APAC equities stayed fairly resilient throughout this year as the trade uncertainty, ongoing political shifts, and the acceleration of AI continued to impact regional markets. The key driver was a strong AI-led rise in tech and semiconductor stocks, helping cushion wider volatility. As the new year now steadily approaches, contrasting monetary paths and renewed tariff risks indicate yet another period of sharp yet opportunity-filled market movements, according to GlobalData, a data analytics and research company.
Murthy Grandhi, Company Profiles Analyst at GlobalData, comments:
“Across 2025, APAC stocks were propelled by both cyclical and structural trends. Early in the year, the return of Donald Trump to the US presidency rattled investor sentiment as prospects of increased tariffs on Chinese exports once again dominated headlines. This triggered a renewed wave of caution among export-reliant Asian economies and sent ripples through supply chains.
They added that strategic late-year trade talks, culminating in a temporary one-year truce between Washington and Beijing to “defer steeper tariffs and relax Chinese controls on rare earth minerals, breathed optimism into the markets, benefiting Korea and Taiwan’s semiconductor sectors.”
Growth stocks surged, with the MSCI Asia ex-Japan Index climbing “4.5% in October, while Japan’s equity market stood out as Sanae Takaichi’s rise to the premiership signaled aggressive fiscal expansion in sync with ‘Abenomics’ policies.”
Southeast Asia and India became the region’s catalysts for growth, capitalizing on “supply chain diversification and foreign investment shifts away from China.”
IMF now forecasts average real GDP growth of 4.3% for Southeast Asia’s core economies and a “6.6% for India, buoyed by labor forces and maturing infrastructure.”
As the Chinese mainland battles overcapacity and fading real estate momentum, its GDP growth rate moderated to “4.8% for 2025, below the levels that once anchored regional expansion.”
However, Beijing kept monetary policy accommodative, “hoping to cushion risks and inject liquidity, with effects felt in asset prices and cross-border flows.”
Grandhi adds:
“Monetary policy in Asia-Pacific was marked by divergence. Central banks in much of the region leaned toward caution, eyeing gradual rate cuts to revive growth while managing inflationary pressures from potential trade disruptions. Japan, however, seized the spotlight for its hawkish pivot.”
They also mentioned that with core inflation hitting multi-year highs, the Bank of Japan has now enacted “two rate hikes, setting expectations for its policy rate to touch 1.0% by end-2026.”
The resulting stronger yen and positive momentum for Japanese equities attracted “yield-hungry global investors, reshaping intra-regional capital allocation.”
A defining macro trend was the AI boom, which “reshuffled sectoral winners. Growth and technology stocks in APAC outperformed, especially for economies closely tied to the global electronics value chain—South Korea, Taiwan, and to some extent Singapore and Japan.”
This enthusiasm for AI and data-centric business models had been offset the drag on rate-sensitive sectors “like small caps and real estate, which faced headwinds from tightening global financial conditions.”
Geopolitically, APAC found itself recalibrating alignments in 2025. ASEAN states surged to assert more “strategic independence amid Washington-Beijing rivalry; new trade pacts and bilateral deals sought to insulate economies against external shocks.”
Political transitions—from Japan’s first female prime minister “to landmark elections and US policy pivots—further shaped sentiment, making diversification and regional playbooks ever more critical.”
Grandhi continued:
“As 2026 approaches, APAC markets stand at a precarious inflection point. Japan and South Korea look set to carry their momentum as long as AI infrastructure spending remains unbroken. India should see steadier performance than 2025 if global demand stabilizes and domestic earnings broaden.”
They concluded that China now remains the primary “swing factor, [and] any credible progress on stabilizing consumption, property and private investment could re-rate the region’s laggard.”
However, the ongoing tariff negotiations, political transitions as well as supply-chain reconfiguration ensure that “volatility will be higher, not lower.”
