Asian markets, the most attractive asset class among global equities

Chinese shares listed in the United States at risk of delisting because of anti-Chinese rhetoric. Interest in Indonesian equities and Japan, and a greater weighting in China in the domestic segment.

by Marcel Zimmermann, manager of the Lemanik Asian Opportunity fund at Lemanik

The market outlook remains difficult to predict because of the erratic nature of the US tariff environment. We nevertheless believe that Asian markets are the most attractive asset class among global equities and that they will continue to be supported by regional expansion.

On April 2, on the occasion of "Liberation Day," US President Donald Trump unveiled his reciprocal tariff strategy. The announced tariffs were far higher than market expectations. Global markets reacted immediately to the shock with a collapse across all US assets, including bonds, equities and the US dollar. Gold rose as investors moved into safe-haven assets. Market turbulence forced Trump to suspend the application of tariffs for 90 days. China responded to the increase in tariffs with countermeasures on US imports amounting to 125% and said it would consult the WTO over the dispute. Global markets reacted to the suspension with a sharp counter-rally across all asset classes, partially reversing the initial sell-off. The Asian equity markets hit hardest were Taiwan, China and, to some extent, Asean. Korean and Japanese indices held up better.

The economic data released in April remained relatively stable, as the front-loading of export orders from Asia to the United States boosted manufacturing activity in Asia. However, economists expect tariffs to have a disinflationary effect on Asia and Europe, as part of production will be diverted out of the United States. The American economy, by contrast, is expected to face a boost in imported inflation, since tariffs will add to import prices. As a result, over the course of the month we closed our exposure to Chinese shares listed in the United States. There is a potential risk that the United States will delist Chinese companies operating in the US as part of its anti-Chinese rhetoric. During the sell-off we added positions in Indonesia and Japan and increased China’s weight in the domestic segment, such as Bio-Tech, Banking and Real Estate.