Why has Malaysia fallen far behind Singapore?

Stock markets: A new boom region is emerging in Southeast Asia

It is the second historical event in a region within a few months. After around 40 years of armed conflict, the Philippine government signed a peace agreement with the largest Muslim rebel groups around a week ago. It was not until the spring that the government of Myanmar, the former Burma, decided in a radical swing to open up the country and turn to democracy and human rights, also after decades of struggle. Hope for the people - and hope for investors. They are speculating on a peace dividend and are now increasingly targeting the region.

"The ASEAN countries will become the third major powerhouse in Asia, alongside China and India," says Medha Samant, who is responsible for the Asian stock market at the fund company Fidelity. Ten countries belong to this group: Singapore, Malaysia, Thailand, the Philippines, Indonesia, Vietnam, Cambodia, Laos, Myanmar and Brunei. Together they have around 600 million inhabitants. "That is only around half as much as in India, but foreign direct investment in the ASEAN countries is already three times as high as that in India," says Samant.

It's easiest for investors in Singapore

The countries benefit from free trade agreements with one another and falling import tariffs. In addition, the most important of them have well-functioning administrations. Singapore has been number one in the World Bank's Doing Business Report for years, the latest data from which was only published on Tuesday. The report measures how easy or difficult it is to start and run a business in a country.

Malaysia is now in twelfth place and has thus improved by six places compared to the previous year, Thailand follows in 18th place, and both are ahead of Germany, which has fallen one place to 20th. The other countries in the region are far behind, but Singapore, Malaysia and Thailand are the clear powerhouse that matters.

The best stock market performance worldwide

In the past three years, the favorable conditions have already resulted in the region's stock market performance being among the best in the world. In many places, prices are well above the previous highs from before the start of the financial crisis, and this is attracting investors. For example, the latest survey by Bank of America Merrill Lynch among managers of emerging market funds found that Thailand is currently by far the most popular investment region for them, ahead of Russia and Turkey.

But will it stay that way? In any case, the countries are doing everything they can. Thailand, for example, has just eased restrictions on capital movements significantly. "That is positive for the country," says Ciaran O’Hagan from Société Générale. Because the flow of capital into the country will continue. Almost more important, however, is that the ASEAN countries are likely to stand out in the coming years with a significant increase in private consumption.

More shopping malls than in India