Global risk assets showed mixed performance as investors balanced optimism over easing U.S.–China trade tensions with concerns about slowing global growth and elevated valuations.

In China and Hong Kong, the market focus has shifted from macro and geopolitical themes to company fundamentals, though earnings revisions remain muted. China A-shares saw policy support reaffirmed through the 15th Five-Year Plan, which emphasizes domestic demand and technological innovation, yet valuations have become stretched in growth sectors.

Across Asia ex-Japan, North Asian markets such as South Korea and Taiwan continued to benefit from strong AI and semiconductor demand, while Southeast Asia remains attractively valued with early signs of foreign inflows returning. Japanese equities advanced on expectations of continued fiscal and monetary easing under Prime Minister Takaichi, though valuations appear rich.

In fixed income, Asia IG and HY credit spreads remain historically tight, limiting further upside, while gold has entered consolidation after its rally, supported by persistent central-bank demand. With correlations across equities, credit, and commodities rising, multi-asset strategies emphasizing income and diversification remain favored amid a cautious but constructive outlook for year-end.

Source: J.P. Morgan, MSCI, Morningstar, Data as of 31 October 2025

China / Hong Kong Equities

• The US government is under the longest shutdown in history, although it may be coming to an end.  The impact of the shutdown has started to affect the economy, and given the weak labor market, we believe the Fed will continue to cut interest rates, although Powell delivered a somewhat hawkish message at the October FOMC meeting.
• Our base case is that the US economy is slowing down, but it could avoid a recession next year.  A non-recessionary rate cut cycle is positive for risky assets.  However, given the high valuation of the market, the market will be range-bounded in the near term with long-only money starting to take profit for the year end.
• There were positive results on the tariff negotiation from the APEC meeting. Market sensitivity to tariffs has diminished, although there will continue to be ups and downs in the US-China relationship going forward.  The conflict between these two superpowers could never be settled in a few meetings.
• Macroeconomic data in China is still mixed, with PMI below expectation and exports slowing down, while the deflation trend has started to stabilize.  The market focus will shift more from the macro and geopolitical focus to company earnings and fundamentals.
• So far, Q3 results for the companies have still missed consensus on average.  For the equity market to rally further, we need to see upward earnings revisions to support the valuation.

China A-Shares

• There were positive messages in the 15 Five-Year Plan (FYP) coming out from the fourth plenary session, not in the matter of stimulus but in the policy direction in the medium to long term.
• Highlights in the 15th FYP include:
  (1) Virtuous cycle between supply and demand. The policy has shifted from “supply-side reform guides demand” during the 14th FYP to emphasizing a virtuous cycle between supply and demand, with a focus on boosting domestic demand, increasing consumption, lifting households’ consumption rate, expanding effective investment, and building a unified national market.
  (2) Developing new and quality productive forces tailored to local conditions. Measures will be implemented to strengthen original innovation, achieve breakthroughs in core technologies, and promote integration of technological and industrial innovation.
  (3) People-oriented development. During the 15th FYP, policies will continue to promote high-quality employment, refine income distribution, and improve education, healthcare, housing, and social security.
• On the other hand, valuation has started to approach the high end of the historical range, especially in growth sectors such as AI/ tech sectors.  Momentum from the retail investors has slowed down after an influx of inflows, which shifted from savings and record investment account openings. The market will first consolidate and range-bound in the near term before taking off for another wave of rally.

Asia ex-Japan Equities

• Valuation in North Asia has gotten stretched, although there were also positive earnings revisions, while Southeast Asia remains cheap due to political and growth concerns.
• South Korea, with more progress on the Value-Up program and the stronger-than-expected upcycle in the memory sector, has continued to catch the spotlight within Asia.  The momentum remains strong in memory, shipbuilding, power, and large, discounted holding companies.
• Taiwan rallied on the increased AI investment and demand in the US.  However, after the rally, most names are trading at relatively high multiples, and some consolidation could follow, especially since Q4 could be a slower quarter, and there is emerging concern about the AI bubble.
• There are some early signs of turning in Southeast Asian, with money starting to flow back to the region, given positive development on the tariff front with the US, and bottoming of the political situations, although it will take time for sentiment to fully recover in the region.

Emerging Market ex-Asia Equities

• Valuation in emerging markets ex Asia are also getting stretched.  The recent price consolidation in commodities and the US dollar reversal may start to clamp down on the overheated momentum in the region.

Japanese Equities

• The win of Takaichi as Prime Minister is positive for the market.  Her policy stance, “Sanaenomics” is like “Abenomics” which proposes both fiscal and monetary easing.
• This has caused concerns of increased supply of JGB and inflation in the future, which has caused long-end yields of JGB to rise and JPY to weaken.
• The weak JPY will support the equity market in the near term, but valuation is also getting stretched at the upper end of the historical range.  The market is likely to consolidate first after the rally and especially with the still 50/50 uncertainty of a rate hike in December by the BOJ.

Asia Investment Grade Bonds

• Credit spreads of Asia investment-grade bonds are very tight now.  Most of the returns this year have come from duration.
• As the US government shutdown maybe coming to an end, there is pressure of profit taking in US Treasuries as the safe haven trade unwinds and yields may rise from here given the renewed concern on the supply of Treasuries.

Asia High Yield Bonds

• Spreads continue to narrow to further below average (now less than half of the historical average only).  As risk appetite has increased, investors are chasing to the same set of names in Asian high yield bonds as new supply remains limited.
• Absolute yields have also started to come down due to the very tight spreads.  Risk-adjusted reward has started to get much less attractive.

Emerging Market Debt

• Spreads have become even tighter, but without many alternatives for yields, investors are still chasing. As investors are preparing for year end, activities in the space starts to get quiet.

Gold

• Gold is now undergoing a period of consolidation after breaking above 4300.  This is a healthy correction to correct from the long-overbought condition.
• On the other hand, we believe the “debasement trade” to diversify the risk from government bonds and USD assets has not ended.  Central banks also continue to increase their gold holdings to diversify their FX reserves.
• Institutional investors will also likely increase their gold allocation further given the current low positioning and the increasing risk in government bonds globally.

Multi-Asset

• A multi-asset strategy offers lower volatility compared to traditional single-asset or balanced portfolios. However, the correlation between risk assets, such as equities, credits, and commodities, has recently increased dramatically. In an uncertain environment, income becomes an essential source of return for investors.

Source: Bloomberg, Data as of 31 October 2025.

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