Market Highlight 29.12.2025

Capital inflows are returning to Southeast Asian equity markets in December, turning the region into one of the most notable hotspots in global financial markets heading into 2026. Attracted by relatively low valuations and the need for portfolio diversification, international funds channelled USD 337 million into Southeast Asia’s emerging markets in December - set to be the highest monthly inflow since September 2024. Indonesia and Thailand have led the rebound in investor interest after months of heavy selling across regional equities in 10 of the past 11 months, which had pushed cumulative capital outflows in 2025 to around USD 15 billion.

The scarcity of stocks linked to the rapidly expanding artificial intelligence sector is one of the main reasons the MSCI ASEAN Index underperformed the broader Asia-Pacific benchmark by around 13% in 2025, marking its steepest relative decline in five years. Beyond more compelling valuations, the region is increasingly drawing fund managers seeking alternatives to heavy exposure to technology equities amid growing concerns over a potential AI bubble. Several ASEAN markets, including Vietnam and Indonesia, are expected to continue benefiting from the global supply-chain reconfiguration trend and from the prospect of further interest rate cuts by the US Federal Reserve in 2026. These dynamics are reinforced by large-scale fiscal spending plans aimed at strengthening infrastructure and boosting household demand. If Foreign Investment allocations return to the average levels of the past three years, Southeast Asia as a whole could attract capital inflows of up to USD 20 billion in 2026.

On the interbank market, the USD/VND exchange rate continued to trade below the 26.300 level on Friday. Toward year-end, should demand for the Vietnamese dong continue to intensify, the exchange rate could move toward the 26.200 level in the coming week.

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