Asian stocks are poised to outperform US counterparts in the current quarter on attractive valuations and earnings prospects, according to a Bloomberg survey.
The MSCI Asia Pacific Index has climbed about 22% this year, outpacing the S&P 500’s 14% advance, on track for the first outperformance of the US gauge since 2022. In a late-September informal survey of 15 strategists and fund managers, more than two-thirds said they expect this outperformance to continue.
Respondents pointed to a range of risks for Wall Street, including lofty valuations, a rally concentrated in a handful of megacaps, and potential tariff-related downturns. This shift highlights how Asia, long a laggard in the post-Covid-19 market cycle, is regaining momentum.
“Asia equities offer a compelling risk-reward profile for the fourth quarter, with valuations well below US peers and earnings growth tracking at similar levels,” said Gary Tan, a portfolio manager at Allspring Global Investments. “As the US AI trade consolidates, Asia stands to benefit from domestic demand, policy easing, and improving corporate fundamentals.”
The MSCI Asia gauge is trading around 16 times forward earnings estimates, below the S&P 500’s 23 times, according to data compiled by Bloomberg. Beyond cheap valuations, easing US-China trade tensions and the prospect of rate cuts by the Federal Reserve also bolster prospects for Asian stocks.
Asian stocks trade at attractive valuations
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While the outlook for the region is bright, strategists are divided on which country will lead the charge. Japan is a top contender, favoured by a third of respondents for its supportive policies and corporate reforms. The same percentage likes China, where many see an opportunity in its under-owned market and growing tech sector.
“The upcoming Fourth Plenum in October should provide clarity on the next Five-Year Plan and could mark a shift in policy priorities,” said Anna Wu, a cross-asset strategist at Van Eck Associates Corp, referring to China. “It would help restore sentiment and attract investors back into an under-owned market trading at attractive valuations.”
The optimism is tempered by persistent risks from possible policy missteps in Beijing to renewed trade tensions, and the possibility of a sharper-than-expected US slowdown. Any of those could quickly sap confidence in Asia’s fragile comeback. But if the bullish calls prove right, Asia may have started on a significant rebalancing in global equity leadership.
Investors are likely to “lock in profits in the US after three strong years and rotate some exposure into underowned Asia,” said Mohit Mirpuri, a partner at global multifamily office SGMC Capital Asia’s valuations are attractive and “incremental policy support in China alongside stronger tech and semiconductor momentum in Korea and Taiwan provides an added tailwind.” — Bloomberg
