In our Star Rating exercise, we look at key valuation metrics like PE and PB ratios, expected earnings growth, along with excess earnings yield to determine how attractive a particular market is. In addition, we consider the economic outlook, generation reforms as well as fiscal and monetary policies in a particular market and tie those stories with our estimates. The Star Rating reflects the upside potential of a market, which is inclusive of valuation expansion, expected earnings as well as expected dividends.

Very Attractive - 5.0 To 4.0 Stars

Asia Semiconductors

Asian markets were in freefall earlier this year, and the consensus was to reduce Asia exposure. We argued the opposite — that Korea and Taiwan were being mispriced because the market was confusing energy exposure with earnings exposure. We did a buy call at the height of the sell-off. That call has since delivered strong returns through two KOSPI circuit-breaker events, a second wave of US-Iran strikes, and every headline that should have made investors question it.

Asia Semiconductors

Singapore

Equity-supportive policies are setting a positive tone for 2026. Fund flows are rising, listings are gaining momentum, and small and mid-caps offer strong return potential. STI earnings are expected to recover, the financial sector remains constructive despite net interest margin pressure, and S-REITs are regaining momentum on lower interest rates. Overall, we view Singapore as a very attractive market.

South Korea

South Korea is upgraded to 4-star on the back of robust AI-driven memory demand, with Samsung Electronics and SK Hynix controlling 79% of global HBM market share and SK Hynix projecting supply shortages to persist until at least 2030. Beyond memory, NVIDIA's partnerships with LG, Hyundai Motor, and Naver signal a broadening of South Korea's AI supply chain role, while capital market reforms under President Lee and improving macro data.

Taiwan

Taiwan’s AI-driven economy remains on a strong growth trajectory, supported by resilient exports, rising semiconductor earnings, and an irreplaceable AI hardware ecosystem. Despite concerns over semiconductor reshoring and geopolitical risks, Taiwan continues to benefit from robust AI infrastructure investment, with companies such as TSMC, MediaTek, and ASE well positioned to capture long-term demand.

Singapore

South Korea

Taiwan

Attractive - 3.5 To 3.0 Stars

China

Chinese equities are expected to extend their rally into 2026. Continued strong government support for the private sector remains a key tailwind, helping to gradually rebuild investor confidence. Technology continues to be a core growth driver, supported by rapidly expanding AI capabilities and China’s long-term self-sufficiency goals. While economic challenges persist, further policy stimulus is expected to help stabilise the property market and boost consumption.

Hong Kong

With China’s policy shift and the recovery in equity performance, we expect Hong Kong equities to perform well in 2026. Key sectoral drivers include easing competition in consumer discretionary, reflation supporting materials earnings, and AI-driven growth in information technology. Improving liquidity should help underpin a more favourable condition for Hong Kong equities in the year ahead.

Digital Economy

While valuations are becoming increasingly stretched, internet companies continue to be supported by strong earnings. AI advancements remain a multi-year trend with companies pouring into AI spendings. Earnings growth expectations remain very robust, and any selloff presents an opportunity.

China

Hong Kong

Digital Economy

Malaysia

Malaysia's economy is set for steady growth in 2025, fuelled by strong domestic consumption, rising investments, and export activity. Structural reforms under the MADANI framework, focusing on regions like Johor, Sarawak, and Penang, enhance resilience. With stable monetary policy and strengths in the banking, consumer, and construction sectors, the outlook remains positive amid the ongoing economic transformation.

Japan

Japan continues to be our top market recommendation. The BOJ has increased its interest rate to 0.75% as of December 2025, reflecting ongoing progress toward monetary policy normalisation. Persistent inflation and robust wage growth are enhancing consumer spending. Long-term drivers, including corporate governance reforms and Japan's re-emergence as a semiconductor leader, are poised to sustain economic expansion.

Asia ex-Japan

Asia ex-Japan markets posted solid gains in 1H25, with all major constituents ending in the green. Looking ahead, China and India are expected to benefit from continued policy support, with China’s growth outlook improving as structural risks ease. Taiwan and South Korea should maintain momentum, supported by strong AI chip demand.

GEMs

We have turned more optimistic on key constituents, particularly China, where pro-growth policies are gaining traction and structural risks are receding. While tariff concerns have eased for many emerging Asian economies, Emerging Markets remain exposed to downside risks, largely due to persistent trade uncertainties in Latin America.

Malaysia

Japan

Asia ex-Japan

GEMs

Neutral - 2.5 Stars

Semiconductors

While the long-term AI structural story remains intact and semiconductor earnings growth is expected to remain strong, early signs of an AI bubble are emerging, and stocks are currently priced to perfection with limited upside. As such, we downgrade the semiconductor sector from 3.0 stars “Positive” to 2.5 stars “Neutral” to reflect our more cautious stance.

Global Healthcare

The global healthcare sector rallied in 2H25, driven by attractive valuations and the view that tariff risks were overstated. Much of this earlier optimism has now been priced in. Looking ahead to 2026, we believe the investment case has become more balanced, with sector fundamentals remaining resilient but upside potential increasingly constrained.

Semiconductors

Global Healthcare

Not Attractive - 2.0 Stars

India

The direct impact of higher US tariffs on India’s economy is likely limited, with exports to the US accounting for just ~2% of GDP. Policy reforms—such as GST cuts lower compliance costs, monetary easing, and middle-income tax relief—are expected to bolster consumer demand and corporate earnings. Nonetheless, the 50% tariffs could slow India’s ambitions to become a global manufacturing hub, while weaker US growth may weigh on Indian IT firms’ earnings.

Global Financials

The financials sector’s cyclical tailwinds are expected to fade in 2026. Banks are likely to face increasing net interest margin pressure as asset yields decline, while funding costs have limited room to fall. At the same time, weakening consumer credit remains a risk, particularly if labour market conditions deteriorate and growth slows. With the sector trading at record-high valuations, it has limited room for error in 2026. We therefore downgrade the sector to 2.0 stars "Unattractive" rating.

US

US GDP growth is expected to moderate in 2026, weighed down by softer consumer demand as the labour market cools and inflation remains sticky above the Fed’s 2% target. While the digital economy sector remains a bright spot thanks to the AI boom, we are less constructive on the broader US market, which face headwinds from tariffs, policy uncertainty under the Trump administration, and weak consumer sentiment.

Europe

Europe's structural vulnerability as a net energy importer has been fully exposed by the Iran-driven supply shock. With inflation reaccelerating, growth forecasts cut, the ECB now tightening into a weakening economy, and Q1 earnings resilience set to fade, Europe no longer offers sufficient risk-adjusted returns relative to Asian alternatives.

ASEAN

ASEAN equities are becoming increasingly differentiated, with stronger macro fundamentals and structural tailwinds supporting Singapore and Malaysia, while Thailand and Indonesia face mounting policy and structural challenges. As a result, we downgrade the ASEAN index to Unattractive and continue to favour a concentrated allocation to Singapore and Malaysia.

India

Global Financials

US

Europe

ASEAN