward-Looking Earnings Growth: Strong Fundamentals Underpin Long-Term Value
Despite the mixed short-term performance, analysts remain broadly optimistic about Southeast Asia’s economic and corporate earnings trajectory. Over the next three years, the average forecasted earnings growth for the index is +12.8% annually. This level of growth, particularly in a global context of slowing expansion, tariffs, and elevated interest rates, is notable.
Breakdown of forecasted annual earnings growth per market:
Indonesia: +25.8%
Vietnam: +13.4%
Thailand: +11.5%
Philippines: +10.7%
Malaysia: +8.3%
Singapore: +7.1%
If one were to apply the Peter Lynch metric — assessing future returns based on earnings growth plus dividends — then the Southeast Asia Index offers compelling forward potential. With a dividend yield-on-cost of 3.2%, the implied annual return for the index over the next three years could be around +16.0%.
Here’s how the expected total annual return (earnings growth + dividend yield-on-cost) stacks up by market:
Indonesia: +30.0%
Thailand: +14.7%
Vietnam: +14.4%
Philippines: +12.9%
Malaysia: +12.2%
Singapore: +11.9%
These numbers reflect not only anticipated earnings but also dividend discipline — a hallmark of Southeast Asian markets where consistent payouts are a cultural norm among blue-chip firms.
Valuation Snapshot: Mispricing Presents Opportunity
One of the key insights for long-term investors is that market prices often move in cycles of sentiment, while earnings follow the more stable logic of business fundamentals. Valuation measures like the price-to-earnings (P/E) ratio help indicate whether a market is trading at a premium (overvalued) or a discount (undervalued) compared to historical norms.
Current market valuations vs. 3-year historical averages:
Indonesia: P/E 19.0x vs. avg 18.6x → Overvalued
Malaysia: P/E 15.7x vs. avg 17.1x → Undervalued
Philippines: P/E 11.4x vs. avg 12.6x → Undervalued
Singapore: P/E 14.3x vs. avg 13.7x → Overvalued
Thailand: P/E 14.6x vs. avg 18.3x → Undervalued
Vietnam: P/E 13.5x vs. avg 14.4x → Undervalued
This suggests that while Singapore and Indonesia may be pricing in future optimism today, the Philippines, Malaysia, Thailand, and Vietnam offer more compelling valuation entry points for patient capital.
Sector Trends: Where Investors and Analysts Are Looking for Growth
Digging deeper, it’s important to understand not just which countries are expected to grow, but which sectors within those markets are drawing capital and confidence.
Sectors currently favored by investors (based on flows and performance):
Indonesia: Technology (+8.9% forecasted annual earnings growth)
Malaysia: Technology (+20.3%)
Philippines: Consumer Discretionary (+19.0%)
Singapore: Real Estate (+13.9%)
Thailand: Technology (+11.5%)
Vietnam: Energy (+18.1%)
Meanwhile, analyst forecasts point to a different mix of high-growth sectors likely to drive earnings over the next five years:
Indonesia: Materials (+62.8% forecasted annual earnings growth)
Malaysia: Consumer Discretionary (+21.4%)
Philippines: Materials (+21.8%)
Singapore: Healthcare (+29.0%)
Thailand: Materials (+50.3%)
Vietnam: Technology (+20.0%)
The divergence between current investor preferences and analyst projections suggests possible misalignments — and opportunities. For example, while investors currently favor Indonesia’s tech sector, analysts believe the materials sector holds far greater growth potential, likely reflecting the country’s natural resource base and green transition prospects.
Conclusion: What the Index Tells Us About Opportunity and Risk
At a glance, the Southeast Asia Index’s +1.9% total return since inception may appear underwhelming. But behind this headline lies a region brimming with divergence, undervaluation, and structural growth.
Investors should take note:
Short-term sentiment is cautious in places like Thailand and Indonesia, but analysts remain highly optimistic about future earnings.
Singapore and Vietnam have delivered strong early performance, but valuations are starting to reflect that.
The Philippines, Malaysia, and Thailand appear to be undervalued relative to earnings potential, offering asymmetric upside.
Across the board, sector dynamics are shifting, and investors should consider rotating into areas that analysts believe are poised to lead over the next 3–5 years.
Ultimately, as Buffett and Lynch would argue, markets follow earnings over the long run. The Southeast Asia Index offers investors a unique window into where sentiment diverges from fundamentals — and therefore, where opportunity might lie.
In an increasingly uncertain world, Southeast Asia’s combination of growth, income, and relative value deserves a serious place on the radar of every global investor.