Most Southeast Asian stock markets fell in weak volume on Wednesday as investors sold consumer-related stocks in favour of financials and property stocks that could outperform in an inflationary environment. The mildly bullish sentiment at the start of the year following a strong run late in 2010 has evaporated somewhat as worries grow over the impact of rising inflation on corporate margins, prompting investors to be more selective.
Regional bourses such as Indonesia have had a choppy week as investors shifted to other Asian stock markets that looked less expensive and offered growth, such as Taiwan. Indonesia's main share index fell almost 1 percent on Wednesday, while the Philippines ended 0.8 percent lower.
Jakarta and Manila, among the best-performing emerging Asian equities last year thanks to a flood of foreign money, have both suffered outflows this year. Technical signals for Indonesian stocks are relatively bearish, with Jakarta's main share index technically overbought and liable to slump another 6 percent. The index was at 3,517.28 on Wednesday.
Singapore inched down 0.2 percent, as did Malaysia ahead of a market holiday on Thursday. But Vietnam rose 1.7 percent and Thai stocks gained 1 percent. Local investors led the buying in Thai stocks, according to traders in Bangkok. The Thai market has seen $491 million in outflows this month, the largest since May. In the second half of 2010, some $2.5 billion flowed into the market.
"There has been some significant selling in Southeast Asian market this year and Thailand is not alone. The foreign selling is globally related rather than down to domestic concerns," said Andrew Yates, head of international equity sales at Asia Plus Securities. "Indeed, the Thai economy looks healthy here." The Thai market gain came in falling volume of 0.7 times its 30-day average, similar to others in the region.
Southeast Asian stocks were weak relative to other Asian markets, with the MSCI index of Asia and Pacific shares excluding Japan up 1.1 percent by 0808 GMT. The MSCI index of Indonesia has fallen 6.1 percent this year, trailing MSCI India's 8 percent fall. Malaysia's MSCI is an outperformer, rising 4.1 percent this year, in part because investors bought into laggard markets. Consumer stocks were among underperformers as investors took the view their margins may come under pressure because of rising inflation. Unilever Indonesia fell 3 percent and Indofood Sukses Makmur dropped 2.1 percent.
A view that banks and property firms would win out in an inflationary environment lifted demand in the sectors. Thailand's Siam Commercial Bank rose 1.5 percent and Singapore's DBS Group Holdings gained almost 1 percent. Energy-related firms, seen as having greater pricing power, ended higher.