Taiwan leads Asian stocks in 2024 – Trump tariffs, cloud outlook for Chinese economy
An Nvidia chip during the Taipei Computex exhibition on May 29, 2023 in Taipei, Taiwan.
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Asia-Pacific stocks performed well in 2024, with most major markets ending the year in positive territory as the region’s central banks eased monetary policy while an artificial intelligence boom lifted tech stocks.
of Taiwan Taix It led the region’s gains, up 28.85% as of Dec. 23, while Hong Kong Hang Seng Index It ranked second with 16.63 percent.
Asia successfully reduced inflation faster than the rest of the worldMike Shiao, former chief investment officer for Japan Asia at investment management firm Invesco, said monetary easing was on the way.
“With the Federal Reserve now beginning a period of easing, Asian countries will have more room to cut interest rates in 2025,” he noted. Easier monetary policy tends to boost stocks.
The market’s focus on tech and tech-related stocks helped lift Taiex. Heavy weights Taiwan Semiconductor Manufacturing Company 82.12% increase in 2024 and Foxconn, the main supplier of Apple Hon Hai Precision Industry 77.51% developed.
At this time Demand for AI data centers and servers may moderate After strong growth this year, demand for AI-powered mobile phones, PCs and other consumer electronics could increase in 2025, according to a DBS Bank forecast note.
DBS noted that the global semiconductor sector typically experiences an expansion period that lasts about 30 months. The current cycle, which started in September 2023, has the potential to extend until the end of 2025.
While tech stocks helped lift Taiwan, they failed to rescue South Korea, the only major Asian market to end the year in negative territory. The country’s “Corporate Value Enhancement Program” tariff fears and political turmoil increases uncertainty.
It is the standard of the country Kospi As of December 23, it lost 8.03%, making it the worst performer in the Asian market.
Paul Kim, head of equities at Eastspring Investments, said in the firm’s 2025 forecast that major economies, particularly the US and China, will have a major impact on South Korea’s export-led economy.
“Major exporters such as IT equipment and automobile players may face problems,” he said.
The impeachment of President Yoon Suk Yeol is sure to weigh on investor sentiment, Morningstar Asia director of equity research Lorraine Tan told CNBC earlier this year that “the longer a leadership change takes, the more likely investors are to walk away.” .
Kim also said the government will play a key role in the country’s markets, noting that potential reforms in corporate regulations, fiscal stimulus measures and the possibility of a future rate cut by the Bank of Korea could help the business environment and stimulate domestic demand.
Outlook 2025
According to George Maris, chief investment officer and global head of equities at Principal Asset Management, the two main areas on investors’ minds in 2025 will be Donald Trump’s presidency and the state of China’s economy.
According to Nomura, the policies of the incoming Trump administration will likely drive the growth and inflation forecast in Asia in 2025.. “We expect an increase in tariffs early next year, which leads to an increase in inflation and a slowdown in investment growth.”
High tariffs and trade barriers will mean weaker exports from Asia, Nomura said. Increased uncertainty and stringent response measures could delay business investment in the region.
Manufacturing and trade-dependent economies such as those in Asia will be more adversely affected as “tariffs reduce trade flows and put downward pressure on growth,” said Freida Tay, institutional fixed income portfolio manager at global investment manager MFS Investment. Management informed CNBC about this.
Nomura predicts that Asia will also have to manage tighter global financial conditions in 2025 due to higher interest rates and a stronger dollar.
The US Federal Reserve at its last meeting in 2024 indicated that interest rate cuts will be less Raised inflation forecasts in 2025.
Nomura said it sees “other monetary policy prospects” in the region, with countries more exposed to currency risks such as China, Australia, South Korea and Indonesia expected to see monetary policy easing in 2025.
Easy monetary policy typically weakens a country’s currency, making exports cheaper and potentially supporting growth in the face of tariffs.
On the other hand, countries like Japan and Malaysia with “strong growth, high inflation and still favorable monetary conditions” will raise interest rates.
In general, 2025 comes with a lot of uncertainty, according to experts.
While strong AI demand and export front-loading should provide some growth support in the first quarter, Nomura analysts write that it is “tumultuous” for the region from the second quarter onwards, pointing to the region’s “heading into rougher seas”. Impact of Trump’s presidency, China’s overpowering and semiconductor slowdown.
However, the company sees growth performance in Asian economies where domestic demand buffers are stronger, such as Malaysia and the Philippines, while India, Thailand and South Korea will face headwinds.
China: challenges and opportunities
The state of China’s economy will also be a key focus for Asian investors, Maris said, with traders expecting a “meaningful commitment to sustained growth” in Asia’s second-largest economy.
China’s stock markets snapped a three-year losing streak in 2024, with the CSI 300 gaining 14.64% as Beijing focuses on boosting its economy.
Nomura analysts expect more stimulus from China to support its economy, while stressing that Beijing needs to stabilize its struggling property market, fix its financial system, strengthen social welfare support and ease geopolitical tensions to “achieve a real, sustainable recovery.” .”
“This is a tall order at a time when China’s exports, the largest contributor to growth in 2024, could face headwinds after Trump’s return. Although Beijing may stick to its target of “around 5%” GDP growth, we expect growth to slow in 2024. from 4.8% per year to 4.0% in 2025,” Nomura said.
Maris sees an opportunity in the world’s second largest economy. He takes a “constructive” approach to companies exposed to Chinese consumers.
These companies often trade at attractive valuations “given the preponderance of negative sentiment,” he said, but if government stimulus materializes, these companies are likely to benefit from increased demand.
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