Pacific Money | Economy | Southeast Asia

2026 Has Been a Wild Ride for Southeast Asian Stock Markets

Transparency concerns and the turmoil in global energy markets have created an unusual volatility in the region’s capital markets.

At the beginning of 2026, stock markets in Southeast Asia looked poised for a good year. Jakarta’s IDX Composite Index was reaching new heights every day. Global index provider FTSE Russell was preparing to upgrade Vietnam to Secondary Emerging Market status, a move likely to attract billions of dollars from institutional funds. U.S. President Donald Trump’s Liberation Day tariffs caused the Malaysian and Singaporean markets to stumble in early 2025, but entering the New Year, both were trending upward.

We are now almost halfway into 2026, and equities across the region have been on a wild ride. Thailand’s stock market saw a big sell-off after the United States attacked Iran, only to bounce back strongly. Singapore recently surpassed Indonesia in market capitalization, while Malaysia’s KLCI index ended May at around the same level it was at the beginning of the year. What is going on, and why have Southeast Asian equities been so up and down this year?

Let’s start with the events of late February. On February 26, Thailand’s SET index hit its highest point in over a year. Two days later, the U.S. began bombing Iran and within a week, the market had plunged 10 percent. Thailand is a major importer of crude oil, with heavy exposure to the Middle East. The sell-off was the market anticipating that Thailand, and other big oil and gas importers, were about to be squeezed.

It didn’t last long. After the initial sell-off, investors piled back into Thai stocks and the benchmark index is up 23 percent on the year. You might expect other energy importers, like the Philippines, to follow a similar path. But that hasn’t been the case. Like Thailand, the Philippines’ PSEi index hit a high watermark for the year on February 26 and then plunged after the attack on Iran. But in the Philippines, the stock market didn’t bounce back. It’s down 6 percent for the year.

This is not just an energy story. Indonesia is less exposed to energy shocks than Thailand or the Philippines, yet has been by far the hardest hit stock market in the region this year. While the energy shock negatively impacted equities in Indonesia as it did across the region, it merely accelerated a sell-off that began back in January when index provider MSCI warned Indonesia it would be downgraded if it didn’t address regulatory and governance issues in its capital markets.

Regulators were quick to make reforms, but MSCI still removed several Indonesian companies from key indexes in May. Investors have been steadily exiting the market for the last several months in anticipation of this reweighting, as well as in response to broader........

© The Diplomat