HSBC Asset Management highlights strong recent gains in Asia Pacific stocks excluding Japan and argues that regional fundamentals are now driving performance. The report cites macro reforms, derisked economies, resilient domestic demand and Asia’s central role in the global tech and AI supercycle. It concludes that Asian equities offer relatively inexpensive, diversified access to high-quality growth opportunities.

Asian stocks benefit from AI cycle

"Last year, Asia Pacific stocks (ex Japan) delivered a 32% gain in USD terms – their best annual performance since 2017. That was despite trade and geopolitical tensions, and global policy uncertainty. A weaker US dollar helped, as did lower-than-feared effective tariff rates, and a US-China trade truce."

"But this year, the region’s solid underlying fundamentals are taking centre stage. Macro reforms and derisked economies provide a strong structural backdrop. Meanwhile, the outlook for GDP and corporate profits looks positive, domestic demand has been resilient, and there has been progress on regional trade integration."

"Another factor is Asia’s role in the tech and AI supercycle. It is dominant in semiconductor manufacturing, particularly in Taiwan and South Korea, as well as software development – Asian countries are among the strongest global contributors to the GitHub code repository."

"India and southeast Asian economies, especially Singapore, Malaysia and Vietnam, are also part of the AI value chain, from assembly to data centres. And mainland China's tech innovation appears poised for strong policy-driven growth this year, with AI at the centre of the country’s economic and industrial plans, along with a focus on sectors like EVs, green energy, and advanced manufacturing."

"The outlook for Asia’s stocks is constructive, with markets offering a less expensive play on the AI trade, as well as broad sector diversification, and high-quality growth opportunities."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)