Asia-Pacific Markets: A Year of Ups and Downs
The Asia-Pacific region experienced a mixed bag in 2024, with most major markets ending the year on a high note. Taiwan’s Taiex led the charge, surging 28.85% as of December 23, while Hong Kong’s Hang Seng Index followed closely behind with a 16.63% gain.
Monetary Easing: A Boost to Equities
The region’s central banks played a significant role in the market’s performance, easing monetary policy to combat inflation. According to Mike Shiao, chief investment officer for Asia ex-Japan at Invesco, this move paved the way for monetary easing, which tends to boost equities.
Tech Stocks: The Driving Force
The focus on tech and tech-related stocks was a significant contributor to the Taiex’s success. Heavyweights Taiwan Semiconductor Manufacturing Company and Foxconn, a major Apple supplier, saw their stocks soar 82.12% and 77.51%, respectively, in 2024.
South Korea: The Lone Loser
However, not all Asian markets shared in the success. South Korea’s benchmark Kospi lost 8.03% as of December 23, making it the worst-performing Asian market. The country’s “Corporate Value-up program” failed to boost stocks, and tariff fears, political turmoil, and uncertainty surrounding the impeachment of President Yoon Suk Yeol added to the market’s woes.
Looking Ahead to 2025
As investors look to the new year, two major areas will occupy their minds: the presidency of Donald Trump and the state of China’s economy. According to George Maris, chief investment officer and global head of equities at Principal Asset Management, the policies of the incoming Trump administration will likely drive the outlook for growth and inflation in Asia.
Challenges Ahead
Nomura forecasts Asia will have to navigate tighter global financial conditions in 2025, due to higher rates in the US and a stronger dollar. The firm also expects a ramp-up in tariffs early next year, leading to a pickup in inflation and slower investment growth.
Country-Specific Outlooks
In 2025, countries like China, Australia, South Korea, and Indonesia, which are more exposed to foreign exchange risks, will see an easing of monetary policy. On the other hand, countries with strong growth, higher inflation, and still accommodative monetary conditions, such as Japan and Malaysia, will hike rates.
Growth Outperformance
Nomura analysts see growth outperformance in Asian economies with stronger domestic demand buffers, such as Malaysia and the Philippines. However, India, Thailand, and South Korea are likely to face headwinds.
China’s Economy: A Key Focus
The state of China’s economy will be a key focus area for Asian investors, with traders watching for a “meaningful commitment to sustainable growth” in Asia’s second-largest economy. Maris sees an opportunity in companies with exposure to Chinese consumers, which frequently trade at attractive valuations.
Uncertainty Ahead
In general, 2025 comes with a lot of uncertainty, according to experts. Nomura analysts write that “turbulence lies ahead” for the region, pointing out that while strong AI demand and export frontloading should provide some growth support in the first quarter, the region “appears headed for rougher seas” from the second quarter.
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