Market Review February 2026
Risk assets started the year on a positive note, heading higher with volatility amid geopolitical tensions. The World Index gained 2.19% in January. The MSCI Far East Ex. Japan index outperformed, gaining 10.96%, driven by North Asia markets, in particular Korea and Taiwan markets. Within the Asia region, ASEAN equities gained +4.82%, led by Singapore (+5.57%) and Malaysia (+3.62%) markets. The performance of regional currencies was mixed against the USD. The best performing currencies were Malaysia Ringgit (+2.88%) and Vietnamese Dong (+1.35%), while the weaker ones were Indonesia Rupiah (-0.63%) and Hong Kong Dollar (-0.40%).
US indices gained on stable economic data. For the month, Dow Jones Industrial Average (DJIA), S&P 500 Index and Nasdaq Composite gained 1.73%, 1.37% and 0.95% respectively. As for economic data, the final Consumer Price Index (CPI) report for December 2025, released in mid‑January, confirmed that headline inflation finished 2025 at 2.7% year over year, with core inflation at about 2.6%. The labor market had also softened significantly but remained tight. Recent data showed monthly job gains around 50,000 with unemployment near 4.4%, indicating slower hiring but no sharp deterioration in employment conditions. The December report showed job gains concentrated in areas such as health care, social assistance and food services, while sectors like retail trade shed jobs.
The Stoxx Europe 600 Index added 3.18% from prior month with defensive and energy names outperforming amid geopolitical risk and commodity strength. India and the European Union have finalized a landmark trade deal on January 27th, paving the way for free trade between India and its largest trading partner and creating major opportunities for both regions. The deal is expected to eliminate up to €4bn of tariffs on EU exports
Hong Kong and H shares indices rose. Hang Seng Index and Hang Seng China Enterprises Index gained 6.85% and 4.53% respectively. China’s GDP grew 4.5% YoY in 4Q25 compared to 4.8% YoY in the previous quarter. China’s factory activity surprised with an expansion in December, snapping an eight-month contraction streak that was the longest slump on record. The official manufacturing purchasing managers’ index was 50.1 in December compared with 49.2 in November, according to data released by the National Bureau of Statistics.
South Korea’s KOSPI Index advanced strongly, gaining 23.97% in January on strong performance of key index counters (Samsung Electronics and SK Hynix) driven by AI theme. The composite business sentiment index in all industries in South Korea decreased 0.2 points to 94 in January from December. However, the seasonally adjusted composite business sentiment index for the manufacturing sector was up 2.8 points to 97.5, while the outlook for the following month rose by 1 point to 95. For the non-manufacturing sector, the seasonally adjusted composite business sentiment index decreased 2.1 points to 91.7, while the outlook for the following month rose by 1 point to 88.4. A reading above 100 indicates optimism, while a reading below indicates pessimism. The January 2026 reading, while below 100, is the highest since 2020.
Taiwan’s TWSE Index gained 10.70% on technology sector strength underpinned by AI sentiment. Taiwan exports continued to show strength with orders reaching US$76.2bn in December, up 4.4% MoM (up 4.4% MoM seasonally-adjusted) and 43.8% YoY, exceeding Bloomberg’s median estimate of 39.5%, and even surpassing November’s already exceptionally strong 39.5% YoY. Orders from US, Europe and ASEAN surged nearly 50% or more, while those from China remained relatively weak. Orders from China and Hong Kong grew by 15.0% YoY, with electronics products up the most, by 25.7%. Orders from Europe rose by 47.0% YoY, led by ICT products.
Singapore’s STI continued to move higher, gaining 5.57%. Economic activities remained resilient. Singapore’s bank loans increased to a new record high of SGD 886.1 bn in December 2025, up from SGD 873.1 bn in the previous month. Loans to businesses surged to SGD 538.7 bn from SGD 528.3 bn in November. Singapore’s seasonally adjusted unemployment rate held steady at 2% in Q4 2025, unchanged from the previous quarter.
Malaysia’s KLCI gained 3.62% on strong currency gain. Malaysia’s economy is expected to expand between 4.0% and 4.5% in 2026, supported by steady domestic demand and sustained investment activity. Policy certainty, ongoing government reforms and supportive external factors have contributed to the ringgit’s steady appreciation to levels last seen in 2018, boosting investors’ confidence.
Thailand’s SET Index gained 5.24% on optimism in the outcome of the just concluded general election that may signal more political stability and policy continuity. Thailand’s industrial production rose 2.52% YoY in December 2025, beating expectations of a 0.9% decline and rebounding from a 3.85% fall in November, marking the strongest growth since April 2024. The recovery was driven by autos, exports and
government measures, with gains in steel, electronics, automotive and food. However, full-year 2025 production still fell 0.78% due to a strong baht. On a MoM basis, output increased 2.33% after a prior decline.
