ASEAN macro to equity markets: Five key questions shaping 2025 and beyond

Divergent growth and inflation dynamics across ASEAN have led to variation in the pace and scale of monetary easing during this cycle. Several ASEAN pursued relatively aggressive monetary easing as softer, or below-target inflation allowed these central banks to prioritize growth support (Exhibits 3 & 4), in the face of external headwinds. For instance, Indonesia and the Philippines lowered policy rates by a cumulative 125bp over the year, alongside Thailand delivering a total of 100bp in cuts. Deflationary pressures eased in Thailand in 4Q25, with CPI growth rebounding steadily.

By contrast, monetary easing in Malaysia and Singapore was more measured. Bank Negara Malaysia (BNM) reduced its policy rate by only 25bp at the July meeting, in response to downside risks to growth due to tariff hikes and potential negative impacts on trade. Singapore’s central bank (MAS) eased by reducing the S$NEER policy slope slightly at both the January and April meetings to ensure price stability and to navigate through an uncertain external trade environment. Beyond April, the MAS appeared comfortable keeping policy unchanged for the rest of the year as export growth strengthened, supported by front‑loading and likely re‑routing activities. Resilient, export-supported growth (as discussed in Question 1) has enabled Malaysia and Singapore to adopt a less aggressive monetary easing stance.

Against the backdrop of a weaker US dollar in 2025, the performance of ASEAN currencies varied, largely attributable to the variation in economic growth paths across the region. For instance, with strong export growth and positive growth outlook being key drivers, SGD and MYR posted 5-10% returns and outperformed their ASEAN peers in 2025 (Exhibit 5). These cases are in line with historical long-term pattern that FX moves are highly correlated with economic growth and external balance of the country. However, factors other than the growth outlook also play an important role in driving FX performance. IDR depreciated 3.6% versus USD in 2025, due to Bank of Indonesia rate cuts (meaning less favorable rate differentials), and wider fiscal deficit (the 2025 preliminary fiscal deficit was reported at 2.92%, wider than the 2.78% target, and closer to the 3% legal limit). This is despite the competitive growth as Exhibit 1 shows. In the Philippines, concerns on domestic political uncertainty have outweighed the positive impact of stronger export growth, leading to a weaker PHP (-1.7%) in 2025. 

A question that investors often wonder when investing in ASEAN countries is whether FX has a direct impact on equity markets. For instance, given Singapore economy’s strong dependence on exports, does SGD performance have a direct or strong correlation to the Singaporean equity market? Exhibit 6 shows the correlations between ASEAN equities and their respective local currencies – expressed as LCY/USD, where a higher FX reading denotes a stronger local currency. The data indicates higher correlations for Malaysia (0.72), Indonesia (0.68) and Thailand (0.65), while much lower correlations in the Philippines (0.33) and Singapore (0.28). That is to say, equities in Malaysia, Indonesia and Thailand have tended to rise with currency appreciation, while Philippines and Singaporean equities are less sensitive to FX moves. 

It is noteworthy that higher correlations observed in Malaysia, Indonesia and Thailand do not necessarily indicate a strong cause-and-effect link. Instead, they likely reflect shared macroeconomic drivers, with both equities and currencies responding to the same underlying growth fundamentals. The lowest correlation noted in Singapore can be explained by the MAS monetary policy targeting the S$NEER basket rather than interest rates, making SGD/USD an imperfect proxy for domestic macro backdrop. On the equity side, Singapore’s equity market is concentrated in the Banking sector (57% of FTSE Singapore as of end-2025) and Real Estate (16%), which are more sensitive to interest rates than to bilateral FX moves. 

Fundamental growth likely remains the key. Singapore equity has become more attractive to investors over the past two years given its defensiveness, higher dividend yields, compelling valuations and improving growth outlook in financials and tech spaces [note1]. As Exhibit 7 shows, Singapore equity has outperformed its peers over 1y and 3y horizons. Its EPS growth forecasts have also seen continuous upward revisions since 2024 (Exhibit 8).

Outside Singapore, Malaysia equity has likewise outperformed over 1y and 3y, consistent with the country’s resilient growth outlook. Its EPS growth also stayed steady in 2025. EPS growth forecasts for Indonesia and Thailand saw a rebound in 3Q25 and 4Q25, respectively. For Thailand, the upward revisions were mainly driven by the Tech, Basic Materials, and Utilities industries. In Indonesia, Telecom, Financials, Consumer Staples, and Basic Materials contributed the most to revisions.

In ASEAN, monetary policies were eased at varying magnitudes as central banks balanced global trade uncertainty against differing domestic growth dynamics, resulting in relatively shallow easing cycles in Singapore and Malaysia and deeper cuts in Indonesia, Thailand, and the Philippines. Export strength, particularly in electronics and AI related components, fueled Singapore’s and Malaysia’s resilient growth in 2025.

Investors wonder whether FX-equity correlations suggest any cause-and-effect relationship. In brief conclusion, FX doesn't necessarily impact equity performance directly. More often, both a country’s currency strength and equity performance are more tied to macro fundamentals. Indeed, Singapore and Malaysia equities have outperformed the region over 3y and 1y horizons. Going into 2026, ASEAN’s appeal continues to rest on growth outlook, and how the economies navigate amid trade risks and the race in AI value chain.