* Stocks pare gains as stretched valuations keep investors wary
* Thailand top underperformer as banks continue downward trend
* Singapore stocks outperform, up 1.7 percent
By Vikram Subhedar
HONG KONG, Aug 25 (Reuters) - Southeast Asian stocks were mostly lower on Thursday, underperforming other Asian markets as foreign investors seeking value showed a preference for markets such as China and Hong Kong.
Regional markets got an initial lift as global equities rallied but the gains faded towards the close, with Thailand's SET index the worst performer, ending down 1.9 percent.
Jakarta closed little changed while Malaysia fell 0.3 percent.
Those losses came as a strong showing for China and South Korea helped the broad MSCI Asia Pacific ex-Japan index post a gain of 0.4 percent.
"Even though the arguments for ASEAN's relative resilience and robust domestic demand hold, it's not going to be a bed of roses for these markets," said Mun Hon Tham, a regional strategist at Daiwa Capital Markets in Hong Kong.
"If there are big redemptions, these are the ones that are going to be taken down," said Tham, adding that Indonesia was probably the most crowded market in terms of foreign ownership and could be most at risk.
Valuations are another concern.
Analysts at Credit Suisse said in a report that the Indonesian market's price-to-book ratio at about 3.6 is more than double the 1.5 seen during the lows of the 2008/09 financial crisis.
By comparison, the MSCI China index trades at just 10 percent above its 2008/09 lows, making the case for a shift of funds away from Southeast Asia into China.
"Indonesia seems priced to perfection at the moment. It's a good time to take money off the table," said Daiwa's Tham.
Corporate results helped underpin gains in places.
Malaysia's Sime Darby , which returned to a profit in its fourth quarter following a dismal performance a year before, rose 1.2 percent.
Banks continued to drag Thailand lower, with the sector sub-index down 1.6 percent. The banking index in Thailand has fallen nearly 12 percent this month, retreating from a record high.
Bucking the regional trend, Singapore stocks rose 1.7 percent, with commercial developer Capitamalls Asia the top gainer with an 8.5 percent rise. Commodities group Noble rose 4.8 percent.
Southeast Asian stocks have lost much of their recent upward momentum, which brough all-time highs for Malaysia in July, and for Indonesia and the Philippines early this month.
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SOUTHEAST ASIAN STOCK MARKETS Change on day Market Current Prev Close Pct Move Singapore 2765.74 2719.90 +1.69 Kuala Lumpur 1464.74 1469.15 -0.3 Bangkok 1025.00 1046.43 -2.05 Jakarta 3844.38 3847.02 -0.07 Manila 4342.69 4366.45 -0.54 Hanoi 401.65 396.68 +1.25 Change on year Market Current End prev yr Pct Move Singapore 2765.74 3190.04 -13.3 Kuala Lumpur 1464.74 1518.91 -3.57 Bangkok 1025.00 1032.76 -0.75 Jakarta 3844.38 3703.51 +3.80 Manila 4342.69 4201.14 +3.37 Hanoi 401.65 484.66 -17.13