For investors in Asia, 2024 looks like it will turn out as a mixed bag of performance across the region. Certain stock markets performed well – like Singapore, Malaysia, and Japan – while others have performed below par (South Korea).
With 2025 set to be an eventful year with president-elect Trump taking office in the US for a second time, investors in Asian markets can expect both headwinds and tailwinds emanating from the global environment.
How the continent’s equity markets will fare is a big topic of conversation among investors and it was one of the topics discussed at the Franklin Templeton 2025 Investment Outlook: Perspectives from Asia and Beyond on 27 November 2024.
A panel of three portfolio managers from Franklin Templeton took part in a roundtable discussion, where the wide-ranging topics included the region’s various stock markets and their outlook for 2025. Here’s what we took away about how the stocks markets in Singapore, Malaysia, and other Asian countries could fare next year.
Challenges For Singapore, Malaysia Attracting Investment
Given Singapore is such a trade-dependent nation, there are bound to be challenges when president-elect Trump takes office given his penchant for trade tariffs. In terms of the currency, the Singapore Dollar could perform better than expected if the tariffs from Trump aren’t as bad as expected.
One silver lining for the city state is that – unlike a lot of other Asian or European countries – Singapore’s government has the fiscal firepower to provide a buffer for the economy from any weakness.
In Singapore’s stock market, there continues to be attractive bottom-up opportunities in specific areas like banks. That’s because the “Big Three” banks in Singapore have fortress-like balance sheets, high dividends, and robust Return on Equity (ROE).
What about neighbouring Malaysia? Well, the Southeast Asian nation has seen its economy recover well in 2024 as investments into manufacturing continue to be strong, on the back of increased foreign direct investment (FDI) flows.
Furthermore, consumption in the Malaysian economy should continue to be strong given the minimum wage hike and double-digit increases in salaries for the country’s 1.6 million civil servants. With no new elections until 2028, there should also be a modicum of political stability in Malaysia. Taken together, this could result in a more positive outlook for both the Malaysian Ringgit and stock market.
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Mixed Fortunes for China And Korea
In China, the broad range of macroeconomic stimulus measures has highlighted the government’s intent to stabilise the economy. However, it’s more akin to stabilisation rather than “accelerating” growth as it had done in the past. One big reason for this is that the government could be reserving its firepower for what is likely to be a more volatile 2025 with Trump taking office.
As for the stock markets, the market-related measures announced in September saw the government put an effective floor on financial markets while trying to boost investor confidence. It’s not likely that stock markets will test the pre-announcement lows and investors remain cautiously optimistic over a cyclical market rebound.
In terms of government policy, the upcoming National Party Congress (NPC) sessions in March 2025 will be key to understanding where the government stands on certain issues. One thing most investors are not be considering is a “best-case scenario” where the incoming US administration actually works actively with the Chinese government to create a positive outcome on a number of issues.
Over in Korea, equities have had a really tough second half of 2024 as some key export-oriented sectors have weighed on the broader market (Samsung etc.). These crucial sectors – such as semiconductors, memory, and automakers – are actually very strong fundamentally but trading at low valuations.
They’re likely being overpenalised and going into 2025, there’s certainly scope for some of these names and sectors to re-rate higher on earnings visibility and continued strong fundamentals.
India And Vietnam As Potential Manufacturing Winners
There’s been a lot of talk about the “China + 1” strategy – that can refer to India and Vietnam – as alternative/additional Asian manufacturing bases for multinationals looking to diversify away from China.
With Trump coming back to power, that thesis could be in jeopardy but the outcomes are actually a lot more nuanced. In India’s case, it’s actually a very domestically-driven market and economy. Even with higher across-the-board tariffs of 10% to 20% could see the country benefit from the mass production of things like clothing and generic drugs.
That’s because these are goods that will likely still need to see their production outsourced from the US. India also continues to be more protected given its huge domestic market as well as being an important strategic partner of the US in the region.
For Vietnam, the outlook is a little less promising given the economy is much more dependent on trade to drive growth. Indeed, one-third of its exports go to the US and Vietnam could be made to increase its transparency and disclosures for its use as a transshipment location.
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