Jakarta Composite Index declined 3.67% on potential downgrade by MSCI from emerging market to frontier market status. Indonesia in January reported its quickest pace of inflation in nearly three years, according to its Statistics Bureau, as it also released surprisingly strong export and import growth in December. The inflation rate accelerated to 3.55% in January from 2.92% a month prior, below the 3.78% that was expected by analysts polled by Reuters
The Philippines PSE Index recovered on bargain hunting after a few months of correction, gaining 4.56%. The Philippines’ trade deficit narrowed to USD3.52 bn in December from USD4.15 bn in the same month last year. Exports surged by 23.3% year-on-year to USD6.99 bn, led by higher sales of electronic products (43.6%), which remained the country’s top export category, accounting for 57.8% of total exports.
Vietnam’s VN-Index gained 2.50%. Investors reacted positively to Resolution 79, a policy directive from the Politburo laying the framework for Vietnam’s State economic sector to serve as an engine of national development. The resolution sets ambitious targets, including for 50 State-owned enterprises (SOEs) to rank among Southeast Asia’s Top 500 and one to three among the global Top 500 by 2030, rising to five globally ranked SOEs by 2045.
For 2026, the shift of market focus to dovish monetary stance particularly in the US will likely be supportive of risk assets in the near term. The Fed reduced rates by 25 bps in December. However, there is much uncertainty as to whether there will be a further acceleration of reduction in 2026, which if it does, will provide tailwinds into the new year. The market is still divided on impact of higher tariffs on macro variables such as inflation and economic activities. US corporate earnings, especially in the technology sector, continue to be key pillar to hold up risk assets. US market valuations are at historical high, and the high valuation is further driven by strong capital expenditure drive for AI. But, questions are starting to emerge as to whether the humongous expenditures in AI will generate the anticipated returns. The semiconductor and AI investment cycle may move into a more difficult phase as investors will start to be more discerning with regard to their return on investment. The supply and demand dynamic in the semiconductor cycle, on the margin, with supply capacity gradually improving at a time when global demand soften on lower GDP growth outlook, can potentially result in headwinds for the industry.
Geo-political developments as well as policy directions in the major economies, in particular US and in China, remain on our radar screen. The market is still watchful of developments in Trump’s tariffs for the key trade partners. The US Supreme Court is expected soon to render its widely anticipated ruling on the legality of the Trump Administration’s reciprocal tariffs. The market is also attentive to other US policy pronouncements that would have major fiscal, financial and economic implications. Investors, by and large, appear to be comfortable with Trump’s “Big Beautiful Bill” that has been signed into law, notwithstanding that it will substantially increase US federal deficit and government debt. Meanwhile, new geo-political fissures have opened up with the recent US military raid and capture of Venezuela President, Nicolas Maduro Moros, and the repeated utterings by President Trump of his intention to bring Greenland within the US fold, militarily if necessary. These developments further heightened tension in global geo-politics. In the near term, the US mid-term election to be held in the later part of 2026 may change the balance of power in the US Congress and have significant impact on US policies in the remaining years of Trump’s term. These developments will create uncertainties for investors.
In Asia, the focus is on the pace of China’s economic recovery which has been weaker than expected. The tariff issues with the US and continuing efforts to broaden restrictions on sales of tech equipment and services to Chinese entities can only exacerbate the economic situation in China. The Chinese property sector continues to face challenges, and any sign of stabilization and growth will have positive catalyst for China’s economy and risk assets. The Chinese government continues to bring forth measures to help the economy. The Chinese government remains constructive on policies to spur economic activities to achieve economic growth target. The various measures have boosted market sentiments. However, the longer- term effectiveness on China’s economy continues to be closely watched. It may take time for the initiatives to bear fruits. The focus will be on addressing the challenges in the property market, lifting consumer sentiments and consumption, and countering the effects of the new US tariffs.
On external trade, countries with high export dependency for growth in the Asia region including ASEAN will face significant challenges arising from the US tariff policies. The disruption in supply chain realignment may result in temporary mismatch in corporate earnings delivery against market expectation during the initial stage of tariff implementation. To-date, while ASEAN countries’ exports to the US have been impacted by the tariffs, these countries have been able to mitigate the impact on the economic growth through trade diversifications.
While interest rates have started to be eased, there remains headwind for risk assets, including the impact of the still high interest rate on business and economic activities, uncertainties in US policies post the US Presidential election, the still rising and historically high market valuations in the US, the geo-political tension in various parts of the World, and the still slower than expected economic growth in China. However, in the investment space we are in, we believe there is room for cautious optimism. After years of prolonged sell down, and despite the upticks in recent months, China equities are under-owned and their favorable valuation offer potential upside, particularly following the recent rounds of significant policy change initiatives from China. Also, the prospect of further softening of the US dollar could see increasing funds flow out of US assets which could be beneficial for emerging markets including China and ASEAN.
We continue to apply our strategy of focusing on identifying fundamentally healthy companies with low valuations, low leverage, high growth, robust management and a strong track record, and adherence to our investment philosophy of “Never Fully Invest at All Times” which has served us well over the years.
We thank you once again for your continued faith in us and hope to remain good stewards in our endeavour to protect and grow your capital.