Hey Reader,
How to not invest in Southeast Asia
A field guide to the ways of getting Southeast Asia wrong, which doubles as a filter for the few who should be in it at all
I am going to try to talk you out of investing in Southeast Asia. After more than fifteen years buying listed companies on the ground here, I have come to believe the fastest way to find the few investors this region rewards is to be honest about every way it punishes the rest.
Southeast Asia is the best structural opportunity I know: nearly 700 million people, a young and fast-growing consumer base, listed markets that trade deeply below the region's economic weight, and governance improving faster than at any point in my career. Yet most investors who come looking leave disappointed, and it is usually their own fault.
What follows is a list of ways to get Southeast Asia wrong. Read each one as a filter. If they all describe you, I have saved you a great deal of money and time. If none of them do, we should probably talk.
The index is not the opportunity
Start with the easy way in, the one most investors reach for. Take the FTSE ASEAN 40, the benchmark most "Southeast Asia" funds follow. Look under the hood of a fund that tracks it and three Singaporean banks, DBS, OCBC and UOB, are close to 40% of the entire exposure. Add the big Malaysian banks and roughly half your money is in six banks in the two richest and most mature markets in the region (Singapore and Malaysia). Singapore alone, already one of the wealthiest economies on earth, is around 44% of the fund. Vietnam (a hundred million people, and some of the fastest consumer growth anywhere) is not in it at all, and the population hubs of the region (Indonesia, the Philippines, and Vietnam - together close to 0.5 billion people) are deeply underrepresented.
The exposure to the young, rising middle class consumer growth remains a rounding error in the index. Buy the ETF tracker and you own a leveraged bet on the Singaporean and the Malaysian credit cycles. An index tracking ETF is a machine for owning the biggest companies, and in this part of the world the biggest companies are financial institutions in the most mature economies of the region (representing only c. 5% of Southeast Asia’s population). If you came to Southeast Asia to gain exposure to a rapidly growing middle-class consumer, you will unfortunately find very little of that in the regional indexes and the ETFs.
The Global X FTSE Southeast Asia ETF, by holding: DBS, OCBC and UOB, three Singapore banks, makes up close to 40% of it. Source: Global X (ASEA), via stockanalysis.com.
If you cannot hold five years, do not start
Emerging markets are a five-year asset class (minimum), and Southeast Asia is no exception. If you dig through the rolling-period returns of the MSCI Emerging Markets index since 1976, what you’ll find is: two thirds of one-year holding periods were positive, with a worst case of -54%. Stretch to five years and three quarters was positive, though a quarter of those windows still lost money, some at -10% a year. Only at 10 years does the picture settle fully: more than 97% of ten-year holding periods were positive, and the worst of them lost about 2% a year. The other half of that picture, and the larger half, is the upside: over its full history since 1988, the index has compounded at close to 10% a year in USD terms and, through its best decade, the 2000s, at close to 16%. The return is there, and it is a large one, but only reliably available to the investor who can hold through the swings.
The hardest part is your own emotional rollercoaster and investment governance framework. The investors who last here fix the rules before they start. They size the position so that the drawdown that will come (and a 20% to 30% one always comes, usually more than once) becomes a reason to add. Capital that fails here mostly fails on the horizon, coming in expecting results within three years when this is an asset class that rewards a decade.
Growth is not the same as return
The most common reason an investor wants Southeast Asia is the macro case. Young populations, rising incomes, faster growth than anything in the developed world. It is all true and, on its own (I would argue) close to irrelevant to your return. Jay Ritter looked at 19 countries over 112 years and found the correlation between real equity returns and per-capita GDP growth was negatively correlated, at minus 0.39. For emerging markets specifically it was about the same. The clearest example is China. From 2000 its economy multiplied several times over while domestic shareholders earned close to nothing in real terms for well over a decade.
What compounds a share price is not general GDP growth - rather, it's each company's earnings growth and whether those earnings reach you. On that measure Southeast Asia is cheap: the region's listed market trades at around 13 to 14 times forward earnings, and its fastest-growing markets, Indonesia and Vietnam, are nearer 10 to 11 times, against roughly 20 times for the US. Earnings there are compounding at close to 10% a year, with a structural runway behind them, a young and still-urbanising consumer base that runs for decades. You are buying a long growth runway at a discount to developed-market prices, which is what to look for in a market like this, not aggregate GDP growth numbers.
