Looking for somewhere to hide from global tensions? Head for ASEAN

Units traded in SGD: $UOBAM Ping An FTSE ASEAN Dividend Index ETF(UPD.SI)$

Units traded in USD: $UOBAM PA FT ASEAN DV US$(UPU.SI)$

The Greenland crisis seems to have eased for now, but geopolitical uncertainties remain. ASEAN offers investors a relative oasis of calm in these unsettled times.

2025: Positive growth despite tariffs

When President Trump announced that ASEAN markets like Vietnam, Thailand and Indonesia would be subject to reciprocal tariffs, many feared that the impact to the region could be significant. Indeed, having benefitted from trade front-loading in the first half of 2025, growth momentum weakened in 3Q25.

However, the latest data emerging suggests that most markets in ASEAN ended last year on a strong note. This means that ASEAN’s full-year 2025 GDP growth rate was only marginally below 2024 levels, with Vietnam and Singapore managing to grow faster. An analysis of the numbers suggests that structural factors are at play. ASEAN’s reliance on US exports continues to shrink and growth is increasingly driven by domestic and regional demand.

As Kristalina Georgieva, Managing Director of the International Monetary Fund, puts it, “Let the first half of this century be remembered as ASEAN’s time—a highly integrated, dynamic community of nations, working for the good of the region and for the good of the world.”

2026: Yet more consumption and investment

The outlook for ASEAN growth in 2026 remains healthy, with many economists surprised by the region’s resilience in the face of tariff shocks. In its most recent December 2025 report, the Asian Development Bank (ADB) raised its ASEAN GDP growth forecast for this year from 4.3 percent to 4.4 percent, in excess of the global average of around 3.0 percent.

The report singles out a few high-potential economies for 2026:

• Indonesia’s 2026 growth forecast was raised to 5.1 percent from 5.0 percent, supported by fiscal and monetary stimulus.

• Similarly, Malaysia’s growth forecasts improved to 4.3 percent from 4.2 percent, with growth led by strong domestic demand, exports, and a mining rebound.

• Singapore is expected to benefit from strong AI-related electronics demand, a resilient services sector and stronger infrastructure demand.

In the region overall, we expect economic momentum to be sustained by domestic demand including consumption and investment. Additionally, we see support coming from ongoing investment in infrastructure, supply chain relocation and data centres amid sustained global AI-related demand.

Defensive and resilient markets

Aside from these macro factors, ASEAN markets continue to demonstrate their resilience to global geopolitical crises. Over the last 5 years, ASEAN returns have lagged the MSCI All Composite World Index (ACWI) albeit with lower market volatility.

ASEAN markets are generally considered to be relatively more defensive. This defensiveness is also reflected over shorter periods. For example, the threat of US military action against NATO allies over Greenland caused the S&P 500’s volatility to spike up by 12 percent so far this year. ASEAN markets such as the Kuala Lumpur Composite Index (KLCI), Straits Times Index (STI) and Jakarta Composite Index (JCI) were not immune but was away from the eye of the storm, causing their volatility to rise by only around 9 percent.

In the near term, we favour the Malaysian market given an expected acceleration in corporate earnings in 2026 and strength in the Malaysian Ringgit (MYR). We also see opportunities in Indonesia’s commodity sector, particularly in base and precious metal mining companies, which look set to benefit from resilient demand and supportive price dynamics.

ASEAN as a dividend play

Asia is described as the world’s next dividend powerhouse and this is certainly true of ASEAN. A dividend-focused investment strategy offers potentially more stable returns amid heightened geopolitical tensions. Over the past 20 years, dividends from ASEAN companies have more than tripled. Historical analysis shows that dividend income has contributed more to total returns in the ASEAN equity market than capital gains over this period.

Looking ahead to 2026, we see potential for positive dividend surprises, particularly among ASEAN’s financial companies – the region’s largest sector. Other sectors such as telecommunications, utilities, and healthcare, which are expected to generate strong cash flow and improve their balance sheets, also have the capacity to raise dividends going forward.

If you are interested in investment opportunities related to the theme covered in this article, here is a UOB Asset Management Fund to consider:

Units traded in SGD: $UOBAM Ping An FTSE ASEAN Dividend Index ETF(UPD.SI)$

Units traded in USD: $UOBAM PA FT ASEAN DV US$(UPU.SI)$

You may wish to seek advice from a financial adviser before making a commitment to invest in the above fund, and in the event that you choose not to do so, you should consider carefully whether the fund is suitable for you.

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