Five countries stand out for Asia income

Global equity markets including the Asia Pacific (ex-Japan) region have performed well over the last three years, and we can't say valuations are cheap at the moment. Given this recent performance, it may be prudent to expect more moderate absolute returns from equities next year. 

However, we think that interest rates have further to fall, and this should be a tailwind for markets, including those in Asia. The US Federal Reserve (Fed) has made two cuts this year and will consider another in December. President Trump will appoint the next Fed chair, who will take over in May and face pressure from the White House to keep rates low.

This should make it easier for central banks in Asia to reduce rates, especially as there's less inflation pressure in Asia. Another tailwind for Asian markets is a weaker US dollar, with the dollar index, which measures the currency against others, down 9% so far this year.¹ The macroeconomic environment is a key driver of how we build our investment portfolio, but ultimately, we are stock pickers. We consider a myriad of information, such as political systems, geopolitics, bond yields and global economic forces to help us decide which countries and sectors we want more or less exposure to, as well as those areas we want to avoid investing in.

Five countries 

Taiwan, Australia and Singapore are where we see the best opportunities in the region, followed by India and South Korea. We believe these five countries offer the best of developed and emerging markets.

We sold our last Hong Kong holding in September, and we stopped investing in mainland China in 2022. This sets us apart from many investors in the region, but we are comfortable because we expect US-China trade and geopolitical relations with the West to worsen in the next few years and over the longer term, notwithstanding the limited agreement reached by President Xi and President Trump on Oct. 30.

President Trump’s tour of Asia last month included stops in Japan, South Korea and Malaysia, and resulted in progress on trade and a reduction in some US tariffs to varying degrees across the region in exchange for a reduction in import and non-tariff barriers on US exports.

Growth and value

As stock pickers, we look for companies offering a combination of growth and value – businesses that will grow their earnings and therefore be able to deliver growing dividend streams. These companies must also be reasonably priced and have a strong balance sheet and good governance.

We think Asia is well placed to benefit from global secular trends. We continue to see that one of the most dynamic sectors in Asia, as in the US, is technology, where there’s a long-term structural growth story around AI.

The technology companies we invest in, mostly  based in Taiwan and Korea, are key parts of the supply chains of the US technology giants known as the Magnificent Seven (including Nvidia, Apple, Microsoft). These Asian companies are the enablers of AI, in our view. Taiwan’s recent exports highlight the tech demand trend – the island’s exports rose in August by 34% YoY to a record $58.5 billion, according to the country’s Ministry of Finance, driven by AI chip demand.²

Beyond tech

We also see opportunities outside of technology. We think gold mining stocks are a sensible way to gain exposure to the precious metal at a time when macro-economic trends are supportive. Money supply is rising, the Fed is cutting rates and real interest rates are trending lower, all of which should support gold. Gold prices have been volatile recently, but that is to be expected.

We also own consumer staples companies, financials and a defense company. We see these as good companies in good sectors and which provide additional diversification. We have a balance of companies exposed to US and global demand as well as companies selling products and services to domestic consumers in India, Southeast Asia and Australia, where demand should be resilient even if we do see a period of slower economic growth globally.

Some market commentators have raised concerns about US technology company valuations and market dominance, and about weakness in the private credit market. For us, periods of market and macroeconomic uncertainty underscore the importance of following a robust investment process with a long-term investment horizon and a well-diversified portfolio.

We are cautiously optimistic that equities in the region will continue to offer good opportunities for investors over the medium and long term. We also are expecting to see good earnings and dividend growth from the companies we own.

Footnotes 

¹Bloomberg, as at 28.10.25

²Bloomberg, as at 9.9.25

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