Southeast Asian stock markets are facing turbulent times as the U.S. dollar’s relentless strength adds to existing economic concerns.
Investors are retreating, wary of slowing growth prospects, while regional stock indexes struggle to keep pace with global peers. From Thailand and Indonesia to the Philippines, stock markets have taken a significant hit, with some reaching multi-year lows.
The impact of the strong dollar has been particularly severe on stock markets in Thailand, Indonesia, and the Philippines. The benchmark Jakarta Composite Index recently plunged to its lowest level in three years, marking a 17% decline from its September peak.
Thailand’s Stock Exchange of Thailand Index hit levels last seen in 2020 and has dropped approximately 15% from its October high. Meanwhile, the Philippine Stock Exchange Index officially entered a bear market last month, deepening concerns among investors.
According to Jerry Goh, investment director of Asian equities at abrdn, the absence of strong domestic catalysts in these economies, combined with the outlook for a stronger dollar, has intensified market pressures.
“What needs to come is for the market to believe that there will be cuts in the U.S., as well as evidence that the dollar can be weakened from here on,” he noted. Several factors have contributed to the region’s underperformance:
- The Strong Dollar’s Ripple Effect
A rising dollar makes imports more expensive, potentially pushing inflation higher. It also affects exporters’ competitiveness, as goods and services from these countries become costlier on the global market. - Indonesia’s MSCI Snub and Banking Woes
In Indonesia, some of the largest stocks saw heavy sell-offs after MSCI Inc. decided not to include them in one of its indexes. Additionally, the nation’s banking sector is under pressure following weaker-than-expected corporate earnings. - Economic Concerns in Thailand and the Philippines
In the Philippines, disappointing domestic economic data has diminished investor confidence. Meanwhile, Thailand’s government is urging the central bank to implement further interest rate cuts to sustain economic recovery, reflecting concerns about the country’s growth trajectory.
This downturn is particularly striking given that Southeast Asian markets were seen as safe havens last year. Many investors had bet on the region’s domestically oriented economies to shield them from global volatility.
However, as economic conditions shift and growth catalysts remain scarce, money managers are now exiting these markets in search of better opportunities elsewhere.