Equities
10 min read 10 Apr 26
In 2025, the market faced several major macroeconomic questions, including the impact of Trump tariffs, the direction of US interest rates, and signs of improvement in China’s domestic economy. Despite less-than-encouraging news on tariffs and China, global markets, notably in Asia, performed robustly in 2025 and continue to do so in 2026.
The MSCI Asia Pacific ex Japan Index delivered approximately 30% in total returns (USD terms). These gains were primarily driven by large capitalisation technology companies. For instance, SK Hynix, a leading semiconductor manufacturer, surged by roughly 279% in local currency terms, while Samsung Electronics advanced by about 130%. Consequently, the Korean KOSPI Index outperformed all other regional markets, rising more than 78%.
The MSCI China and Taiwan indices also posted strong performances, each rising over 30% in total USD returns. Technology giants such as TSMC and Alibaba contributed significantly, rallying more than 45% and close to 80% respectively. In contrast, several South East Asian markets, including Thailand, the Philippines, and Malaysia, ended the year with either modest gains or declines (in local currency terms). The limited technology exposure of these indices, coupled with slightly softer domestic demand, weighed on returns. Australia and India also lagged behind the broader region.
While technology was a key differentiator, the decisive factor in 2025 was the delivery of earnings relative to expectations. The strong performance of technology stocks, particularly those related to semiconductors, was underpinned by substantial earnings upgrades throughout the year. Initially, demand for High Bandwidth Memory chips used in AI data centres propelled earnings, but as the year progressed, prices for legacy semiconductors also rose sharply.
This dynamic explains why Samsung Electronics, despite its impressive share price gains, is trading at around 10 times 2026 consensus earnings, with SK Hynix at just over mid-single digit multiples. Other beneficiaries of earnings upgrades included TSMC, Hon Hai, Delta Electronics in Taiwan, and Tencent in China.
Notably, a number of non-technology stocks also performed strongly during 2025. Several industrial stocks began the year under the shadow of Trump-related tariffs but delivered robust core business performance. As these companies met or exceeded earnings expectations, their share prices responded positively. Conversely, companies that failed to deliver on earnings saw their shares lag. Despite the recent market turbulence caused by the escalation in the Middle East, we believe that companies' ability to meet or exceed earnings expectations will likely remain a key performance driver moving into 2026.
Past performance is not a guide to future performance.
The M&G (Lux) Asian Fund delivered a significant outperformance through 2025, largely due to effective stock selection. Performance was driven by a broad array of positive contributors, with six stocks each adding more than 40 basis points in 2025.
Delta Electronics more than doubled in value, benefiting from increased AI-driven demand for its power management systems and substantial earnings upgrades. In Korea, Samsung Life reported steady earnings growth, further supported by the rising value of its Samsung Electronics stake and improved shareholder returns. Both SK Hynix and Samsung Electromechanics enjoyed material earnings upgrades as technology demand surpassed expectations.
Calendar year performance (%) |
2025 |
2024 |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
|---|---|---|---|---|---|---|---|---|---|---|
Fund (EUR A Acc) (gross/net1) |
21.2 |
23.9 |
3.6 |
-3.5 |
13.4 |
0.9 |
21.3 |
-10.6 |
10.9 |
8.8/3.4 |
Benchmark2 |
14.2 |
17.5 |
3.7 |
-12.1 |
4.5 |
12.3 |
21.3 |
-9.4 |
20.6 |
10.3 |
Rolling period performance (%) |
Year to end of Most Recent Quarter |
YTD |
1 Month |
3 Months |
1 Year |
3 Years |
5 Years |
10 Years |
|---|---|---|---|---|---|---|---|---|
Fund (EUR A Acc) |
N/A |
14.9 |
7.8 |
16.1 |
36.2 |
20.2 |
12.3 |
11.0 |
Benchmark2 |
N/A |
14.0 |
6.9 |
15.8 |
28.7 |
15.9 |
6.6 |
10.1 |
Sector3 |
N/A |
14.4 |
7.1 |
16.3 |
29.2 |
13.7 |
6.0 |
9.5 |
1 Gross = performance after fees but before any entry charge is taken into account. Net = performance after fees but after any entry charge has been taken into account. The maximum allowable entry charge of 5.00% (i.e. €50.00 for an investment of €1000) is deducted in the first investment year. This means the gross/net figures differ solely in that year. Other charges may reduce performance.
2 Benchmark: MSCI All Country Asia Pacific ex Japan Net Return Index. It is a comparator against which the fund’s performance can be measured. It is a net return index which includes dividends after the deduction of withholding taxes. The index has been chosen as the fund’s benchmark as it best reflects the scope of the fund’s investment policy. The benchmark is used solely to measure the fund’s performance and does not constrain the fund's portfolio construction. The Fund is actively managed. The Investment Manager has complete freedom in choosing which investments to buy, hold and sell in the fund. The Fund’s holdings may deviate significantly from the benchmark’s constituents and as a result the Fund’s performance may deviate significantly from the benchmark. The benchmark is shown in the share class currency. Benchmark is Gross Return prior to 26 October 2018 and Net Return after this date.
