Southeast Asian stocks have been quick to shrug off the post-Brexit blues.

The Jakarta Composite Index entered a bull market as the gauge surged on the passing of a tax amnesty bill. Equities in the Philippines are at the highest in more than a year on optimism President-elect Rodrigo Duterte will speed infrastructure development. Thai stocks are up 18 percent from the year’s low and Singapore capped the biggest two-day rally since April.

Markets are regaining momentum after concerns about higher U.S. interest rates and slower global growth cut short a rally that sent the MSCI South East Asia Index to an eight-month high in April. Investors are optimistic the region is relatively protected from Europe and stands to benefit from a more dovish Federal Reserve. The MSCI gauge has recouped all its losses since Britain’s vote to leave the European Union, while global stocks are still down 4.5 percent.

“Investors are running away from Europe and into areas where there is growth,” said Mixo Das, a strategist in Singapore at Nomura Holdings Inc. “Indonesia and the Philippines certainly fall into that category. Indonesia’s tax amnesty is definitely positive for the economy. In the Philippines, any increase in infrastructure investment by the new government is most welcome.”

Nomura now has a more favorable stance on Asean stocks versus Korean and Taiwanese equities, as they’re less dependent on demand from Europe and other developed nations, the Japanese brokerage said in a note on Monday.

The JCI rose 2 percent in Jakarta on Wednesday, as the new tax amnesty bill passed this week is forecast to lure more than $40 billion of undeclared money back to Indonesia. The benchmark gauge has climbed more than 20 percent from a low in late September, fitting the definition of a bull market.

The Philippines’ equity gauge surged 1.7 percent, to the highest since May 22, 2015. Thailand’s SET Index increased 0.6 percent, trading near the highest level in almost a year, while Singapore’s benchmark measure was up 1.3 percent, giving it a two-day gain of 2.3 percent.

“While Brexit is really bad for the U.K. and Europe, Asia is largely insulated,” Raymond Kong, who oversees $2.5 billion as a fund manager at One Asia Investment Partners in Singapore, said by phone. “I don’t think there’s a lot of companies from Asia with huge exposure to the U.K. We are looking to buy some Asian equities.”

CLSA Chief Equity Strategist Christopher Wood said he’s upgraded emerging markets to overweight from neutral in a research note on Monday, citing an increased negative outlook for European equities. Brexit provides an “excuse” for more monetary easing by the G7 central banks including, sooner or later, the Fed, he wrote.

The drop on Friday after Brexit created buying opportunities, said Jemmy Paul, investment director at PT Sucorinvest Asset Management in Jakarta. “In the medium term things are looking good for the emerging markets.”

Source:
courtesy of BLOOMBERG

by Jonathan Burgos and Harry Suhartono

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