Southeast Asia Market Insights: Decoding Investor Sentiment, Growth Expectations, and Sector Trends Across the Region
June 6, 2025 Edition
Executive Summary
This report analyzes The International Investor’s Southeast Asia Index, a composite of seven U.S.-listed exchange-traded funds (ETFs) representing Southeast Asian equity markets. Since its inception on December 31, 2024, the index has climbed +5.2%, equivalent to an annualized return of +12.4%, far outpacing the overall U.S. equity market’s flat -0.01% return over the same period.
However, rather than focus solely on short-term price gains, we take a long-term, fundamentals-driven approach by examining forecasted earnings growth, dividend yields, valuations, and sector-specific dynamics to determine what investors can reasonably expect over the next three to five years. Whether you’re a seasoned investor or just beginning to explore emerging markets, this report provides a comprehensive breakdown of the region’s economic pulse and investment potential.
Understanding the Index and Investor Behavior
The International Investor’s Southeast Asia Index includes ETFs from the following countries: Singapore, Vietnam, the Philippines, Indonesia, Malaysia, Thailand, and an ASEAN Top 40 Companies ETF representing the region’s largest firms. The combined portfolio provides a broad, diversified lens through which to view investor sentiment across Southeast Asia.
From a starting value of US$10,000, the index has risen to US$10,517 as of June 6, 2025, reflecting both unrealized capital gains and received dividends. This robust performance stands in contrast to stagnating developed markets, suggesting a growing investor appetite for Southeast Asian equities.
Looking at country-specific returns since inception:
Singapore leads with a +20.4% gain, likely driven by optimism in real estate and yield-focused strategies.
Vietnam (+12.2%) and the Philippines (+11.7%) follow closely, supported by compelling growth narratives.
ASEAN Top 40 ETF posted a modest +4.8%, while Indonesia barely moved (+0.2%).
Malaysia declined slightly (-1.1%), and Thailand fell sharply (-11.8%), reflecting deeper investor concerns.
Beyond the Headlines: A Focus on Business Fundamentals
Renowned investors like Warren Buffett and Peter Lynch often stress that stock prices eventually follow earnings. In that spirit, the true measure of the Southeast Asia Index should lie not in its short-term returns but in the operating performance of the underlying businesses.
According to consensus analyst forecasts, the average expected earnings growth across the index over the next three years is +12.9% annually. When combined with the current dividend yield-on-cost of 3.3%, investors can anticipate a total expected return of approximately +16.2% annually — a level that significantly outpaces most developed market forecasts.
Here’s a breakdown of the forecasted annual earnings growth by country:
Indonesia: +25.7%
Vietnam: +12.9%
Thailand: +12.5%
Philippines: +10.8%
Malaysia: +8.4%
Singapore: +6.9%
Meanwhile, dividend yield-on-cost — a metric that tells us how much income investors are earning relative to their original investment — adds another layer of appeal:
Indonesia: 5.2%
Singapore: 4.3%
Malaysia: 3.3%
Thailand: 3.2%
Philippines: 2.3%
Vietnam: 1.0%
Combining earnings and dividends, the expected total annual returns for each market are as follows:
Indonesia: +30.9%
Thailand: +15.7%
Vietnam: +13.9%
Philippines: +13.1%
Malaysia: +11.7%
Singapore: +11.2%
Are Southeast Asian Markets Overvalued or Undervalued?
Valuation matters greatly when assessing the attractiveness of future returns. One common metric is the Price-to-Earnings (P/E) ratio, which compares a market’s current price to its earnings per share. We analyze whether current valuations are high or low relative to each country’s 3-year historical average:
Indonesia: Overvalued (P/E: 19.3x vs. 3-Year Avg: 18.6x)
Singapore: Overvalued (P/E: 14.4x vs. 13.7x)
Malaysia: Undervalued (P/E: 15.9x vs. 17.1x)
Philippines: Undervalued (P/E: 11.5x vs. 12.6x)
Thailand: Undervalued (P/E: 15.6x vs. 18.4x)
Vietnam: Undervalued (P/E: 13.5x vs. 14.4x)
These findings imply that investors are paying a premium for Indonesia and Singapore — possibly reflecting confidence in earnings durability and dividends — while bargain opportunities may lie in undervalued markets like Thailand, Vietnam, and the Philippines.
Sector Focus: What Are Investors and Analysts Betting On?
Another key insight is found in sector rotation — where capital is flowing and what industries are forecasted to drive future growth. Interestingly, investor preferences and analyst forecasts do not always align.
Sectors Currently Favored by Investors:
Indonesia: Technology (+9.0% expected annual growth)
Malaysia: Technology (+20.3%)
Philippines: Consumer Discretionary (+18.3%)
Singapore: Real Estate (+13.9%)
Thailand: Telecommunications (+28.3%)
Vietnam: Energy (+18.1%)
Sectors with Highest Analyst Forecasts (Next 5 Years):
Indonesia: Materials (+63.6% forecasted annual growth)
Malaysia: Consumer Discretionary (+21.3%)
Philippines: Materials (+21.5%)
Singapore: Healthcare (+28.5%)
Thailand: Materials (+50.3%)
Vietnam: Technology (+20.0%)
This divergence reveals potentially underappreciated opportunities. For instance, although investors are favoring Vietnam’s energy sector, analysts see more explosive growth in tech. Similarly, Thailand’s materials sector is projected to surge, but investor focus remains in telecoms. Savvy investors may want to explore contrarian positions where analyst forecasts are bullish but investor enthusiasm is muted.
Final Thoughts: A Long-Term Growth Opportunity with Selective Risks
Southeast Asia remains one of the world’s most compelling growth stories. With a young, digitally connected population, accelerating economic liberalization, and rising middle-class consumption, the region offers a mix of income and capital appreciation.
However, not all markets or sectors are created equal. Indonesia looks poised for the strongest combined returns but may already be priced for perfection. Thailand, despite recent negative returns, is undervalued with high earnings potential — offering a classic value-investing opportunity. Meanwhile, Vietnam and the Philippines offer balanced growth and income profiles at attractive valuations.
For investors willing to adopt a diversified, long-term view, Southeast Asia presents a compelling frontier of growth, value, and resilience in a world increasingly looking beyond the saturated developed markets.