When ASEAN Leaders meet in Singapore November 18-22, much of the focus in the media will likely be on Burma. This is clearly an important topic, given the events there in recent months. But for the purpose of this blog, I am going to stick to our regular theme: stock markets. ASEAN's markets vary greatly. Quite aside from the obvious differences in size (Singapore is the biggest, worth US$538.3 bln, The Philippines' the smallest, worth US$93.8 bln) and make-up of sectors, there are greatly varying levels of retail and foreign investor participation, not to mention regulations governing disclosure. In our view, ASEAN needs to make headway on greater standardisation, if not integration.

Looking at the growth and focus on China's equities markets, efforts to build up ASEAN as an investment destination need to be stepped up. The Chinese markets have grown tremendously. The value of the Shanghai market in September is US$2.62 trillion, up 431.1% compared to September last year. This makes it the second largest market in Asia behind Tokyo (US$4.57 trln) and even ahead of Hong Kong (US$2.58 trln). Shenzhen is worth US$755 bln, and while it's significantly smaller it is up 347.8% to surpass even Taiwan (source: World Federation of Exchanges).

Clearly, a lot of the money boosting the mainland markets are funds from domestic investors, which are growing rapidly. But the global importance of the Chinese economy is undeniable. Accessing the Chinese economy through mainland companies listed in Hong Kong, Singapore, Nasdaq and London is becoming fashionable. ASEAN needs to stand up and be counted as an investment destination of choice.

Here is our wishlist for the ASEAN Leaders Summit, in relation to the markets:

1. Greater standardisation. The markets don't have to merge – just be more like each other. Individually, the markets are like small fish. If they all "swam in the same direction" like a school of fish, they would still be small fish individually, but look large and impressive.

Areas for standardisation would certainly include corporate disclosure regulations, but also more bread-and-butter issues such as taxation, settlement arrangements, fees, and so on.

ASEAN needs to get this step right first.

2. Greater number of products tracking ASEAN markets. FTSE previously came up with a set, but you don't hear much about them. ABN AMRO launched Zero Certs recently, but these track only the less accessible markets individually.

3. Greater joint promotion. Once all the individual markets are heading towards a common goal, they need to make a concerted effort abroad to market themselves.

There is some value to the argument that ASEAN members should make progress at their own pace – meaning, faster, more nimble members should not be held back by those which make progress more slowly. But by learning from the faster markets, here is an area where the slower markets can be brought up to speed quicker, and one which should be implemented for everyone's benefit.


Mark Laudi

Labels: ASEAN Leaders Summit, stockmarkets, World Federation of Exchanges