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An Nvidia chip during the Taipei Computex exhibition in Taipei, Taiwan, on May 29, 2023.
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Asia-Pacific stocks had a good run in 2024, with most major markets ending the year in positive territory as the region’s central banks eased monetary policy while an AI boom boosted tech stocks .
Taiwan Taix led gains in the region, up 28.85% as of December 23, while Hong Kong Hang Seng Index came in second place with 16.63%.
Asia with success Reducing inflation faster than the rest of the world.said Mike Shiao, chief investment officer for Asia ex Japan at investment management firm Invesco, paving the way for monetary easing.
“Now that the Federal Reserve has begun its easing cycle, Asian countries will have more room to lower interest rates in 2025,” he said in a note. Looser monetary policy tends to boost stocks.
The market’s focus on technology and technology-related stocks helped boost the Taiex. heavy weights Taiwan Semiconductor Manufacturing Company soared 82.12% in 2024, and Apple’s main supplier Foxconn is listed as Hon Hai Precision Industry advanced 77.51%.
While the demand for data centers and AI servers may moderate After this year’s sharp rise, demand for AI-enabled mobile phones, PCs and other consumer electronics could rise in 2025, according to an outlook note from DBS Bank.
DBS noted that the global semiconductor sector typically experiences an expansion cycle that lasts around 30 months. The current cycle, which began in September 2023, has the potential to extend until the end of 2025.
While tech stocks helped boost Taiwan, they couldn’t save South Korea, which was the only major Asian market to end the year in negative territory. The country’s “corporate appreciation program” appears to have failed to boost stocks, with tariff fears and Political turmoil increases uncertainty..
The country’s benchmark. Kospi lost 8.03% as of December 23, making it the worst performing Asian market.
Major economies, particularly the United States and China, will have a big impact on South Korea’s export-driven economy, Paul Kim, head of equities at Eastspring Investments, said in the firm’s 2025 outlook.
“Major exporters such as IT hardware and automakers may face challenges,” he added.
The ouster of Chairman Yoon Suk Yeol will no doubt weigh on investors’ minds, and Lorraine Tan, head of Asia equity research at Morningstar, told CNBC earlier this year that “the longer the leadership change takes, the more investors will likely be sidelined.”
Kim also said the government will play a key role in the country’s markets, highlighting that possible reforms in corporate regulations, fiscal stimulus measures and the possibility of further rate cuts by the Bank of Korea could help the business environment and stimulate domestic demand.
Outlook 2025
Two major areas that will occupy investors’ mindspace in 2025 will be Donald Trump’s presidency and the state of China’s economy, according to George Maris, chief investment officer and global head of equities at Principal Asset Management.
According to Nomura, the incoming Trump administration’s policies will likely boost growth and inflation prospects in 2025 in Asia.. “We expect a tariff increase early next year leading to a pick-up in inflation and slower investment growth.”
Nomura said higher tariffs and trade barriers would mean weaker exports from Asia. Greater uncertainty and tit-for-tat retaliation could delay business investment in the region.
Manufacturing and trade-dependent economies, such as those in Asia, will likely be most negatively affected, “as tariffs lead to reduced trade flows and put downward pressure on growth,” said Freida Tay, manager of institutional fixed income portfolio from the global investment manager MFS Investment. Management told CNBC.
Nomura predicts that Asia will also face tighter global financial conditions in 2025, due to higher rates and a stronger dollar.
At its last meeting of 2024, the US Federal Reserve. He noted that there will be fewer rate cuts. in 2025, while raising inflation forecasts.
Nomura sees “divergent monetary policy outlooks” across the region and says countries such as China, Australia, South Korea and Indonesia, which are more exposed to currency risks, will see monetary policy easing in 2025.
Loose monetary policy typically weakens a country’s currency, makes exports cheaper and potentially supports growth in the face of tariffs.
On the other hand, countries that have “strong growth, higher inflation and still accommodative monetary conditions” will raise rates, such as Japan and Malaysia.
In general, the year 2025 is accompanied by a lot of uncertainty, according to experts.
Nomura analysts write that “turbulence lies ahead” for the region, noting that while strong AI demand and anticipated export concentration should provide some support to growth in the first quarter, the region “appears headed toward rougher seas.” “starting in the second quarter, due to the impact of the Trump presidency, China’s excess capacity and the slowdown of the semiconductor cycle.
However, the firm sees higher growth in Asian economies with larger reserves of domestic demand, such as Malaysia and the Philippines, while India, Thailand and South Korea will likely face headwinds.
China: challenges and opportunities
The state of China’s economy will also be a key area of focus for Asian investors, with traders watching for a “significant commitment to sustainable growth” in Asia’s second-largest economy, Maris said.
In 2024, China’s stock markets snapped a three-year losing streak, with the CSI 300 gaining 14.64%, as Beijing focuses on shoring up its economy.
Nomura analysts expect more stimulus from China to support its economy, while highlighting that Beijing needs to stabilize its beleaguered housing market, fix its tax system, bolster support for social welfare and ease geopolitical tensions to “achieve a real and sustainable recovery.” sustainable”. “.
“This is a tall order at a time when China’s exports, the biggest contributor to growth in 2024, could face strong headwinds with Trump’s return. Although Beijing can stick to the GDP growth target of “around 5%,” we expect growth to slow. to 4.0% in 2025 from 4.8% in 2024,” Nomura said.
Maris sees opportunity in the world’s second-largest economy. He is “constructive” regarding companies with exposure to Chinese consumers.
He said these companies often trade at attractive valuations, “given the preponderance of negative sentiment,” but if government stimulus materializes, these companies will likely benefit from increased demand.
