Equity markets across ASEAN may be poised for a structural expansion in valuation multiples as governance reforms gather pace and equity risk premia moderate, according to RHB Research.
In a thematic report, the research house said accelerating improvements in corporate governance — including stronger board accountability, better capital allocation discipline, and enhanced protection for minority shareholders — could help narrow longstanding valuation discounts across the region.
RHB said these governance-led improvements support a structural re-rating thesis for ASEAN equities and underpin 15 actionable investment ideas identified across its coverage universe.
“As governance standards improve, valuation discounts related to governance concerns should narrow, creating scope for structural multiple expansion across ASEAN markets,” the research house said.
The report highlighted that stronger governance practices can enhance investor confidence by improving the quality and sustainability of returns.
Using the latest available data as of December 2025, RHB screened companies under its coverage universe with strong governance profiles, defined as stocks with a Governance (‘G’) score of 3.6 and above.
The firms were then assessed based on return on equity (ROE) and price-to-book value (P/BV) metrics to identify counters with the greatest potential for governance-driven valuation re-rating.
This process, combined with bottom-up fundamental analysis, led to the identification of 15 investment ideas across the region.
RHB said its conviction that governance remains a key structural driver of long-term share price performance has been longstanding.
The research house pointed to its October 2020 ESG thematic report, EnviSioninG a Better Future, which found governance to be the most influential ESG pillar for stock prices, affecting 78% of share price outcomes based on survey evidence.
It also noted that improving ESG scores — particularly governance-related scores — are strongly associated with stronger ROEs.
This view is consistent with the OECD Principles of Corporate Governance (2025), which outline best practices in five critical areas: ownership structure, board composition, reporting standards, incentive alignment, and business ethics.
RHB added that its October 2025 report, Women on Boards: Unlocking Firm Value, further reinforced the view that gender diversity serves as an important governance lever by strengthening board oversight, improving risk discipline, and supporting long-term value creation.
The research house believes ASEAN is entering what it describes as a governance-led “value-up” phase, drawing parallels with reform-driven valuation re-ratings seen in Japan and South Korea.
In particular, Japan’s corporate governance code and stock exchange reforms, alongside South Korea’s 2024 Corporate Value-Up Programme, have pressured companies with low price-to-book valuations to improve capital allocation, dividend payouts, disclosure standards, and board effectiveness.
RHB sees early signs of similar reforms emerging in Singapore, Malaysia, and Indonesia, particularly in areas such as performance-linked board oversight and stronger minority shareholder protections.
In Malaysia, the MY Value Up programme provides direct policy support to this theme, further strengthening the investment case.
The programme more explicitly links governance standards to value creation, measurable corporate performance, and board accountability, with the aim of improving the visibility of high-quality public listed companies and catalysing valuation re-ratings where justified.
“Governance reform is increasingly becoming a valuation catalyst,” RHB said.
As governance standards continue to improve across the region, companies with strong governance profiles are expected to benefit from more efficient capital allocation, stronger balance sheets, more sustainable ROEs, and lower cost of equity.
This, in turn, supports higher justified price-to-book multiples through both improved profitability and lower required returns from investors.
