Year Ahead 2026: Asia Multi-Asset
Geopolitical and fiscal risks during US President Trump’s second term, alongside a weaker US dollar, led investors to favour Asia, where corporate reforms and the AI-driven boom in semiconductors and related sectors spurred confidence and investment.
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Asia markets in 2025:
US President Trump’s second term has been marked with geopolitical and fiscal risks. Investors have thus been redeploying capital to relatively attractive and less volatile opportunities in Asia.
The additional weakening of the US dollar and dovish sentiment from the US Federal Reserve have also contributed to a more positive sentiment here.
Separately, key Asian markets like Mainland China, South Korea, and Japan have benefited from corporate reform campaigns, fueling domestic demand and investor confidence.
The AI boom continued, led by semiconductor firms in Taiwan and South Korea. Related sectors like communications and automation also gained from ongoing investment in related technologies.
Key themes expected to drive Asia markets in 2026
We see two key potential themes at play in Asia in 2026:
- Firstly, we expect enthusiasm around AI to continue and to be a key growth driver in Asia. AI capex in Asia has outpaced the US and Europe in recent years, a trend likely to continue into 2026 due to favourable demographics and greater technological adoption. “AI enablers” and “AI adopters” are also diverse across the Asia region, contributing to broad market strength. However, concerns are emerging over sector concentration and capital expenditure that is increasingly debt-funded, raising questions over earnings sustainability.
- Secondly, the US Federal Reserve’s signal to end quantitative tightening by December is expected to boost global liquidity, making it easier for Asian central banks to lower interest rates. This environment should support sentiment for Asian equities and fixed income, especially interest rate sensitive sectors.
Key opportunities we see for Asian investors in 2026?
We see several attractive opportunities for Asian investors in 2026.
- AI’s growing influence here drives our conviction in the region’s technology sector, with PwC forecasting an annual compounded growth rate of 8.8% for global semiconductor demand from 2024 to 2030. Relative valuations are also attractive, with a significant Price-to-Earnings ratio gap favouring Asia ex-Japan technology versus US technology.
- Amid ongoing uncertainty, gold is even more important as a portfolio diversifier. Central Banks, alongside Chinese retail investors, continue to support gold demand.
- Lastly, US equities remain attractive due to strong earnings, and after downgrades to Earnings Per Share (EPS) growth expectations post-Liberation Day, there is potential for upside surprises. The likely backdrop of a dovish monetary environment and AI enthusiasm also support attractive growth expectations in US equities.
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