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Asia is back on top. The region\u2019s stock markets have beaten the US and Europe this year, credit markets are strong, currencies are strengthening, and investors expect the momentum to carry into 2026.<\/p>\n
In dollar terms, the MSCI Asia Pacific Index of the region\u2019s equities is up 27% this year including dividends. It\u2019s also the first time since 2020 that Asian shares have outpaced both US and European benchmarks in the same year.<\/p>\n
Read:
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Billionaire Cheng family seeks sale of London Rosewood as pressures mount<\/p>\n
The resurgence reflects Asia\u2019s expanding appeal to investors seeking faster growth than the US and Europe.<\/p>\n
\nA weaker dollar has made Asian assets more attractive, while the region\u2019s deep links to the technologies shaping the global economy have strengthened the investment case.<\/p>\n<\/blockquote>\n
\u201cAsia\u2019s outstanding performance isn\u2019t just a cyclical bounce \u2014 it reflects where global growth and policy momentum are converging, giving the region a credible runway into 2026,\u201d said Hebe Chen, senior market analyst at Vantage Global Prime Pty.<\/p>\n
\u201cWhile the US still dominates the top end of the tech stack, Asia \u2014 especially China, Taiwan, Korea, and Japan \u2014 now anchors critical parts of the AI value chain, often without US-style valuation strain.\u201d<\/p>\n
The rally\u2019s breadth is striking. Japan, South Korea, Taiwan and China have all posted double-digit gains this year.<\/p>\n
\nSouth Korea\u2019s Kospi index alone has climbed 71%, making it one of the top-performing major markets globally.<\/p>\n
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In China, stocks are heading for their strongest year since 2020, driven by the excitement around artificial intelligence. DeepSeek\u2019s AI advances have helped revive interest in Chinese technology, an area that had been heavily discounted after years of regulatory pressure.<\/p>\n
Jonathan Armitage, chief investment officer for Australia-based Colonial First State, said the renewed focus on Chinese tech has strengthened the money manager\u2019s outlook for emerging-market stocks into 2026.<\/p>\n
Possible risks<\/strong><\/p>\n
To be sure, the rally comes with risks. China\u2019s economic recovery has been uneven and any renewed strength in the dollar could hurt returns for foreign investors.<\/p>\n
There\u2019s also concern that the rally in AI-related tech stocks is getting crowded, which may leave prices vulnerable if growth slows or sentiment flips.<\/p>\n
\nEven so, some investors say those risks don\u2019t change the broader story. The region\u2019s cross-asset rally is seen as the early stage of a longer re-rating \u2014 a period when markets are valued more highly as growth prospects improve.<\/p>\n<\/blockquote>\n
\u201cWith a hotter and more diverse growth engine than the US or Europe, 2025 looks less like a peak for Asia and more like the early stage of a longer re-rating cycle,\u201d Vantage Global\u2019s Chen said.<\/p>\n
Investor interest is spreading beyond the biggest markets, with Vietnam emerging as a favorite. Stocks there are up about 38% this year, and some investors say the rally could extend.<\/p>\n
\u201cWe are most bullish on Vietnam, which has attractive value and growth characteristics,\u201d said Nick Ferres, chief investment officer for Vantage Point Asset Management in Singapore.<\/p>\n
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FX, Credit<\/strong><\/p>\n
A weakening greenback has boosted the value of Asian assets for dollar-based investors, making returns look more attractive just as most Asian currencies are strengthening.<\/p>\n
China\u2019s offshore yuan is trading close to its strongest level in more than a year, and the Australian and New Zealand dollars have advanced as traders begin to price in tighter monetary policy. Meanwhile, the Malaysian ringgit and Thai baht are close to a 10% gain.<\/p>\n
\u201cDespite the volatility surrounding tariffs, Asia FX \u2014 including the Australian dollar \u2014 have done well broadly,\u201d said Wee Khoon Chong, a senior Asia-Pacific market strategist at BNY.<\/p>\n
\u201cThe weak US dollar, resilient regional trade growth and the AI-led optimism has benefited Asia this year and likely to continue into 2026.\u201d<\/p>\n
The bullish mood extends to corporate debt. An index of Asia\u2019s dollar-based investment-grade debt has beaten its US counterpart and is on track for its biggest year gain since 2019. Spreads are slightly above the record lows hit in November, while high-yield spreads have held near a seven-year low reached in September.<\/p>\n
\u201cWe\u2019re talking about a high credit quality market, particularly when it comes to investment grade, which is backed by strong fundamentals,\u201d said Omar Slim, co-head of Asia fixed income at PineBridge Investments.<\/p>\n
Outside of China, defaults have been minimal, while issuance \u201cis under control and being sought after by a growing money pool,\u201d Slim said.<\/p>\n
\u00a9\u00a02025\u00a0Bloomberg<\/p>\n
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