by Erin Kutz

BOSTON - A strong retirement market and growing middle class will likely swell Southeast Asian mutual fund assets by about 56 per cent over the next four years, led by Thailand and Malaysia, a Boston-based consulting firm said.

Mutual fund assets in Southeast Asia are expected to reach US$129.2 billion (S$187.9 billion) in 2013 from US$82.5 billion in 2008 in dollar terms, according to a report by Cerulli Associates, a financial research and consulting firm.

Asset growth would remain relatively flat throughout 2009 and then begin to rise at a faster rate from 2010, it said.

Thailand will hold the biggest share of mutual fund assets in Southeast Asia with projected assets under management of US$61.2 billion in 2013, up from US$38.5 billion at end-2008.

The country of 63 million people is seeing an increasing number of people converting cash into investments, particularly in fixed-income assets, the report said.

Malaysia will hold the second-largest share, with projected mutual fund assets of US$32.6 billion in 2013, up 83 per cent from 2008, followed by Singapore with US$22.6 billion, up 33 per cent, Indonesia at US$9.3 billion, up 50 per cent, and the Philippines at US$3.6 billion, up 24 per cent over the four-year period.

'Cerulli expects Malaysia and Thailand to be the primary drivers of the region's asset growth going forward,' the report said, adding that growth of the Philippine market will lag the region because of regulatory constraints.

'Singapore's growth rates reflect that of a mature market and the uncertain path of the global economic recovery.' It did not provide figures for Vietnam.

Southeast Asia, hammered by a currency crisis in 1997/98, is weathering the current global economic storm with its banks relatively free of toxic assets and its savings rates relatively high, contributing to record foreign reserves in some countries. Still, its economies are mostly in recession.

Assets in Southeast Asian mutual funds shrank 18 per cent in 2008, less than the decline than US mutual funds, the report said.

Before the global financial crisis, mutual funds in Southeast Asia grew to US$100.3 billion in 2007 from US$46.2 billion in 2003, a rate of 21 per cent per annum.

But the Cerulli report noted that internal issues such as political unrest could lead to regular bouts of volatility in Southeast Asian markets.

Malaysia faces potential political upheaval as opposition leader Anwar Ibrahim faces trial in July for a sodomy charge he says is politically motivated.

Thailand has been gripped by a four-year political crisis, including demonstrations that led to a 2006 coup that ousted former prime minister Thaksin Shinawatra.