Uncertainties and volatility will likely continue to plague global markets in the months, or even years, ahead despite strong returns thus far in 2025, according to leading asset managers in Asia.
Their outlook is tied to geopolitical risks surrounding the US-China trade war and the erratic trade policies of US President Donald Trump, such as the wide ranging “Liberation Day” tariffs he announced in April that sparked a global market sell-off.
Asset managers, including Eddy Wong, chief executive officer of Asia at France’s Amundi Asset Management, shared their perspectives during a panel discussion at the Asia Securities Industry & Financial Markets Association asset management conference in Singapore on October 23.
Wong pointed out that even though US-China trade tensions appear to be under control now, there is no telling whether there will be another escalation. He urged investors to invest with an eye on the long term.
“Stay invested if you have a 30-year investment horizon. But if you have, like, three months…I have no idea what you are going to do,” he said.
“Granular” approach
According to Wong, US market valuations are “high” and volatility is likely to remain under the Trump administration.
“Whether or not the US market is already pricing at perfection is something we should keep an eye on. If it is, any kind of blip would actually trigger a market correction,” he added.
Investors haven’t exited the US market because it’s the largest in the world, but the Liberation Day tariffs have compelled them to think about diversifying some of their investment allocations elsewhere, according to Daisy Ho, chief executive officer for Asia and the Middle East at HSBC Asset Management.
Investors “need to be taking a much more granular approach in terms of location”, she said.
She pointed to Japan which was once considered a standalone market in Asia, underscored by the Asia ex-Japan theme. But Japan began to be viewed as part of Asia during the last two decades when its economy stagnated and its development became more on par with the rest of the region.
“However, recently, we have been hearing investors going back to [viewing] Japan as a standalone again. This is one sign of the more granular approach in terms of looking into [investing] by country, by markets, and then by sector,” Ho explained.
Strong gains
US stock indices have posted double-digit gains thus far this year, with the S&P 500, Dow Jones Index and the Nasdaq Composite rising around 15%, 10% and 20%, respectively.
Markets in Asia have generally posted even stronger gains. Benchmark stock market indices in Japan and South Korea are up 23% and 64%, respectively. Hong Kong’s stock index has jumped 30% and in Singapore, the key index is up 16%.
Given how big the US market is, even if a small portion of funds diversify into Asian markets, the amounts can be substantial, according to Yao Loong Ng, head of equities at the Singapore Exchange Group.
A typical global portfolio has around 70% weighting in US stocks.
Ng said the weighting will probably have to drop around five percentage points if investors hold a neutral view of developed markets, including the US, for the longer term. Such a drop will translate into significant inflow of capital into other markets.
“I don’t think people have massively reallocated away from the US, [only] at the margins. And actually, that does have an impact on the size of our markets [in Asia] because we are small relative to the US,” he said.
