In Indonesia, based on historical valuation, market looks fairly valued at 13X PER FY16E. The team will accumulate on weakness. They are overweight on banks, retail companies, and consumer staples and looking to buy consumer discretionary on weakness.

In Thailand, forward valuation is now +2SD above mean due to EPS downgrades. Market performance in the next 12 months will now depend on the direction of export recovery, private investments and consumption. Alan prefers visible recovery plays in the tourism sector, and a few stock specific plays in the consumer sector.

In Malaysia, the equity market and currency fell in the last quarter due to 1MDB/political fears, falling oil prices and general risk-off appetite due to Greece/China. Economic data were largely below expectations. However, some good news came in at end-June when Fitch surprisingly upgraded Malaysia’s outlook to “Stable” from “Negative” previously. With low earnings growth, expensive valuation (above mean) and numerous political scandals (eg 1MDB etc), Alan does not expect the market (and the ringgit) to rebound in the short term. He will look to trim more exposure here to re-allocate to other parts of ASEAN

The Singapore market is trading at 12 months forward PE of about 13.8x PE, in line with its past 5 year average. Earnings are expected to grow 2% in 2015. Singapore remains an attractive market for dividend yield, and the yield theme could still see interest in 2015 as the decline in oil prices and the disinflationary effects of central bank action has lowered the outlook for global inflation. However, growth in Singapore is likely to be muted due to continued economic restructuring, though the pace of restructuring could bottom out for this year. A depreciating SGD would be beneficial to exportable manufacturing, such as technology, as well as service such as tourism. Alan expects the market to continue to be range-bound.

The Philippines market was among the best performing market in Asia and far better than the rest of ASEAN due to strong macroeconomic environment and higher growth rates. However Alan sees the risk of growth moderation going forward due to lower than estimated government spending and slower export recovery. He likes the mall operators given the positive structural outlook in the sector. As the GDP/capita of Pilipino reached US$3000, foreign brands will flock to the country and there will be competition for space in the mall. However, due to high foreign ownership in the market, any disappointment in macro figures and capital flight from emerging markets will cause a sharp sell down.

In conclusion, the investment outlook remains clouded in the near term with several moving parts in the global economy. While Alan and his team remain positive on the long-term potential for the region, they expect more negative newsflow in the coming quarter, which will lead to more earnings downgrades. They will maintain a defensive position for now and will look to buy back into the market on weakness after 2nd quarter earnings results have been fully priced in.