When institutional investors think about Asia’s emerging markets, they tend to pay more attention to the larger and more industrialized economies such as China, Korea and Taiwan. Proportionally less attention is paid to the smaller Southeast Asia nations such as Singapore, Indonesia and Malaysia. Yet these countries, which together with Thailand and the Philippines constitute the MSCI AC ASEAN Index, have returned 5.6% a year (gross) over the 10-year period ending Dec. 30, 2016.

The quality factor has worked best in a "risk-off" market environment. Yet quality is not as well understood as other factors, despite being deeply embedded in Benjamin Graham’s value investing philosophy. In this Research Insight, we argue that the quality of a company can generally be evaluated along five key dimensions: Profitability, Earnings Quality, Financial Leverage, Asset Growth and Corporate Governance. Investors can replicate a variety of quality indexes, depending on their...