Considering the risks for Asia stocks after a strong run in global markets

Stock markets around the world have had a strong run over the last three years¹ so it is a prudent time to think about what may lie ahead in the coming months.

We remain confident of earnings and dividend growth in the Asia ex-Japan companies that we invest in, yet we wouldn’t expect market returns over the next six to nine months to be as strong as they have been over the previous six to nine months.

Markets may rise but perhaps not in a straight line, and we may be approaching the late part of this global economic growth cycle. We have slightly reduced the risk profile in our Asia ex-Japan equity income strategy.

Higher bond yields, which we have seen this year, tend to put pressure on equity prices. Elevated energy prices, with oil rising above $100 a barrel this month, are pushing up inflation. The conflicts in the Middle East and Ukraine, which are disrupting energy supplies and pricing, don’t appear to be close to resolution. Higher inflation and relatively healthy levels of economic growth are pressuring central banks to raise interest rates, and this could restrain equity markets.

US, French elections

There is risk around the US midterm elections in November, including whether the US Treasury may become more active in markets. We think the French election in April also bears monitoring because both government debt and corporate debt levels are high there. Any significant changes to government policy in France could add volatility in the euro and currency markets generally.

The potential for weather-related disruption from the El Niño event has been well flagged. This could include additional extreme weather events, higher food prices and at worst, social unrest.

We’ve talked about risks, but a resolution in the Middle East conflict could extend the current economic growth cycle by bringing down energy prices and easing inflation and  pressure on central bankers to raise rates.

All-weather strategy

We have invested in recessions and extended periods of volatility. Market corrections are possible and are a normal part of market cycles. For this reason, we seek to run an “all-weather’’ strategy, meaning that we want our portfolios to be resilient through a range of economic scenarios. Diversification across companies, markets, sectors and countries is important.

We look to invest in businesses with strong balance sheets – nine of our 25 companies are in a net cash position. If there is a downturn, we would expect these companies to be better placed than businesses with burdensome levels of debt. The rest of our holdings have low levels of leverage relative to their business models.

We have a mixture of companies exposed to US and global demand, and companies selling products to domestic consumers in India, Southeast Asia and Australia, where demand should stay resilient if global economic growth slows.

Technology and financials

Technology remains the largest sector in our Asia ex-Japan income strategy. We expect earnings growth for the tech companies that we own to be strong through 2027, into the beginning of 2028 and possibly beyond.

Technology is a cyclical sector, however, and eventually there will be a downturn. We see good opportunities for the Asia tech companies we invest in on a five-year view, and we think that the next uplift for the tech sector will come partly from demand for humanoid robots.

Financials are the second-largest sector in our strategy, and we've been happy with the performance of the select stocks that we own. They are benefiting from a healthy demand for loans and low levels of credit risk.

Five countries

We are invested in just five countries (Taiwan, Australia, Singapore, India and South Korea). We think these five provide the best of both developed and emerging market opportunities.

It might surprise some people that equity markets in Australia and Taiwan have outperformed those in the US this century (2000 to 2026²) and that Singapore’s GDP per capita is higher than that of the US.³

US and Asia long term

The price to earnings multiple for Asia Pacific ex Japan equities is at a similar level to its average over the past 20 years. While not extremely cheap, the market is absolutely within a range that we're comfortable with.

In our view, the US and Asia are the best markets for investors over the long term. We’ve talked about risk because we think it’s prudent to do so, but we remain cautiously optimistic about the outlook for Asia Pacific (ex Japan) equities for the remainder of this year and going into 2027.

Footnotes

¹ FTSE All World Index of global large-cap and mid-cap equities gained 77% in the three years through August 2026. Source FTSE All World factsheet. 31.8.2026. Past performance does not predict future returns. 

²Australia equity market returned 1201% from 4.1.00 to 14.8.26 vs Taiwan +1057% vs US +805%,  in USD. Source: Bloomberg as at 14.8.26. Past performance does not predict future returns.

³Source: Bloomberg as at 14.8.26. Singapore $71,000 vs US $67,000, in USD.

Strategy risks

• Currency (FX) Risk - The strategy can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as well as rise.
• Pricing risk - Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
• Market Concentration Risk (Geographical Region/Country) - Investing in a particular country or geographic region can cause the value of this investment to rise or fall more relative to investments whose focus is spread more globally in nature.
• Market Concentration Risk (Single Name) - The strategy holds a relatively small number of stocks and may therefore be more exposed to underperformance of a particular company or group of companies compared to a portfolio that invests in a greater number of stocks.
• Derivative risk - the Strategy may use derivatives to reduce costs and/or the overall risk of the Strategy (this is also known as Efficient Portfolio Management or "EPM"). Derivatives involve a level of risk, however, for EPM they should not increase the overall riskiness of the Strategy.
• Emerging Markets Risk - Emerging markets are potentially associated with higher levels of political risk and lower levels of legal protection relative to developed markets. These attributes may negatively impact asset prices.
• Liquidity Risk (general) - During difficult market conditions there may not be enough investors to buy and sell certain investments. This may have an impact on the value of the strategy.
• Charges from capital - Some or all of the strategy’s charges are taken from capital. Should there not be sufficient capital growth in the Fund this may cause capital erosion.
• Stock Connect Risk - Stock Connect is governed by regulations which are subject to change. Trading limitations and restrictions on foreign ownership may constrain the strategy's ability to pursue its investment strategy.
• Default Risk - The risk of losses due to the default of a counterparty on a derivatives contract or a custodian that is safeguarding the strategy's assets.
• Default Risk - The strategy may invest a significant portion of its assets in distressed securities which have a higher risk of losses due to the increased likelihood of an issuer of securities defaulting on its obligations. While they may retain some potential value in the event of default, the recovery process may be lengthy and there may be no secondary market to exit causing a deterioration in liquidity.

Important Information

Marketing communication. This document is intended for investment professionals and is not for the use or benefit of other persons, including retail investors.  This document is information only and is not investment advice. The value of investments and income may go down as well as up and investors may not get back amounts originally invested. Exchange rate changes may cause the value of investments to fall as well as rise. The views expressed are those of the author(s) at the time of preparation, are not necessarily those of Jupiter as a whole and may be subject to change. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Past performance does not predict future returns. Holding/stock/company examples are for illustrative purposes only and are not a recommendation to buy or sell. Jupiter Asset Management Limited, registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority. Jupiter Asset Management International S.A. (JAMI), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg is authorised and regulated by the Commission de Surveillance du Secteur Financier.

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