Investing in Asia Pacific

The Asia-Pacific region is experiencing a 'Silicon rally' driven by AI hardware demand, which is offsetting economic headwinds from the Iran war and high oil prices. While North Asian markets lead, the rally is expected to broaden toward laggards as energy flows stabilize.

Key Takeaways

• 1.North Asia's technology sector is driving an earnings boom, with MSCI Asia ex-Japan forecasted to deliver 62% earnings growth this year.
• 2.The region is bifurcated: AI beneficiaries (South Korea, Taiwan) are rallying, while energy-importing South Asian markets (India, Philippines) face headwinds from the Iran war.
• 3.Asia High Yield has been upgraded to Attractive as the market has emerged from the China property default cycle and offers high carry.

Table of Contents

• Silicon rally
• Yielding to headwinds
• Japan's new normal
• How should investors position?
• Asia's equity rally has been powered by a handful of markets benefiting from strong AI tailwinds
• China tech valuations remain appealing amid strong earnings growth and monetization prospects
• Earnings growth outlook for the region is solid
• The Asia-Pacific region has remained resilient despite elevated oil prices and ongoing geopolitical tensions
• Japanese equities have rallied 12% this year yet are still positioned for further upside
• Asset allocation
• Messages in focus
• APAC economic forecasts
• APAC currencies versus the USD

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