Schroder's 2025 Outlook for the Asian Market: Positive Views on Stocks and Credit, Prefers Companies with Stronger Pricing Power.

Despite the challenges in 2024, most categories of ACR HOLDINGS saw growth during the year, benefiting from strong corporate profits, the Fed's rate cuts, and the fiscal stimulus measures announced by China at the end of September. Looking ahead to 2025, Schroders global remains positive on Asia. In the past 5 to 7 years, many companies have diversified their supply chains due to trade tariffs, which should enable them to better navigate the market environment. Schroders global still favors local Asian companies. For exporters, Schroders global prefers companies with stronger pricing power, whether through their competitive advantages (such as strong intellectual property, superior technology) or a lack of alternatives to US products. Schroders global also maintains a positive view on the Asian credit markets, based on investors' continued demand for attractive total returns, moderate supply, and improving credit fundamentals. Schroders global believes that the US economy, interest rate policies, and Asian corporate earnings will continue to drive the development of the Asian investment market in 2025 and has identified three key themes as a result. Focus on local economies across Asia Strong demand from consumers across Asia reduces dependence on global markets and mitigates the potential impact of US import tariffs. Countries like India, Indonesia, Malaysia, and Thailand have favorable demographics to support local consumption. Additionally, for investors targeting income and growth, Singapore's real estate investment trusts (REITs) are attractive due to the resilience of the local economy driving sustained demand for real estate and further enhancing rental income and property appreciation. Meanwhile, banks in Taiwan and South Korea also offer attractive dividend yields and benefit from strong trade relationships with major economies such as mainland China, the US, and Japan. These banks can also leverage favorable trends in the Asian economy and investment flows. World-class leaders in the digital age Many companies in Asia are market leaders with resilient profit growth. For example, the semiconductor industry in Taiwan is a major beneficiary of the rise of artificial intelligence (AI) applications. Ongoing research and development investments enable Taiwanese semiconductor companies to maintain their competitive advantage and adapt to changes in the market environment. Companies exporting globally in electric vehicle battery manufacturing and machinery are important drivers of technological progress and economic growth. Benefiting sectors from rate cuts The Fed is expected to further cut rates to address inflation risks, albeit at a slower pace. Lower interest rates can stimulate consumer spending on non-essential goods and services (such as retail, entertainment, tourism). Utilities are also expected to benefit from rate cuts as they are capital-intensive industries that typically rely on debt financing. Technology companies often make significant investments in research and development and capital projects, so rate cuts can help reduce their financing costs and stimulate innovation. Schroders global will continue to closely monitor developments in the regional investment markets and policies. More importantly, the impact of Trump's policies will take some time to manifest, and Schroders global will adapt flexibly according to the circumstances.