We approach 2026 with a confident view on Asian markets, following a year in which the region delivered strong absolute returns. The backdrop in 2025 was shaped by several powerful forces: a vigorous technology upcycle fuelled by sizeable AI-related investment in the US; China’s dramatic shift from being seen as almost uninvestable to becoming one of the standout opportunities worldwide; and a pronounced rebound in South Korea, supported not only by the memory-chip cycle but also by renewed momentum behind corporate governance improvements promoted through the Value-up Program.

As we move into 2026, many of the dynamics underpinning North Asia’s performance appear durable. Low starting valuations combined with modest growth levels leave room for further rerating across key markets, in our view. At the same time, we expect economic slowdowns in India and the ASEAN bloc to have largely run their course, with several markets now offering appealing valuation entry points after significantly trailing the broader region through 2025.

Low starting valuations combined with modest growth levels leave room for further rerating across key markets, in our view.

Taken together, these factors suggest a supportive macro and market environment across much of Asia. Investors also seem increasingly accustomed to what were once considered extreme risks – particularly around tariffs and geopolitical tensions – which are now effectively embedded into the investment landscape as part of the ‘new normal’.

Earnings prospects across the region remain healthy, and Asia continues to trade at a pronounced discount to the US on a risk-adjusted basis. Currency trends may further enhance returns if, as we expect, the US dollar resumes a weaker trajectory. In addition, monetary policy across several Asian economies has shifted towards easing and, although policy works with a delay, these actions could begin to lift growth meaningfully over the next year.

That said, there are three key uncertainties that could challenge this constructive outlook:

  1. The possibility that US AI-related capital spending enters bubble territory
  2. A sharper-than-expected US economic slowdown or potential recession
  3. Escalating geopolitical frictions, particularly those tied to the US/China rivalry in trade and technology