Market Review March 2025
Risk asset performance diverged across regions. Notably, US and ASEAN region underperformed, while China/HK shares had a good run. The World index declined 0.81% against MSCI Far East Ex. Japan index’s 3.37% rise. ASEAN equities underperformed relatively with a return of declined 3.67%. H shares (+14.02%) and Hong Kong shares (+13.43%) were the top performers. The laggards were Indonesia shares (-11.80%) and Thailand shares (-8.43%). Regional currencies had a mixed performance against the USD. The best performing currencies were Philippine Peso (+0.66%), Singapore Dollar (+0.39%) and Malaysia Ringgit (-0.09%), while the weaker ones were Vietnamese Dong (-1.86%) and Indonesia Rupiah (-1.75%).
Major US indices mostly retraced on profit taking as uncertainty on economic growth outlook started to re-emerge in addition to upcoming tariff implementation. February saw both business and consumer sentiment weakened. Services activity and small business investment intentions both fell, while consumer confidence registered its largest decline since August 2021. Dow Jones Industrial Average (DJIA) and S&P 500 and Nasdaq Composite Index declined 1.58%, 1.42% and 3.97% respectively. Technology sector stocks, and Nvidia in particular, were impacted following release of open-sourced AI models in China that offer comparable performance at substantially lower costs than established AI names in the US. The US Composite Purchasing Managers’ Index (PMI) registered 51.6 in February, down from 52.7 in the previous month. It still indicated continuous expansion of overall activity, though the reading is the lowest since April 2024.
The Stoxx Europe 600 Index gained 3.27% as investors increasingly factored in the likelihood of a ceasefire in Ukraine. European financials maintained their strong run and were the top performing European sector with returns on equity that continued to outstrip their US counterparts. European defence stocks also benefitted from a renewed focus on domestic production.
Hong Kong and H shares indices posted strong gain driven by technology sector on AI theme following the announcement by China’s DeepSeek of its AI model. For the month, Hang Seng Index and Hang Seng China Enterprises Index gained 13.43% and 14.02% respectively. Chinese A shares chalked a milder gain of 1.91% amid a weak domestic investors’ sentiment. The China Securities Regulatory Commission (CSRC) outlined measures to promote medium- and long-term investment funds to flow to the stock market. Among the announced measures are : 1) Public offering funds are required to increase their holdings of A-shares by at least 10% annually over the next three years; 2) Major state-owned insurers will allocate 30% of their new premiums annually to invest in A-shares, starting 2025; 3) Financial institutions have achieved cooperation with 800 listed companies and their major shareholders, among which over 300 companies have announced purchase shares or increase share holdings, with a total amount of over Rmb60bn.
South Korea’s KOSPI Index gained 0.61%. The Bank of Korea revised its 2025 gross domestic product growth forecast to 1.5% from 1.9%. The downward pressures on exports and domestic demand due to US tariffs and political uncertainty led to the lower forecast. The Financial Services Commission (FSC) also cautioned on household debt level. The FSC aims to manage debt growth within the 3.8% nominal GDP growth rate for 2025 and will maintain 60 trillion won in policy loans for vulnerable groups. This is negative for domestic consumption outlook.
Taiwan’s TWSE Index declined 2.01%. Taiwan export orders totalled US$46.91bn in January, down 11.2% Month-on-Month and 0.1% Month-on-Month seasonally adjusted, and dipped by 3.0% Year-on-Year, far below consensus of 2.7% Year-on-Year growth. Aside from China and Europe, orders from major regions trended up. Orders from the US rose by 6.4% Year-on-Year in December, with electronics up the most, by 25.7%, or US$1.64bn. Orders from China and Hong Kong fell by 18.3% Year-on-Year, with electronics down the most, by 19.1%, or US$1.11bn, the decline being largely attributed to the timing of the CNY holiday period. Orders from Europe fell by 12.4% Year-on-Year, with orders for ICT down the most, by 11.6% Year-on-Year.
Singapore’s STI gained 1.03%. Singapore’s economy grew 5.0% Year-on-Year in Q4 2024, moderating from 5.7% in Q3, according to final data. For the full year, GDP expanded 4.4%, significantly higher than 1.8% in 2023. The manufacturing sector remained strong, rising 7.4% in Q4, though lower than 11.2% in Q3. Construction also saw steady growth at 4.4% in Q4, following 5.6% in Q3. Meanwhile, services producing industries expanded 4.6% Year-on-Year, driven by gains in wholesale and retail trade, transportation and storage, information and communication, finance and insurance, and professional services. While economic growth moderated in Q4, Singapore’s economy maintained strong momentum, supported by robust manufacturing, construction, and services sectors.
