Asian Stocks Gain Traction: Japan & China Lead Market Performance
Asian stocks are gaining traction, with Japan and China emerging as top contenders for leading market performance. A third of respondents favor each country, drawn by attractive risk-reward profiles and lower valuations compared to US stocks.
The MSCI Asia Pacific Index has surged by 22% this year, outpacing the S&P 500's 14% gain. Asian stocks trade at 16 times earnings forecasts, significantly lower than the S&P 500's 23 times. This disparity presents an opportunity for investors to shift exposure from the US to Asia.
Market strategists anticipate Asian stocks to continue their outperformance in the fourth quarter, boosted by easing US-China trade tensions and expectations of US rate cuts. More than two-thirds of respondents expect this trend to persist. The upcoming fourth plenum in China is also expected to provide clarity on the next five-year plan, potentially signaling a shift in political priorities.
Looking ahead to Q4 2025, South Korea (KRW) and the Philippines (PHP) are tipped to lead Asian countries in the global stock market. Favorable macroeconomic conditions, expected policy support, and specific index inclusions contribute to their promising outlook. While China's currency (CNY) shows appreciation bias from policy easing, its growth is slowing but still targeted near 5% GDP growth. Indonesia (IDR), however, faces political and fiscal uncertainties limiting its outlook.
If optimistic forecasts materialize, Asia could initiate a realignment of global stock market leadership. The region's attractive valuations, strong performance, and favorable conditions in key countries make a compelling case for increased investment in Asian stocks.
