Differing macro outlooks and trade risks in APAC: What to watch?

Over the last three months, the direction of monetary policy continued to diverge in APAC as growth outlooks differed. Most central banks in the region have eased their monetary policy over the last 6 months, with Korea, Indonesia and Philippines easing further in the last 3 months. However, Australia, Taiwan and Malaysia have kept rates on hold, while the Bank of Japan hiked in January for the first time since July 2024. With the new Trump administration, US-China trade tensions raised uncertainty for the economic outlooks for the region. • Global trade uncertainty: Uncertainty around US trade policy not only affects China’s economy but also increases risks to growth in economies with higher export exposures such as Singapore, Malaysia, Thailand, Taiwan and Korea. That said, the risks can be either to the upside or downside according to historical experience. • Fixed Income: Resilient global growth data and concerns around stickier-than-expected inflation caused bond yields to rise, weighing on returns. Government bond returns in the region were strongest in Thailand and China, while government bond spreads to US treasuries narrowed across the board. • Equity markets: Singapore, Taiwan and Japan were the only three markets with positive returns. With markets expecting the new Trump administration to lead to higher inflation and hence higher interest rate environment in the US, Financials in Singapore as a result outperformed. BoJ rate hikes also benefit Japan’s Financials stocks. Taiwan’s Tech industries remained strong with solid AI demand. China and Hong Kong fell as the boost from stimulus diminished while US-China trade tensions raised uncertainty. Throughout the discussion, our presenters will draw upon key findings from our APAC Financial Markets Spotlight Market Maps report, published shortly before this webinar.