Asian Equity Market Forecast 2025

Trump’s second term could bring volatility to global markets, though its overall impact on emerging and Asian markets remains uncertain. Notably, China outperformed during his first term and has already accounted for a higher risk premium tied to trade disruptions.

• Lower interest rates and potential government policy support could boost Asian markets, especially twin deficit economies like India and certain ASEAN nations, while also benefiting less liquid market segments such as small-cap stocks and REITs.
• Trump’s second term may introduce volatility across global markets, but it is uncertain whether it will have a net negative impact on emerging and Asian markets, as China outperformed during his first term and has already factored in a higher risk premium for trade disruptions.
• Opportunities in China are likely to remain in self-sufficient industries and those that have undergone consolidation, while supply chain diversification in Asian regions with negligible trade balances with the US and clear alternatives to China-based production could also benefit.

With central banks worldwide beginning to ease monetary policy, Asian central banks have followed suit, creating a positive environment for twin deficit economies like India and parts of ASEAN. However, uncertainties remain due to the unpredictable nature of Donald Trump’s second term as US president, which may lead to increased volatility across global markets. Despite this, it’s not certain whether Trump’s policies will have a net negative impact on emerging and Asian markets.

Opportunities are seen in China, particularly in areas of self-sufficiency and consolidated industries, as well as in companies with strong cash flow generation. India, despite some reservations, remains a compelling long-term investment opportunity, especially in the IT services sector. The growth of AI is also highlighted, with a focus on eGaming, software, and IT services in Asia.

Changes in energy markets, driven by the resource-intensive nature of AI and concerns over energy security, are leading to strains and bottlenecks across the energy sector. However, this is also leading to opportunities, particularly in the area of small modular reactors (SMRs).

Asian small caps are expected to benefit from key growth trends worldwide, including the rise of AI, an expanding MZ demographic, energy transition, and the nearshoring of operations. Asia REITs are also seen as a growing opportunity, with robust industry and asset fundamentals.

ASEAN markets are expected to benefit from lower rates and the ongoing integration into the AI theme. Domestic policies in several ASEAN countries are also seen as favorable for investment. Despite some headwinds, China’s equity markets are poised for a potential positive shift, driven by policy interventions and economic recovery signals.

In conclusion, despite uncertainties, the Asian market is expected to offer attractive absolute returns, reinforced by lower interest rates and positive structural reforms. The focus remains on identifying quality companies with competent management teams, forward-looking strategies, and the ability to adapt to change.

Investors are encouraged to adopt a long-term perspective, as the region’s growth potential remains robust. Sectors such as technology, healthcare, and renewable energy are likely to drive future opportunities, supported by rising consumer demand and government initiatives. Maintaining a disciplined approach to portfolio diversification will be crucial in navigating the evolving market dynamics while capitalizing on emerging trends.