You have to be in the room
Before we commit our capital into Southeast Asian equities, we talk to the people around each company: its customers, its suppliers, its competitors, its other shareholders, the current management and often the people who ran it before them, as well as the board members and key shareholders. The desktop analysis of the reported figures is only the starting point, and what we are trying to understand is how the controlling family behaves in the long stretches when no announcement is due, how capital has been allocated over the past ten years, and how the business treats the minority owners alongside it.
Where a company is good enough and cheap enough, in Southeast Asia, you need to go further than a passive desktop analyst can, and ideally even engage directly: At Endurance Capital, we are taking this point to heart by taking what we have learned about the companies into the boardroom, building alliances with other shareholders, and pressing for improved capital allocation, international level investor relations work, cleaner related-party dealings, and stronger governance, which over the years is what turns a cheap, well-run company into a strong realised return. It takes years of being on the ground, in the market, and in the boardroom. Done that way, the governance risk that frightens most investors is what makes the outsized long-run returns possible.
A passive minority is a passenger
Even if you get close and you pick well, owning a small passive stake in a family-controlled company leaves you a passenger. The controlling family decides how capital is allocated, on what terms it deals with itself, and what the dividend is really for, and from the outside all you can do is watch it happen.
To make this concrete, without naming names: a few years ago, Endurance Capital built a position in a leading listed hospital operator in the region. On paper it was cheap and growing; underneath, capital was leaking: an over-leveraged expansion into a saturated big-city market and related-party arrangements that were not aligned with the minority shareholder’s interests. A passive holder would only have been able to complain. We built a shareholder alliance of more than 40% of the votes in the company, took three of seven board seats, and added an independent director who had rolled out hospitals elsewhere in the region.
From there the work was unglamorous: we wound down the expansion, changed the chairman and the chief financial officer, and moved the related-party dealings under board oversight. A minority holder owning the same shares from the outside could have done none of this. The stake was only our entry ticket; the work that produced the return came in the years that followed, in and around the boardroom.
Buying the index gets you the average. In emerging markets, the excess return has gone to active specialists and activist owners. Sources. Clare, A. (2022), Journal of Asset Management 23(1); Ninety One; Rowland & Lawson; Financial Times; Goldman Sachs. Per Endurance Capital thoughtpiece, September 2025.
Volatility is not the risk
The last filter is temperament: Southeast Asian markets are more volatile (often violently so) than the ones you are used to. The volatility is the toll the asset class charges, and the reason the long-run return is there to collect. There is no way to get the long-run outsized returns without the volatility. Permanent loss of capital is what ends portfolios, and the two get conflated in the heat of a drawdown, which is where the really expensive decisions to exit the region are made. A 30% fall costs you nothing unless you sell into it. If a screen full of red will make you capitulate at the low, this region will find that out about you, and charge you for the lesson.
Emerging market equity: the highest-returning listed asset class over the long run, and also the most volatile. The volatility is the price of the return. Source. David Swensen, Pioneering Portfolio Management, Table 5.1. Arithmetic returns, inflation adjusted (HEPI). Emerging equity has 21 annual observations, US equity 80.
One last thing
Add these up and you have a fairly complete guide to losing money in Southeast Asian stock markets. Buy the index. Come with a three-year horizon. Assume a 1:1 relationship between GDP growth and stock market returns. Pick individual stocks from a screen far away from the region. Do no first hand research. Hold a passive stake. Sell out when there is a drawdown. Do those things and the region will take its “toll fee” cut, the same way it has taken one from many pools of foreign “tourist” capital that has passed through it for decades past.
I have written all of this as a filter, and I mean that warmly. A market this inefficient rewards a particular kind of investor: patient, close to the ground, and willing to do the work. The clearest way to find them is to be honest with everyone else about why this is hard, so they can put their capital somewhere better suited to them.
Do the exercise. Read back through the six. If four or five of them describe you, I have done you a favor, and I mean that. Put your capital where your temperament and your time horizon really are, which for most investors is closer to home. If instead you reached the end and none of them described you, if you can hold for a decade, get close, take a seat, and hold still through the drops, then you are the rare reader this region was built to reward. It is where I have spent fifteen years and most of my own net worth, and I have allocated accordingly.
Christopher B. Beselin
Investing, compounding & exiting
Christopher B. Beselin is the Chief Investment Officer of Endurance Capital. The views & opinions expressed in this newsletter is for informational and educational purposes only and should not be considered investment advice.
PS. If you're a qualified professional investor and you're not sure where to begin structuring your emerging market investment exposure, feel free to schedule a 1-to-1 emerging market strategy call with Christopher B. Beselin via this link. DS.