Most Southeast Asian stock markets gained on Friday led by Indonesia with net foreign inflows as investors bought beaten-down shares as they shrugged off worry about inflation. Most of the stock markets in the region gained this week, erasing losses since the beginning of the year.
Analysts said foreign inflows had improved in the region this week as investors were starting to find good value again in Southeast Asia. Indonesia rose 2 percent to a 3-week high led by banks, extending a gain for the week to 3.2 percent as investors bought battered shares amid hope of low inflation.
"Market expects a low inflation in February compared to January's 7 percent and that has helped to boost the index," said Harry Su, head of research at Jakarta-based brokerage Bahana Securities. "Strong rupiah also helped to attract foreign inflows and we have seen a net foreign inflow so far this month."
On Thursday, Indonesia's Finance Ministry said it expected month-on-month inflation in February to range between 0.3-0.5 percent, easing from 0.89 percent, as rice prices soften with the start of main harvest. The Indonesian rupiah hit a 3-1/2-year high on Friday, buoyed by heavy demand from foreign banks, while the Southeast Asia's largest economy has seen $305.2 million net foreign buying in February compared with a $442.3 million last month, Reuters data showed. Regional analysts say inflation remains the main concern among the countries in Southeast Asia.
In a scenario analysis based on historical periods of contrasting capacity utilisation and commodity price trends, UBS Investment Research said inflation may have already peaked in Singapore, while it may only peak in the fourth quarter in the Philippines and Indonesia and in the second to third quarter in Thailand and Malaysia.
"Relative to the more pessimistic of the historical scenarios, we are broadly optimistic on inflation. Relative to consensus we are more concerned in Indonesia and less concerned in Thailand and Malaysia," it said. Asian stocks overall rose on Friday to finish their best week in two months as fading concern over inflation encouraged investors to hunt for value.
Malaysia gained 0.6 percent to a more-than 1-week high to end the week with a 1.5 percent rise, and Singapore edged up 0.1 percent, adding 0.3 percent in the week. Bucking the trend, the Philippines ended 2.7 percent higher for the week after losing 0.4 percent on Friday, while Vietnam closed 1.2 percent weaker with a weekly loss of 3.1 percent.
Thailand, which rose 4.8 percent in the last four sessions, was closed for a holiday. It enjoyed total inflows of 14.6 billion baht ($477 million) for the week to Thursday after outflows of $366 million last week. Singapore saw a higher trading with the day's volume 1.5 percent of its 30-day daily average, while Indonesia's volume was 1.2 percent higher than its 30-day average.