CAN ASIAN EQUITIES CONTINUE TO PERFORM?
October 14, 2025 10:00 am Leave your thoughts14.10.2025 Asian equities have performed strongly this year. With signs of stabilization in the Chinese housing market we look at whether this trend is likely to continue.
Despite all the noise around tariffs Asian equities have performed strongly this year registering a double-digit gain in GBP terms. Below we look at whether this is likely to continue.
A lot of the volatility in Asian equity markets has been caused by US tariff policies. ‘Liberation day’ and the subsequent escalation in Sino-American tariff rates prompted a big sell-off in Asian markets. However, the subsequent revision of these rates in recent months has allowed the Asian equities ex Japan sector to register a 16% gain for the year in GBP terms.
Whilst China now faces an effective average tariff rate of around 57% this is a lot more manageable than it seems at first glance. Ever since US import tariffs became a feature of the trade landscape manufacturers in China have used increasingly sophisticated strategies to circumvent the headline tariffs that they face. One of the main work arounds has been exporting components to a third country with a low tariff rate for final assembly. In Asia Vietnam and Thailand were common destinations, while in central America Mexico was often a favoured destination. With Vietnam and Thailand facing a comparatively low 20% US import tariff this work around is only likely to increase.
The other big macro factor that has hurt Asian equities has been the down turn in the Chinese housing market. This began in 2021 and has damaged business and consumer confidence as much of Chinese consumers’ wealth was invested in the housing market. Additionally, it has led to anemic growth in recent years as property construction accounted for about 30% of economic growth. However, in recent months there have been some signs of stabilization with prices of properties in the most prestigious cities starting to rise slightly. Whilst a full-scale recovery is unlikely, due to a still large inventory overhang, the drag from the property sector on economic growth seems likely to fade over time.
Asian equities currently trade on a record 40% discount to US equities on price to profits ratios. However, with both Trump’s tariffs and the down turn in the Chinese housing market arguably in the price they represent an interesting contrarian investment opportunity.
For information only. Investors should seek professional advice for their own circumstances before making an investment.
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This post was written by Robin