In May 2013, I wrote an essay “ASIAN CRISIS AGAIN”. I was mainly referring to ASEAN, not so much North Asia. As I continued to follow the theme, it became clear that it would not be a sudden shock event like in 1998 but a long period of protracted economic malaise.

I already discussed some the factors in my essay “ASEAN Enters Its Lost Decade. Maybe Two” in Aug 2015. Since then, many of the numbers I follow have become worse and the more I read, the more I am convinced that ASEAN is at a dead end.

The bureaucracy of ASEAN is talking about AEC and TPP as if it is going to solve our problems. It’s a classic situation of using the same formula again and again, even when the circumstances have changed. AEC and TPP won’t matter. ASEAN’s problems go far deeper.

ASEAN exports have struggled with a NEGATIVE growth bias since 2013 and the magnitude of the decline has accelerated in the past 12 months.

Only Vietnam is doing well on the export front. A lot of people have the perception that it is from a small base but their export boom has been ongoing for long enough that the base is no longer small.

For example, Vietnam’s export of electrical & electronic products has just overtaken that of Malaysia.

From the above chart, you can see that Malaysia’s export of “high tech” goods has stagnated since the mid-2000s.

The overall economic malaise is borne out by the Manufacturing PMI, which has been mostly below 50 i.e. contraction mode, since 2014.

Of course, there is the “consumption boom that will come from the burgeoning young population of ASEAN”. How many times have you heard this argument? In my opinion, it is hogwash.

Here is the logic without the jargon.

You can’t consume more if you don’t have rising income. You won’t have rising income unless you have the ability to keep producing ever higher value goods and services (to domestic and overseas markets). And you can’t do that unless you keep investing heavily in the education of your population.

Even if you do make the investment in education, you can’t benefit fully unless you have your own indigenous companies that are built on the intellectual property you have created or if your best trained people keep leaving the country in large numbers for greener pastures. The former situation limits your benefits as a nation to only the remuneration portion of the value-added while the latter puts you on an endless treadmill just to keep your position.

In May 2013, I wrote an essay “ASIAN CRISIS AGAIN”. I was mainly referring to ASEAN, not so much North Asia. As I continued to follow the theme, it became clear that it would not be a sudden shock event like in 1998 but a long period of protracted economic malaise.

I already discussed some the factors in my essay “ASEAN Enters Its Lost Decade. Maybe Two” in Aug 2015. Since then, many of the numbers I follow have become worse and the more I read, the more I am convinced that ASEAN is at a dead end.

The bureaucracy of ASEAN is talking about AEC and TPP as if it is going to solve our problems. It’s a classic situation of using the same formula again and again, even when the circumstances have changed. AEC and TPP won’t matter. ASEAN’s problems go far deeper.

ASEAN exports have struggled with a NEGATIVE growth bias since 2013 and the magnitude of the decline has accelerated in the past 12 months.

Only Vietnam is doing well on the export front. A lot of people have the perception that it is from a small base but their export boom has been ongoing for long enough that the base is no longer small.

For example, Vietnam’s export of electrical & electronic products has just overtaken that of Malaysia.

From the above chart, you can see that Malaysia’s export of “high tech” goods has stagnated since the mid-2000s.

The overall economic malaise is borne out by the Manufacturing PMI, which has been mostly below 50 i.e. contraction mode, since 2014.

Of course, there is the “consumption boom that will come from the burgeoning young population of ASEAN”. How many times have you heard this argument? In my opinion, it is hogwash.

Here is the logic without the jargon.

You can’t consume more if you don’t have rising income. You won’t have rising income unless you have the ability to keep producing ever higher value goods and services (to domestic and overseas markets). And you can’t do that unless you keep investing heavily in the education of your population.

Even if you do make the investment in education, you can’t benefit fully unless you have your own indigenous companies that are built on the intellectual property you have created or if your best trained people keep leaving the country in large numbers for greener pastures. The former situation limits your benefits as a nation to only the remuneration portion of the value-added while the latter puts you on an endless treadmill just to keep your position.

David Fuller's view

Here is Bernard Tan’s report.

This is certainly a sobering analysis but how does it compare to the charts of the main ASEAN Indices.  Shown in local currencies, here are Singapore (p/e 11.67 & yield 4.11%), Malaysia (p/e 18.26 & yield 3.14%), Indonesia (p/e 23.67 & yield 2.05%), Thailand (p/e 19.16 & 3.40%), Philippines (p/e 22.23 & yield 1.81%) and Vietnam (p/e 13.42 & yield 3.81%).

Formerly known as the ‘little tigers’, these recovered well from their 2008/9 lows, with the exception of Vietnam.  However, they have struggled since 2013 and it would be premature to conclude that this long-ranging corrective phase is ending.  Vietnam’s technical pattern is now somewhat more encouraging, provided it continues to hold above 500.  Singapore has the best valuations, followed by Vietnam.  Most of these countries should benefit somewhat from the recovery in commodity prices which commenced earlier this year, albeit from extremely depressed levels.