Key Highlights:

• Global Trade Frictions: US’s reciprocal tariff framework heightens uncertainty, dragging global growth.
• Asia’s Defence: Countries like India and Indonesia with strong domestic demand and policy flexibility are better positioned.
• China’s Response: Government committed to stabilizing income, consumption, and markets amid ongoing tariff threats.
• Sector Views: Upgraded consumer staples to neutral; downgraded healthcare to underweight.
• Country Calls: Overweight India and Indonesia; underweight Thailand; neutral on Taiwan and South Korea.
  
  

Navigating the Shifting Trade Landscape
As US-led tariffs surge globally, Asia ex-Japan (AxJ) faces a storm of uncertainty. These protectionist moves pressure corporate profits and consumer confidence, forcing investors to toggle between risk-on and risk-off. The temporary 90-day US-China tariff pause signals diplomatic thawing, offering brief optimism but not full resolution.

Countries with large domestic markets and policy room—India and Indonesia—are seen as resilient buffers against external shocks. Meanwhile, ASEAN nations like Thailand, Malaysia, and Vietnam must fast-track policy reforms and consumption-driven growth to stay afloat.


China: Stabilising from Within
After a strong start to 2025 driven by AI optimism (e.g., DeepSeek), China’s rally faltered under trade heat. Authorities now aim to:

• Boost household income,
• Stabilise real estate and equity markets,
• Rebuild public confidence.
  
  

The CSRC’s recent reform push and increasing share buybacks suggest intent to revitalise investor sentiment. Despite lower export contributions to GDP (<20%) and minimal US exposure (~2.4%), China’s growth will depend on deeper structural reforms and consumption-led recovery.


ASEAN and Regional Standouts
Indonesia: Riding on foreign inflows post-tariff truce, with a 16% JCI rally. Government spending and easing monetary policy are key tailwinds, although 2025 earnings growth outlook has been trimmed to 5%.

India: Net FII inflows have turned positive amid optimism from falling oil prices, fiscal support, and reforms like PLI and “Make in India.” India’s limited US export exposure (2.3% of GDP) makes it a natural hedge against global disruptions.

Thailand: Vulnerable to exports and tourism slowdowns. Chinese tourist drop-offs and high US export reliance (~10% of GDP) weigh on growth. Defensive plays in telecoms, hospitals, and consumer goods preferred.

Malaysia: Faces US tariffs but benefits from resilient domestic demand and low inflation. Banks, infrastructure, and energy transition sectors remain attractive.

Singapore: Supported by high dividend yields (banks, REITs), resilient NIMs, and sector support from MAS.

Sector & Strategy Outlook
• Growth Sectors: Tech, platform giants, AI, tourism, and cyclicals remain key.
• Defensive/Income Plays: Quality banks and REITs with sustainable yields.

Tactical Changes:
• Upgrade: Consumer Staples (neutral) driven by domestic demand.
• Downgrade: Healthcare (underweight) due to trade-related risks.

Investment Implications
Despite volatility, Asia ex-Japan is positioned for a valuation re-rating thanks to:
• Low export-to-GDP ratios,
• Rising intra-regional trade,
• Strong domestic liquidity (e.g., China’s USD20tn in household savings),
• Increasing investor interest as global capital rotates out of US assets.

Conclusion
Asia ex-Japan remains a beacon of resilience and opportunity amid global turmoil. Countries with robust domestic ecosystems, sound policies, and growing consumer markets—especially India and Indonesia—will be central to the next growth wave.

Investors are advised to adopt a barbell strategy: balancing growth and income plays, staying selective, and remaining agile as the global economic and policy environment continues to evolve.

Below are some products for consideration: