The Association of Southeast Asian Nations was established as a regional political and economic organisation in 1967. The partnership aims to increase the region's bargaining position in the world, and share resources among members. One of the activities related to financial-sector development is the linking of seven stock markets in six countries in Asean, namely Asean Exchanges. The members of Asean Exchanges are Thailand, Malaysia, Indonesia, the Philippines, Singapore and, in Vietnam, Ho Chi Minh City and Hanoi. In an otherwise hazy global economy during the past four years, Asean Exchanges has been a shining exception. As the United States continued to limp out of recession and the euro-zone crisis was prolonged, Asean Exchanges has been a rising star of global investment, especially in the TIP (Thailand, Indonesia, Philippines) markets, which have enjoyed a rally throughout the period. Investment flows, largely of foreign funds, were driven largely by strong domestic economies. International investors have poured nearly US$25 billion (Bt820 billion) into the TIP markets since the first round of quantitative easing (QE) was announced by the US Federal Reserve in November 2008. Since then, the market capitalisation for each of the three markets at least doubled, as shown in table. Nonetheless, all three TIP indices lost out later on concerns that the US Fed might start to cut back its asset-purchase programme sooner rather than later. The question is whether Asean Exchanges is still on the preferred list of global investors. There are several factors to support the positive argument over the long run and pullbacks over the short run. First, the purpose of forming the Asean Exchanges was to enhance the feasibility of funding and investment in the region. Together, there are more than 3,000 companies listed in the seven stock markets, with market value of $2 trillion. Hence the markets' integration has become more interesting in the perspective of global investors. However, to create visibility is a good strategy, and the tapering of QE will affect the stock markets in this region for the next few years. The accelerating pace of recovery in developed economies and North Asia stock markets will be overweighed in the years. Second, another integration worth noting is the Asean Trading Link, a gateway for securities brokers to offer their clients easy access to each exchange. Individual investors can buy about 2,300 shares of a company in Malaysia, Singapore or Thailand at their convenience with a tax exemption on capital gains. This has high potential to boost the trading volume and activities among its members. Integrated securities trading via Asean opens up a lot of possibilities for capital markets' development: deepening liquidity, encouraging more cross-border investments, and putting savings into long-term investments. However, in the short run, most private investors are domestic-focused and have home-country bias. Therefore, it will take time for them to see the advantages of investing among other Asean members. On top of that, the trading-system platforms are underdeveloped and a single standard for all Asean members is lacking. Third, with a population of more than 600 million and being located next to the growth engines of China and India, Asean economies face the opportunity of becoming developed countries thanks to their growing labour forces and improving infrastructure to boost productivity. Although seen as the new frontier for growth, however, these Southeast Asian countries have still performed below their potential, averaging just 5-per-cent growth in the past decade. On top of that, Thailand also faces political turmoil, preventing the country from being a good place to invest relative to other markets in the region. The author, Prof Sorasart Sukcharoensin, DBA is Associate Dean for Academic Affairs, Graduate School of Development Economics, National Insititute of Development Administration Market capitalisation of Asean-5 equity markets 2008-2013 (million USD) Exchange 2008 2009 2010 2011 2012 2013 Bursa Malaysia 189,239.2 289,219.4 408,689.1 395,623.8 466,587.6 500,387.4 Indonesia SE 98,760.6 214,941.5 360,388.1 390,106.9 428,222.6 346,673.8 Philippine SE 52,030.6 86,349.43 157,320.5 165,066.4 229,316.6 217,320.3 Singapore Exchange 264,974.4 481,246.7 647,226.4 598,272.7 765,078.0 744,413.2 Stock Exchange of Thailand 103,128.2 176,956.1 277,731.7 268,488.8 389,756.3 354,339.7 Source: World Federation of Exchanges, 2013 By Prof Sorasart Sukcharoensin

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