Kuala Lumpur, 9 April 2026 – Southeast Asia is steadily strengthening its position in global capital markets, with six key economies accounting for 8.8% of total capital inflows to developing markets between 2021 and 2024, according to a new report by the Milken Institute.
The figure marks a notable increase from 7.6% in the 2017–2020 period, highlighting growing investor confidence in the region despite global economic uncertainty and shifting capital flows.
ASEAN’s Growth Markets Gain Traction
The report identified six standout markets, Malaysia, Indonesia, Vietnam, the Philippines, Cambodia, and Laos, as key drivers of inflows, supported by strong economic fundamentals and expanding financial ecosystems.
These economies are increasingly seen as well-positioned to capture future investment opportunities, benefiting from:
- Rising domestic demand
- Expanding middle-class populations
- Ongoing structural reforms and digital transformation
FDI Dominates Capital Flows
Foreign direct investment (FDI) remains the dominant source of capital, accounting for 72.5% of inflows into the six Southeast Asian markets during the 2021–2024 period.
This represents a significant increase from previous years, underscoring the region’s attractiveness for long-term investments such as manufacturing, infrastructure, and technology.
In contrast:
- Portfolio inflows declined sharply to 8.5%
- Bank-related and other inflows fell to 19.1%
The shift suggests investors are prioritising long-term strategic investments over short-term capital flows, reflecting confidence in the region’s structural growth story.
Malaysia and Indonesia Lead Regional Activity
Among the six markets, Malaysia and Indonesia emerged as leaders in capital activity, particularly in mergers and acquisitions (M&A), both in terms of deal volume and value.
Malaysia also ranked 23rd globally on the Global Opportunity Index, making it the highest-ranked Southeast Asian economy in terms of investment attractiveness.
China’s Decline Reshapes Capital Flows
A key factor behind Southeast Asia’s rising share is the sharp decline in capital inflows to China, which fell by 64.1% (US$295.2 billion) between the two comparative periods.
China’s share of inflows to developing economies dropped significantly to 14.7%, creating space for ASEAN markets to capture a larger portion of global capital.
Implications for Investors
For investors, the data reinforces a major structural shift in global capital allocation:
- ASEAN is emerging as a key alternative investment destination
- FDI-led growth signals long-term confidence in regional economies
- Diversification away from China is accelerating
Southeast Asia’s ability to sustain inflows despite trade frictions and global uncertainty suggests the region is transitioning from a secondary investment destination to a core pillar of emerging market portfolios.
As capital continues to rotate across regions, ASEAN’s growth markets are increasingly positioned at the centre of the next phase of global investment flows.
