Multi-Asset Insights
Key Highlights:
- The dominance of US equities is facing challenges from valuation pressures, fiscal constraints, and shifting global economic dynamics.
- The rest of the world is showing resilience, with attractive valuations and policy shifts creating opportunities for diversification. Europe and Asia have emerged as credible contenders.
- Emerging markets in Asia are increasingly attracting foreign portfolio investments, driven by domestic fundamentals, reflecting the region’s growing maturity and appeal as a source of diversification and defensiveness.
A turning tide in global equity leadership
For over a decade, US equities have dominated global markets, benefiting from strong fiscal policies, technological leadership, and substantial foreign capital inflows. However, this dominance is now being tested by stretched valuations, fiscal constraints, and shifting geopolitical dynamics. The April 2025 market correction underscored these vulnerabilities, prompting global investors to reassess their allocation strategies. Regions like Europe and Asia are emerging as credible contenders for equity leadership. With attractive valuations and supportive policy shifts, these regions present compelling opportunities for diversification, potentially prompting a reassessment of asset allocations.
Unpacking the pulse of foreign flows into EM Asia
As investors start looking for opportunities outside the US, emerging Asia has become a focal point for foreign portfolio investments. Its evolving financial infrastructure, demographic trends, and resilience to global economic shocks is increasingly attracting foreign investments. While global factors such as US dollar movements remain significant drivers, domestic fundamentals like valuation and earnings growth are gaining importance. This shift underscores the maturing investor perspective and the growing appeal of Asia’s markets as sources of diversification and defensiveness. The region’s evolving capital markets offer dynamism and differentiation, balancing global integration with domestic policy safeguards.