Via Mark Mobius’ blog, a detailed look at Southeast Asia:

“…Southeast Asia, which comprises mainly of the 10 member countries in ASEAN (Association of Southeast Asian Nations) and a few others, is an often overlooked region in Asia, as a result of being overshadowed by the Asian giants, China and India. The GDP of Southeast Asia is about the same size as India, and within two decades, it is expected that the region will have a larger and younger population than Europe. It is also a major exporter of soft commodities like palm oil, rice, tapioca, coconut oil, and rubber.

Vietnam is one of the key frontier markets in Southeast Asia that I like and our experience with Vietnam goes back as early as 1994.

Numerous comparisons have been drawn by foreign investors and the media between Vietnam and China, but the two countries are quite different, so comparison between them can be tenuous. For example, the population of China is 1.3 billion while Vietnam’s is only 86 million. The GDP of China is $4.8 trillion while Vietnam’s is only $92 billion. Direct foreign investment during 2009 in China was $576 billion while in Vietnam it was $47 billion. And the market capitalization of the Chinese market is $3.2 trillion while in Vietnam, it is only $34 billion. We could go on and on, but there is really no way to make a fair comparison between the two countries in view of the size differences. Of course, there are historical ties between the countries that go back decades. At one time, Vietnam was a tributary state of China and adopted many elements of Chinese culture. Vietnamese historical documents are in the Chinese language. They also share similar political ideology since both governments are led by Communist parties.

The big question in Vietnam remains whether the Communist government is willing to adopt a market-oriented economic model as China’s communist government had done. Lenin’s statue is still standing in Hanoi. However, more and more leaders from the market-driven and commercially oriented southern region of the country have been joining the government and influencing economic policies. In addition, many young Vietnamese who have lived, worked and studied overseas are returning home to help build up its economy and participate in the anticipated high growth in that country.

It is important for the Vietnamese government to focus on broadening the privatization process in the economy. In this way, they can reap the potential benefits of privatization, just like other countries that have adopted similar market-oriented principles. One of Vietnam’s strengths is her people – a hardworking and ambitious local population coupled with a large population living overseas, the “viet kieu”, who are capable of contributing know-how and capital to grow the country at a faster pace.

Valuations in Vietnam remain one of the cheapest in the world with the local stock index down less than half since its peak in 2007. The country’s growth trend is exciting, as it usually is in most frontier markets.

Elsewhere in Southeast Asia, Indonesia is another market that is drawing our interest. Indonesia has a young, growing population, and Jakarta, the capital of Indonesia, is expected to be the largest city in the world within two decades. Indonesia’s extensive resources and large population put it in a favorable position to attract investments and establish a strong domestic economy. To that extent, the outlook for Indonesia is good.

As the largest Muslim democracy in the world, Indonesia has the challenge of continuing on the path of “Pancasila”, the official philosophy of the Indonesian state, calling for people of all faiths to be given equal rights and respect. But, if the government is unable to discourage radical forms of Islam, there may be considerable risks to the political and economic aspects of the country.

I find the Indonesian people, in general, wonderful with outstanding creative abilities. I have been visiting Indonesia for over 20 years, so we have strong ties to the country, and overall, we have a positive take on investment opportunities there.

I also wanted to point out that we have a team of 10 (including Indonesians, Chinese, Thais and Vietnamese) covering the Southeast Asian markets, where different dynamics create immense opportunities for investors. I’m confident that their insight will help us identify bargain stocks in the region.”