ING Barings positions itself as the ASEAN investment bank but their analysts see little reason for cheer.

To underscore its continuing commitment to the nations of South-East Asia, ING Barings trotted out four country research heads yesterday at the close of a two-week investor client conference in Hong Kong. The start of the year is the time when investment banks stake out their claims of expertise, and we’ve been hearing a lot about the interesting markets of North Asia. Barings chose instead to bring attention to Thailand, Malaysia, the Philippines and Indonesia.

To the cynic, this is because the US have eaten Barings’ lunch in Greater China and Korea, leaving them with a South-East Asian deal pipeline that will require public massaging. To the sympathetic, ING Barings is a regional player that sees value in maintaining a full-blown regional presence. Arnold Lim, head of research for Malaysia, says: “A lot of clients still have exposure to ASEAN. We’re the last firm with a deep presence there.”

But the firm maintains a zero recommended weighting for all four countries. And judging by the outlook of its analysts, investors won’t have much reason to return.

Thailand is generating a bit of interest these days with the election of Thaksin Shinawatra. Investors like the size of the majority more than Thaksin, because it will lead to a semblance of stability. Indeed, bank stocks in Thailand have doubled since the election, and the relative infusion of liquidity has allowed foreign investors to dabble in some short-term punting. Kenneth Ng, the country research head for Thailand, says he has spent the past fortnight counselling clients on how to best take advantage of short-term opportunities.

But that’s about as far as it goes – he doesn’t recommend anyone put in new money for the longer run. The incoming government’s idea to create an asset management company is just shuffling bad loans without addressing the problems of lack of credible debtors, lack of demand for new debt, and lack of confidence in the banking system because of the absence of a proper legal framework. Also, Thaksin’s electoral promises will require fiscal stimuli that threaten to build government debt beyond serviceable levels, warns Ng.

And that sums up what analysts can say about South-East Asia right now (obviously not counting Singapore). The troubled quartet is so politics-driven that aggressive investors can make big trading gains during spurts of liquidity. Otherwise it’s still depressing.

Malaysia demonstrates absolutely no commitment to corporate restructuring or corporate governance. Bailouts will continue, says Lim. Malaysia will be further squeezed. With electronics accounting for 30% of exports, the slowing US demand will hurt. Foreign reserves at Bank Negara have fallen from RM131 billion ($29.74 billion) to RM113 billion, not so far to pressure the currency peg but prohibiting Malaysia the luxury of lowering interest rates to spur growth because that would further decimate reserves. Until new faces run Malaysia Inc., value will continue to be destroyed and upside potentials won’t be realized.

Indonesia has a more severe problem in that no one knows what will happen to President Wahid. Two ways to improve general investor confidence is to stabilize politics and to execute successful asset sales. But with a $3 billion agenda at IBRA, the bank restructuring agency, and the best assets already sold, that will be difficult, says Laksono Widodo, Indonesia country research head.

And the Philippines is right now at the brink of a major power shift, with a replay of the 1986 People Power movement in full blood, says Joey Cuyegkeng. He believes while stocks are cheap, and a few such as Manila Electric hold great promise, he still sees more downside ahead. Philippine valuations remain pricey against ASEAN peers. Contrarian investors are now propping up the market but this is a move for only the very brave. “If you’re wrong, you’re dead,” he says.

Depending on what happens over the next few days, the Philippines could put itself back on the road of reform and therefore back on the map for investors. But until that becomes clear, investors have no reason to go there. Yeah, South-East Asia is cheap. And it’s likely to stay that way.

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