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Asia's new stars could be Southeast Asian currencies
Thailand, Indonesia and the Philippines could see their currencies outperform those of richer Asian neighbours in the coming months as foreign investors fuel a stock market boom on signs of a sustained economic upswing.
Thailand, Indonesia and the Philippines could see their currencies outperform those of richer Asian neighbours in the coming months as foreign investors fuel a stock market boom on signs of a sustained economic upswing.
The three economies fell off the radar screens of global investors after the 1997 Asian financial crisis. The rise of China and India since the turn of the millennium pushed Southeast Asia further into the shadows.
Not any longer. Leading stock market indices in all three countries have almost doubled in the past two years, even as their currencies weakened or underperformed those of their powerful neighbours South Korea, Taiwan, Singapore and Japan.
Analysts now say it's time for the Southeast Asian currencies to play catch up with, or even outrun, their northern rivals to reflect an improvement in their economies and the confidence investors have shown in the region's companies.
"Our indicators are pointing to an outperformance of the Southeast Asian currencies in the coming months and a stalling of the (north Asian) currencies," said Philip Wee, strategist at Singapore's DBS Bank, Southeast Asia's largest lender.
"Although the dollar looks weak, it's difficult to squeeze out more from north Asian currencies. So the path of least resistance is Southeast Asia. Do the policy makers mind? No!"
The central banks have largely stayed out of the currency markets in the past few months even as their counterparts in South Korea, Taiwan, Singapore and India accumulated tens of billions of dollars -- brought in by foreign investors and local exporters -- to curtail strong gains in their exchange rates.
Some analysts say this intervention could well continue as demand for North Asia's electronics exports slows. That would make currencies of economies boasting resurgent domestic demand -- such as Thailand or Indonesia -- relatively more attractive.
