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Barings sees new ASEAN investment opportunities

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Political and structural reforms in Indonesia and the Philippines are creating new investment opportunities in the ASEAN region, according to Baring Asset Management, the international investment firm.

South East Asian markets have continued to strengthen, with the best performing markets in the second quarter being Thailand and the Philippines. Despite a period of unfavourability with foreign investors following the military coup in Thailand, local optimism has helped lift the market with aggressive local buying helping to make it one of the best performing markets in the region.
 
In Indonesia, markets consolidated after very strong performance in the first quarter as investors showed caution pending the results of the presidential election and engaged in profit taking. However, Barings believes the outlook for ASEAN markets is attractive compared to the second half of 2013, which became a challenging environment because of cyclical headwinds which included interest rate rises, a sharp currency depreciation and a rising current account deficit.
 
SooHai Lim, manager of the Baring ASEAN Frontiers Fund, says: “The infrastructure story in Indonesia is important as this will be a priority under President-elect Mr Joko Widodo. The next phase of structural reforms will set the direction for the country going forward. Reduced political uncertainty and improving macro-economic outlook have helped to boost both the currency and domestic stocks, resulting in the Indonesian market gaining 23 per cent this year.”
 
In other areas, the Philippines enjoyed a rally across various sectors even though first quarter GDP growth disappointed slightly.
 
Lim says: “In view of the improvements in the macro and political situation, we believe the market will re-focus on the structural story of ASEAN and we have started to increase our exposure in Indonesia and the Philippines. We have been looking for opportunities, particularly in areas that would benefit from future infrastructure developments, such as mass rapid transit systems, ports and expressways. Also, reform measures addressing the fuel subsidies in Indonesia and incentivising more private sector oil and gas exploration and development could open up other investment opportunities.”

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