3 Sector: Morningstar Asia-Pacific ex-Japan Equity sector
Source: Morningstar Inc. 28 February 2026, EUR A Acc share class, income reinvested, price to price, net of all fees. Fund performance prior to 26 October 2018 is that of the equivalent UK authorised OEIC, which merged into this fund on 26 October 2018. Tax rates and charges may differ. Performance data does not take account of commissions and costs incurred on the issue and redemption of units.
Several significant portfolio changes were made throughout 2025. In the second quarter of 2025, a new position was established in Samsung SDS, the digital arm of the Samsung Group, which was attractively valued at 15 times earnings and held substantial net cash. We believe the company is well-positioned for buybacks and dividend growth, in line with Korea’s ‘value-up’ agenda. Simultaneously, the position in Chinese EV manufacturer BYD was exited due to concerns over slowing growth and its balance sheet.
An initial position was taken in Bank of the Philippines Islands during the fourth quarter. As the Philippines’ leading blue chip bank, it became attractively valued following a sharp sell-off as part of broader market weakness.
The portfolio was also enhanced by adding CP All, Thailand’s dominant 7-11 operator with over 70% market share. Although this quality stock previously traded at about 30 times forward earnings pre-COVID, it has since been materially de-rated despite meeting 2025 earnings expectations. This provided an opportunity to add the stock at 14 times forward PE and a 3,5% dividend yield, a level well above long-term risk-free rates, which appears undervalued given the company’s consistent high single-digit growth.
Additionally, the holding in Jing Dong Industrial (JDI), a Chinese MRO business, was increased. JDI is expanding its presence in industrial supply chains, offering strong recurring revenue and growth through new and existing clients. The company’s ability to grow at a high-teens rate, even in a challenging Chinese economy, demonstrates its quality. Trading at 17 times forward earnings and holding 40% of its market cap in net cash, JDI remains valued below global peers despite its highly digitised product offering.
More recent transactions include the addition of three new holdings in January 2026; Taiwanese semiconductor sector play ASE Tech, Beijing-Shanghai High-Speed Railway and small position in Korea's leading life-care brand, Coway.
Over the past 18 months, there has been a marked de-rating of many stocks previously regarded as quality, steady growth companies. This phenomenon has been particularly evident among names in consumer staples, telecommunications, and niche industrial sectors. Historically, these stocks were viewed as somewhat expensive; however, that is no longer the case. Despite their consistent earnings performance, these companies have experienced a significant reduction in their valuations.
The primary driver behind this trend appears to be a shift in investor preference towards AI-related stocks. As enthusiasm for artificial intelligence has grown, investors have substantially reallocated capital, resulting in a dramatic revaluation of these prior favourites. Crucially, these companies have not failed to deliver on earnings; rather, they have simply fallen out of favour as sentiment has swung towards newer, high-growth opportunities.
From a portfolio construction perspective, these so-called “fallen angels” represent just one area of interest for us. The strategy remains focused on building a diversified portfolio, seeking multiple, uncorrelated sources of alpha. The aim is to avoid excessive reliance on a narrow group of stocks or thematic trends, instead favouring a balanced approach that captures value across various sectors.
Investment policy
The Fund aims to provide a higher total return (capital growth plus income) than that of the Asia Pacific (excluding Japan) equity market over any five-year period while applying ESG Criteria. At least 80% of the Fund is invested in the shares companies that are based, or do most of their business, in the Asia Pacific (excluding Japan) region. The Fund may invest in China A- Shares via the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect or via the QFI status granted to the investment manager. Up to 5% of the Fund may be invested in the shares and equity-related securities of Special Purpose Acquisition Companies (SPACs). The Fund invests in securities that meet the ESG Criteria, applying an Exclusionary Approach and Positive ESG Tilt as described in the precontractual annex. The fund’s recommended holding period is 5 years.
Please note, investing in this fund means acquiring units or shares in a fund, and not in a given underlying asset such as building or shares of a company, as these are only the underlying assets owned by the fund.
Further details of the risks that apply to the fund can be found in the fund's Prospectus.
The Fund promotes Environmental/Social (E/S) characteristics and while it does not have as its objective a sustainable investment, it will have a minimum proportion of 20% of sustainable investments.
The Fund’s sustainability information are available to investors on the Fund page of the M&G website.
Please note that the decision to invest in the promoted fund should take into account all the characteristics or objectives of the promoted fund.
Capabilities & funds
This is a marketing communication. Please refer to the prospectus and to the key information document (KID) before making any final investment decisions.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast, nor a recommendation to purchase or sell any particular security.