THE last few months of 2024 have proven that volatility will remain heightened as we step into 2025. While we expect global growth to plod along in the first half of next year, the second half could be largely influenced by developments in the US and China.
The uncertainty surrounding the policies from the incoming Trump administration and the sequence of their implementation add significant layers of unpredictability to the outlook. All eyes will also be on further stimulus measures from China – targeted and effective measures that lift consumer confidence and spending would be viewed positively.
Notwithstanding these factors, the “consensus” focus on the potential negative impact of tariffs between the US and other economies may run the risk of distorting the underlying picture of both trade and the domestic focus of a good proportion of stocks and bonds within Asia.
Asia is the world’s second most integrated trade region after the European Union, with nearly 57 per cent of its trade value originating within the region – an increase of 3 per cent over the past 20 years, in contrast to declines observed in other regions.
Trade between Asean and China grew by 8.1 per cent in early 2024, and bilateral economic relations are expected to remain robust with the signing of several agreements, including the Regional Comprehensive Economic Partnership and the Asean-China Free Trade Agreement 3.0.
Yet, many stocks across Asian markets in the consumer discretionary, finance and industrials sectors – which derive nearly all their revenues and earnings from their domestic economies – are being penalised by a “risk-off trade” towards Asia.
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