Schroders global stated in a publication that by 2025, tariffs and a strong US dollar may impact Asia through the maintenance of high US interest rates for a longer period, leading to liquidity tightening in deficit markets. Export-oriented companies may face pressure due to tariffs. Additionally, given the significant capital expenditure on artificial intelligence, Schroders global believes that the market in 2025 will question whether a large amount of capital expenditure can be sustained without sufficient returns. Schroders global continues to believe that Asian stocks are an attractive asset class for investors in 2025 and believes that the themes described by the team can be achieved through a bottom-up stock selection strategy to identify high-quality companies. Overview of Asian stocks in 2024 The Asian stock market in 2024 experienced many different events. Driven by investments related to artificial intelligence (AI), Chinese and Taiwanese companies saw better profit growth, leading the region for the second consecutive year. India started strong but faced setbacks later on, including the Bharatiya Janata Party (BJP) failing to win a majority in the elections, leading to a slowdown in the local stock market and oversupply of stocks. On the other hand, mainland China faced deflation concerns and continued real estate market adjustments in the first three quarters of 2024, but significantly rebounded under the monetary and fiscal stimulus measures announced at the end of September. South Korea lagged behind due to a significant downgrade of its largest stock. The performance of ASEAN markets varied, with Singapore and Malaysia showing strong performance driven by strong banking sector profits, while Indonesia and the Philippines faced difficulties due to tightening monetary policies. Key Drivers of Asian Stocks in 2025 Schroders global believes that key issues that may dominate the Asian stock market in 2025 include: Trump 2.0: Considering the geopolitical situation, mainland China may further provide fiscal and monetary support. How China deals with its real estate industry, consumer confidence, and deflation pressure will play a key role in profitability and market performance. Prospects for capital expenditure investments in artificial intelligence: Despite strong revenues related to artificial intelligence and many Asian tech stocks hitting new highs, the market still lacks clarity on how cloud service providers will profit from consumer adoption of AI. India: Recent corporate profits and macroeconomic data show signs of slowing stock growth margins, with weather and election impacts also affecting performance. While Schroders global does not expect long-term slowdown, mass issuance of stocks and possible market reallocation may lower returns in certain industries and decrease stock returns. Most Attractive Potential Investment Opportunities The following are several sectors favored by Schroders global's Asian stocks team: Private banks with good liquidity profiles and benefiting from tight monetary policies. Schroders global particularly favors Indian private banks without problem unsecured loans, Singapore banks benefiting from international institutional frameworks, and Asian banks that have long reduced balance sheet risks and trade at low multiples. Overlooked Hong Kong stocks: Some Hong Kong companies are world-class operators and are gradually seeing positive capital return policies, which Schroders global believes will improve their undervaluation. Additionally, some tech stocks in mainland China are worth watching due to their market share. Schroders global is particularly bullish on stocks related to video games, music, and online travel platforms. Yields: Schroders global believes that with increased geopolitical uncertainty, emphasis on capital returns will be higher than ever before. Dividend payout ratio is closely related to corporate governance in Asia, and Schroders global believes that companies increasing their dividend payout ratio to return to shareholders are likely to perform well in 2025. Schroders global believes that in 2025, the market will reward disciplined, fundamentals-focused, bottom-up investors more than ever. Schroders global will continue to invest in companies with attractive long-term fundamentals and valuation upside, as they believe this is the key to creating lasting and stable returns for investors.