(Bloomberg) -- Southeast Asian stocks are on a tear this month, outperforming the rest of the region in a rally that's being fueled by rising commodity prices and economic reopening from the coronavirus pandemic.
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Investors expect further gains this year, with Thailand cited as a key beneficiary from a rebound in tourism and Indonesia a winner thanks to its huge natural resources sector.
While stocks from Tokyo to Seoul and Taipei are all down in October, an index of shares of Asean nations has jumped about 4.5%. As global funds stream back into these equity markets, currencies are also getting a boost, making the Thai baht and Indonesia's rupiah Asia's top performers this month.
"The growth impulse from economic reopening and higher commodity prices should translate to Asean equity outperformance" said Alan Richardson, a fund manager at Samsung Asset Management (HK) Ltd. Of the two, rising commodity prices may have greater impact on comparative stock performance than reopening, according Richardson.
"Rising vaccinations and endemic policies have laid a path towards sustainable economic growth," said Rajiv Batra, Southeast Asia and emerging markets equity strategist at JPMorgan Chase & Co. Southeast Asian equities are likely to maintain their strong rally through this quarter and into the next, he said.
Thailand has seen net equity inflows this month of about $280 million, according to data compiled by Bloomberg. Inflows to Indonesia stand at $251 million while Malaysia has received $81 million, the data show.
Here is a look at what to watch in some of the region's key equity markets as pandemic curbs are rolled back and prices of natural resources surge:
In Indonesia -- an exporter of oil, gas, coal, tin, rubber and palm oil -- the Jakarta Composite Index has advanced 4% this month, putting it within reach of the record high set in early 2018.
"We remain bullish on Indonesia as the country enters an early-cycle recovery phase," said Adrian Joezer, head of equity research at Mandiri Sekuritas, who sees the gauge rising almost 5% to 6,850 points this year.
"Infection rates and hospital bed occupancy ratios are now much lower," he said. "Strong commodity prices have lowered the macro risks associated with the Fed's tapering."
Indonesia can expect more foreign inflows, particularly into the mining and resources sectors, said Paul Ng, a fund manager at Areca Capital Sdn.
"Countries with a large population such as Indonesia will remain a popular investment choice," said Chua Zhu Lian, an investment director at Fortress Capital Asset Management Sdn. Across all of Asean, "retail and consumer stocks, which have not picked up in terms of valuation, should see good upside potential," he said.
Thailand's benchmark SET Index has gained 2.4% this month and is trading near a two-year high as the nation eases travel requirements for vaccinated visitors.
With an announcement this week that visitors from 10 low-risk countries will no longer undergo isolation on arrival from Nov. 1, tourism-related stocks are surging.
Asia Aviation Pcl, which controls the nation's biggest budget airline, is up more than 10% this month while Airports of Thailand Pcl, the state-controlled airport operator, has jumped 11%. Bumrungrad Hospital Pcl, which earned most of its revenue from overseas patients before the Covid-19 outbreak, has climbed 2.5%.
"Thailand is highly dependent on the tourism industry, so recovery will help a great deal in the consumer and tourism sectors," said Areca Capital's Ng.
Vietnam's VN Index has jumped about 4% in October amid slowing virus cases. Investors see any uptick in vaccination rates and reopening of manufacturing plants as triggers for further near-team gains back toward the benchmark's record high set in July.
"As vaccinations ramp up in Vietnam and case numbers taper off we can see a further rebound in economic activities, which should be positive for investor sentiment especially in re-opening themes like modern retail and domestic tourism," said Ruchir Desai, a fund manager at Asia Frontier Capital Ltd.
He cited Mobile World Investment Corp., Phu Nhuan Jewelry JSC and Vincom Retail JSC as reopening plays that can benefit over the next few quarters as stores and shopping malls reopen.
The Philippine Stock Exchange Index has rallied 1.7% this month and almost 7% since the government eased restrictions in the capital region in August.
"The prospects of further loosening is fueling risk-on sentiment and attracting foreign funds," said Andrei Soriano, an analyst at AP Securities Inc., who estimates that the benchmark could climb another 4.7% to as high as 7,400 points this year.
Aside from further reopening, the fourth quarter is a seasonally strong period for consumer spending, and a boost in government spending can be expected with a presidential election next year, Soriano added.
The nation's KLCI Index has jumped more than 4% in October, boosted by the government this week easing travel restrictions in a step toward ultimately reopening all the economy.
With 90% of adults fully vaccinated, travel and leisure stocks are soaring. Casino operator Genting Malaysia Bhd. has risen 6.7% this month while budget airline AirAsia X Bhd. has rallied 25%.
Palm oil stocks also climbed in conjunction with the rise in prices of the commodity. IOI Corp. has jumped about 8.5% so far this month and Sime Darby Plantation Bhd. is up around 24%.
Meanwhile, elevated energy prices are boosting oil and gas stocks. Hibiscus Petroleum Bhd. has gained 23% in October while Coastal Contracts Bhd has jumped almost 49%.
While virus infections have risen to new daily records in recent days in Singapore, the city-state's stocks are in a good position to build on gains seen after the nation announced further easing of travel restrictions on Saturday. The Straits Times Index is already up about 1.8% this month.
Singapore is allowing vaccinated travelers from nine more countries including the U.S. and U.K. to enter without having to quarantine from Oct. 19.
Shares of flag carrier Singapore Airlines Ltd. have gained 9% this month while those of airline food caterer SATS Ltd. have risen about 5%. Other reopening plays include ComfortDelGro Corp., a taxi operator, and many consumption-focused real estate investment trusts.
(Updates with section on Singapore)
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