ASEAN Perspectives: Domestic resilience in focus for ASEAN

Highlights: As trade uncertainty persists despite further clarity on tariff levels, investor focus is likely to shift towards the resilient domestic consumption-driven growth for the region. We have upgraded GDP growth estimates for Singapore while downgrading the same for Thailand. We maintain our overweight stance on Singapore equities but remain underweight on Indonesia and Thailand equities. 

• Singapore: We upgrade our GDP growth forecast to 2.8 per cent for 2025 and 1.8 per cent for 2026 as strength in services and construction sectors, along with easing to trade uncertainty support the economy. MAS is unlikely to ease policy further in the near-term, which should lead to modest SGD appreciation. Our overweight stance on Singapore equities has worked well, as it has been the best performing market in ASEAN. We retain our overweight on MSCI Singapore as strong fundamentals and lower bond yields should drive outperformance
• Indonesia: Supportive fiscal and monetary policy, combined with lower US trade tariffs lead us to expect 4.5 per cent GDP growth in 2025. We expect further 75bp rate cuts by March 2026, which should lead to lower local currency bond yields. We are neutral on Indonesian local currency government bonds and IDR. We maintain a mild underweight on Indonesian equities as cheap valuations are more than offset by subdued earnings growth expectations
• Malaysia: Broad-based strength across manufacturing, construction, domestic consumption and tourism lead us to expect resilient growth for Malaysia. We expect BNM to keep interest rates on hold, in light of robust growth and risk of modest inflation upside. We are neutral on Malaysian government bonds and MYR. We are neutral on Malaysian equities despite the attractive dividend yield due to lacklustre earnings growth
• Thailand: We have downgraded our GDP growth forecasts to 1.7 per cent for 2025 and 1.9 per cent for 2026 due to slowing private consumption, recent decline in tourist arrivals and limited room for further fiscal stimulus. While BoT is likely to cut rates in August, we are neutral on THB and Thai government bonds. We retain our underweight on Thailand’s equities as challenges in manufacturing space and lack of earnings catalysts are likely to lead to subdued sentiment