Stocks with leveraged balance sheets would also benefit from lower interest rate costs, add JPM analysts, but broad monetary easing will spell trouble for local banks via lower net interest margins.
JPM remains “neutral” on both banking and REIT sectors.
For one, the yield differential is not significant enough to drive performance, says the bank, and the economic outlook remains fluid with impacts from tariffs and trade deals.
In addition, a low interest rate environment could spur subscriptions in local equity funds, supporting broad market performance, as evidenced by fund inflows having accelerated over the past 12 months.
See also: Indonesia says US$34 bil in trade, investment MOU with US in pipeline
“While risks could emerge from the steep decline in regional trade following the front-loading phase, we believe Singapore has enough fiscal room to boost the economy if necessary,” adds JPM.
Singapore is currently in talks with the US over tariff-affected sectors like pharmaceuticals and semiconductors. Further clarity on trade deals would boost investor confidence, says JPM.
Elsewhere, JPM analysts think it is “unlikely” that the Monetary Authority of Singapore’s bid to revitalise the Singapore stock market via a $5 billion allocation for local fund managers would result in small- and mid-cap stocks “significantly outperforming” large-caps.
Small- and mid-caps have higher price-to-earnings (P/E) multiples, lower liquidity and uncertain profitability and growth prospects, they add. “In our view, stocks with good track records of earnings growth and quality balance sheets should attract additional flows.”
Instead, stocks trading at a discount on book value will have more incentive to spin off or monetise assets, driven by market reform programmes, says JPM.
Coupled with support, this could engender new IPOs and issuance in 2H2025, they add.
To JPM analysts, key beneficiaries include quality mid-cap stocks and stocks with upside potential from asset recycling. These names include CapitaLand Integrated Commercial Trust, CapitaLand Ascendas REIT, Keppel DC REIT, Frasers Commercial Trust, Singtel, ST Engineering, Sea and stocks in the consumer staples sector.
Equity strategy
The MSCI Asean index has gained about 3% in US dollar terms year-to-date. This is much lower than MSCI AxJ and MSCI emerging markets, which are up around 14%.
Their weak performance is consistent with JPM analysts’ cautious view for Asean in 2025.
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For 2H2025, the JPM analysts believe the macro backdrop for equities is “turning incrementally better”.
Several factors signal gradually improving conditions. They include further monetary easing, clarity on US trade deals and tariff policies, and low investor positioning and valuation multiples. However, these could potentially be overshadowed by a 40% chance of a US/global recession.
JPM provides a base case target of 660 and a bull case target of 750 for Asean equities. The bank labels Singapore and Philippine equities as “overweight” and Thailand as “underweight”. They stay “neutral” on Malaysia, Indonesia and Vietnam equities.
“We continue to prefer domestic exposure over exporters and high quality/defensive over growth,” they add.
Tariff war
As the end of the tariff pause draws near, JPM expects the US administration to maintain an average tariff floor of 10% after July 9 and expects aggregated tariffs to settle in the 15% to 18% range.
Asean could face “higher-than-average” tariffs to discourage transshipment from China, says JPM.
Clarity on trade policy would help resume foreign domestic import flows to select countries if the tariff gap with China remains sizeable, and visibility could help investors back to the region, write JPM’s analysts. In addition, governments could announce industrial policies to bolster economic growth.
Industrial real estate, ports, logistics companies, construction and tech producers are sectors to watch once the uncertainties are lifted, they add.
Reversal of flows
After approximately US$15 billion of outflows since the US election, Asean went through one of the sharpest outflow streaks in history, second only to Covid-19, notes JPM.
“We believe this trend should reverse if tariff uncertainties are reduced and positioning shifts to favour emerging market assets,” add analysts.
Investors’ holdings in the rest of Asean, excluding Indonesia and Singapore, are among the lowest in the last 10 to 15 years, resulting in stocks trading at a discount compared to their regional peers.
Asean’s earnings are “not out of the woods yet”, say JPM’s analysts. Asean 2025 earnings per share (EPS) growth expectations have been revised down to 3.6% from approximately 7% at the start of the year, reflecting the disruption from US trade policies.
“While the worst of the downward revisions may be over, it is still early for earnings forecasts to rebound,” they add.
