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Investors returning to S-E Asia

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Fed, infrastructure, lower oil prices boost markets

JAKARTA/MANILA: Bruised by global political and economic turbulence last year, foreign investors are now returning to South-east Asian markets, encouraged by easing trade frictions, a more benign interest rate outlook and prospects of increased infrastructure spending.

So far this year, foreign investors have been net buyers of stocks in markets such as Indonesia, the Philippines, Thailand and Vietnam, while currencies in the region have clawed back some of their last year's losses.

A key moment for investors was the US Federal Reserve's surprise dovish tilt on policy last month, a source of relief for emerging markets that were hit by a rising US dollar and capital outflows last year.

The Fed, however, is just one of the bullish factors driving South-east Asia.

For Ms Sarah Shaw, portfolio manager at Australian boutique fund 4D Infrastructure, one of the top investment picks for this year is Indonesian state-owned toll-road operator PT Jasa Marga.

"We really like the infrastructure story in Indonesia," Ms Shaw said. "Jasa Marga is definitely capitalising on the infrastructure investment that is ongoing in Indonesia."

Companies such as Jasa Marga, whose shares are up by a quarter since November and mobile gadgets retailer Global Teleshop are leading a rally in Indonesian stock markets that investors believe will be driven by upcoming elections, a pause in Fed tightening and lower oil prices.

Foreigners have bought US$1 billion (S$1.35 billion) worth of Indonesian equities so far this year, having been net sellers for the last two years. In the Philippines, foreigners have invested more than a third of their net US$1.1 billion selling last year.

The Philippine stock market has risen 8.5 per cent, while the Jakarta and Bangkok indexes are up 6 per cent each. The baht is at the fore of Asia's rising currencies and up 4 percent this year.

"The re-pricing of the Fed is undoubtedly supportive for emerging market bonds and FX," said Mr Stuart Ritson, a portfolio manager for emerging market debt at Aviva Investors in Singapore.

The rising tide has not lifted all boats with uncertainty over the political and reform prospects in Malaysia crimping that market. Stocks there have not budged this year.

However, investors are taking a more positive view on elections in other markets, with Indonesia, Thailand and the Philippines due to head to the polls. - REUTERS