Equities
Asia’s diverse opportunities offer a path through the uncertainty
5 min read 18 Jul 25
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Despite global volatility and geopolitical tensions, David Perrett discusses how Asia’s markets—particularly Korea and Taiwan—delivered strong returns in Q2 2025. Against this challenging macroeconomic background he also highlights potential stock picking opportunities across the region.
The second quarter was one that contained the greatest assault on the global trading regime since the Second World War and a hot conflict between Iran and Israel. Carnage for markets, right? Actually no!
In US dollar terms, the MSCI Asia ex Japan Index rose more than 12%, with Korea and Taiwan leading the way rising a staggering 35% and 26% respectively1. The worst performing market was Thailand, which was broadly flat during the period. Throughout the period there was tremendous volatility, with markets plunging and then recovering their losses or, in many cases, then pushing on to new year-to-date highs. During this period of volatility, we added to our AI exposure and India holdings, while lightening some of our exposure to regional financials, Greater China and, later in the period, some telecom holdings.
Tech-heavy Korea and Taiwan benefited from ongoing evidence that AI demand remained strong, prompting index heavyweights like SK Hynix and TSMC to rally hard. The Korean market received a further boost from the election of a new president who appears committed to reforming the corporate code, encouraging companies to boost shareholder returns and simplify ownership structures.
Southeast Asian markets lagged for the most part. This relative weakness was partly tied to an absence of technology stocks within their respective benchmarks, but also concerns about the strength of global activity in a heavily trade-dependent part of the world.
Diverse stock opportunities
In many ways the events of the second quarter highlight the challenges of forecasting future events from a clean sheet of paper. Even if one had forecast events correctly, the likelihood is that one would have got the resultant market movements wrong.
“In many ways the events of the second quarter highlight the challenges of forecasting future events from a clean sheet of paper.”
Recognising the challenges of macroeconomic and geopolitical event forecasting, our approach is to focus on bottom-up stock opportunities and carefully mitigate unintended risks through portfolio construction.
Fortunately, there are a number of potentially interesting single stock opportunities dotted across the region at present: a Southeast Asian telecom company yielding nearly 8%, which is currently at the tail end of market consolidation; a global packaging company, trading at a 5%+ yield, that is going through an acquisition which should drive material synergies over the coming two years; and Chinese hotel businesses that are growing rapidly, as they consolidate the market with their nimble, client-focused franchise models. These examples offer a flavour of the diversified and uncorrelated stock opportunities that currently exist across the Asia Pacific region.
Importantly, they are opportunities that are in no way predicated on an investor having the ability to make an accurate judgement call on macroeconomic or geopolitical events.
You can read the full outlook here.
1 Bloomberg, MSCI Asia ex Japan Index, KOSPI – Korean Stock Exchange Index, MSCI Taiwan Index, total returns in US dollars. Period: 31 March 2025 through 30 June 2025.
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.
