HONGKONG-based economists are focusing on Singapore and Malaysia as their favoured single-country investment prospects for the remainder of this year. Southeast Asian countries in general find favour, including Indonesia and Thailand. SG Warburg Securities regional economist Ewen Cameron Watt remains keen on South Korea and Jardine Fleming Investment Management managing director Robert Thomas likes Australasia as well. But there is deep caution towards Japan, Hongkong and Taiwan equities. The best performing market in the region in local currency terms on the year to date was Japan, with the Nikkei 225 Average up 38 per cent on the period. In US dollar terms the index rose 19 per cent. The best regional market in US dollars was Indonesia where the Jakarta Composite rose 30 per cent. This compares with poor returns from the US, Britain and some Latin American investment prospects, including former high-flyer Mexico, which is down almost two per cent. In Continental Europe there is a better story to tell, with many European Community members managing to achieve main index stock market returns above 15 per cent. In some cases the return was as high as 22 per cent, in US dollar terms, as in the case of Milan. Other forms of investment, such as US bonds, have provided lacklustre returns while, in contrast, gold has risen 18.64 per cent. Hongkong has returned 26 per cent on the Hang Seng Index, making it one of the best performing regional markets. However, the lack of progress in the Sino-British handover talks and the dark clouds gathering over China's economy have made investors cautious towards local stocks, many of which have doubled or trebled in price in the past three years. Retail investors weighted heavily in Hongkong stocks should consider diversifying the risk attached to this type of investment by spreading the range of their equity exposure across a number of markets in the region. GT Management Asia economist Simon Ogus said: ''Although I like Indonesia for the second half, I think there is quite a wide choice in the region right now and you cannot go far wrong with a regional fund.'' He recommends investors should consider going into a regional fund investing in the equities of Southeast Asian stock markets. This avoids getting involved in Hongkong, Taiwan, South Korea and Japan where political factors have to some extent clouded market outlook. In general, the economic fundamentals in these economies are going in the right direction to enable investors to reap satisfactory equity returns. Falling interest rates, sufficient liquidity, satisfactory budgetary conditions and trading positions all bode well for these economies. Thailand is the only Southeast Asian market causing concern, as the continued reporting of poor corporate earnings in the second half will severely impair the market's potential for progress. At the 900 level many stock analysts believe this market could be fairly valued for the time being, with it needing a crop of decent earnings. For Singapore, Mr Cameron Watt said although significant gains had been made, as measured by the Singapore Straits Times Index, this to a large extent could be explained by the movement of a handful of large stocks. He said there were a number of interesting shares waiting to catch up and buoyant activity in the market was expected over the period of the planned listing of the country's telecommunications operator. Meanwhile, overall stock market valuations remained reasonable. In Malaysia, Wardley Investment Services economist Alfred Wong said he was optimistic about the medium-to long-term prospects for the country. While there were short-term political concerns with the coming national elections, the planned US$10 billion of infrastructure spending on airport, power and road projects underpinned the medium-term economic outlook.