Is the investment focus shifting to the East? Asian stocks outperform Europe and the US for the first time in five years, while bond markets are also gaining momentum!

The Asian market is "waking up" - this year, the region's stock market performance is surpassing that of Europe and the United States, while the credit market is strong, local currencies are continuing to strengthen, and many investors expect this momentum to continue until 2026. Market data shows that the MSCI Asia Pacific Index, measured in US dollars, has a total return rate of 27% this year, including dividends. This is the first time since 2020 that the Asia-Pacific stock markets have outperformed European and American benchmark indices in a year. The recovery in financial markets reflects the increasing attractiveness of Asia to investors seeking faster growth, amidst the slowdown in the European and American economies. The weakening US dollar has made ACR HOLDINGS more attractive, while the region's deep connections with the technology sector shaping the global economy have further enhanced its investment value. Hebe Chen, senior market analyst at Vantage Global Prime Pty, pointed out, "The outstanding performance of the Asian market is not only a cyclical rebound, but also reflects the convergence of global growth policy trends, laying a solid foundation for the region to move towards 2026. Although the US still dominates the high end of the technology industry chain, Asia - especially China, South Korea, and Japan, has now firmly occupied key segments of the artificial intelligence value chain, often without the overvaluation pressure seen in US stocks." In terms of market distribution, the breadth of the current Asian stock market rally is particularly significant. Japan, South Korea, and China have all recorded double-digit gains this year. Among them, the KOSPI index in South Korea surged by 71%, becoming one of the best-performing major markets globally. In China, the stock market is heading towards its strongest annual performance since 2020, driven by the AI boom. Market interest in Chinese technology stocks has been reignited by the narrative sparked by DeepSeek's AI. Jonathan Armitage, Chief Investment Officer of Colonial First State, stated that the renewed focus on Chinese technology stocks has increased the fund's outlook for emerging market stocks until 2026. Of course, this wave of gains is also accompanied by risks. The economic recovery processes of the major Asian economies are not balanced, and a strengthening US dollar could harm the returns of foreign investors. The market is also concerned that the rise in AI-related technology stocks has become overcrowded, and if growth slows down or market sentiment reverses, stock prices could come under pressure. However, some investors believe that these risks will not change the overall trend. The across-the-board rise in the region's asset classes is seen as the initial stage of a longer revaluation cycle - as growth prospects improve, market valuations will gradually increase. Chen of Vantage Global said, "Asia has a more robust and diverse growth engine than Europe and the US. 2025 is more like the starting point of a longer revaluation cycle for Asia, rather than the peak of growth." Investor interest is also expanding beyond major markets - for example, the Vietnamese stock market is becoming a new favorite for many investors. The country's stock market has already risen by about 38% this year, with some investors believing that the uptrend will continue. Nick Ferres, Chief Investment Officer of Vantage Point Asset Management in Singapore, said, "We are most bullish on the Vietnamese market, as its valuation and growth characteristics are extremely attractive." Bond and currency markets are also picking up momentum. From the perspective of the forex market, the weakening of the US dollar has also increased the attractiveness of local markets to USD investors, with most Asian currencies strengthening. The offshore renminbi exchange rate is currently approaching a year-high, while the Australian dollar and New Zealand dollar are strengthening due to traders beginning to price in tighter monetary policies. At the same time, the Malaysian ringgit and Thai baht have seen gains of almost 10% this year. Wee Khoon Chong, senior strategist for the Asia-Pacific market at BNY Mellon, said, "Despite tariff issues causing volatility, the overall performance of Asian foreign exchange markets is good. The weak US dollar, regional trade resilience, and the optimistic sentiment driven by AI are benefiting Asia this year, and are expected to continue until 2026." This optimism has also spread to the corporate bond market. The performance of the Asian investment-grade bond index in USD this year is better than that of a similar index in the US, and is expected to achieve the largest annual gain since 2019. Currently, the spread is slightly higher than the historic low hit in November, while the high-yield bond spread remains near a seven-year low touched in September. Omar Slim, Co-Head of Asian Fixed Income Investments at PineBridge, said, "The quality of credit assets in the current (Asian) market is high, especially investment-grade bonds, which are supported by strong fundamentals." Slim pointed out that defaults in most Asian regions are rare, and bond issuances are "under control and are increasingly sought after by growing pools of funds."