Malaysia’s KLCI gained 1.14%. Malaysia’s headline inflation remained steady at 1.7% Year-on-Year in January. The Malaysia government is taking measures to mitigate the negative impact of global economic uncertainties on international trade by expanding export destinations to Central Asia, the Middle East, and Africa. It is also strengthening trade diplomacy amid geo-political challenges and escalating trade wars in 2025 according to the Ministry of Investment, Trade and Industry (MITI).
Thailand’s SET Index declined 8.43%. The University of the Thai Chamber of Commerce’s consumer confidence index rose to 57.9 in December 2024, up from 56.9 in November. This marked the third consecutive improvement and the highest level since June, supported by government economic measures and a surge in tourism. Thailand recorded 35.55 million foreign tourist arrivals in 2024, a 26.27% Year-on-Year increase, surpassing the year’s target. However, the recent news flow involving human trafficking in the Thailand border affected tourist arrival significantly especially the Chinese tourist.
Jakarta Composite Index was down sharply by 11.80% on foreign fund outflow. Indonesia’s consumer confidence declined to 127.2 in January 2025 from December’s eight month high of 127.7, retreating for the first time in three months amid weakening purchasing power. Most of the six sub-indices deteriorated: the country’s current economic conditions (down 2.5 points to 113.5), job availability compared to six months ago (down 4.5 points to 107.7), and income expectations for current income (down 1.3 points to 122.6). On the other hand, sub-indices improved for economic outlook (up 1.3 points to 140.8) and income expectations for the next six months (up 1.5 points to 144.8).
The Philippines PSE Index gained 2.31%. The Central Bank of the Philippines unexpectedly kept its benchmark interest rate at 5.75% during its February 2025 policy meeting, following three consecutive periods of rate cuts and defying market expectations of a 5.5% rate. The annual inflation rate in the Philippines stood at 2.9% in January 2025, unchanged from the previous month and exceeding market expectations of 2.7%. Inflation expectations for 2025 were adjusted upward to 3.5% from the previous forecast of 3.4%, while the 2026 forecast remained unchanged at 3.7%.
Vietnam’s VN-Index gained 3.19%. The National Assembly approved the Lao Cai – Hanoi – Hai Phong railway project with a total investment of USD8.4bn. Its main route will cover 391km and pass through 9 provinces and cities including Lao Cai, Yen Bai, Phu Tho, Vinh Phuc, Hanoi, Bac Ninh, Hung Yen, Hai Duong and Hai Phong. The project is expected to be completed by 2030 and potentially boosting GDP growth by 0.16 percentage points per year for the duration of the project.
Market optimism over the election of Donald Trump as the new US President on expectations that his policies would be positive for the US sparked a recalibration of macro variables and asset allocation decision. However, as a result of concern about the potential impact of his tariff policies, US inflation and interest rate outlook turned less dovish and USD strengthened.
In 2024 and, to a lesser degree so far this year, resilient US economic data and the prospect of US rate cuts, albeit subject to uncertainty in the light of Trump’s tariff policies, as well as developments in the semiconductor and AI space, have boosted the US tech sector and pushed the US stock market higher, breaching new historical highs. This is despite the US market’s already elevated valuation and continuing geo-political tensions. During his Presidential election campaign, Donald Trump had pitched that he would bring about a quick cessation to the Russia-Ukraine war should he be elected. Any adverse change in the US economic growth trajectory and its consequent effect on corporate earnings would have significant impact on the market. Escalation of geo-political conflicts and tensions could also have major adverse impact on the markets. Since his inauguration as US President, Trump has made moves in seeking to bring about a cessation of the conflict in Ukraine. It remains to be seen if and when this will come about, and how it would change the geo-political situation in Europe and elsewhere. An end to the Ukraine conflict would be positive for the equity markets.
We are watchful of geo-political developments as well as policy directions in the major economies, in particular US under a Trump Administration and in China. US economic, labour market and inflation data and interest rate policy responses will affect market sentiments and liquidity. Despite it being Trump’s second Presidency, the market will have to be prepared for policy changes that are unexpected and unconventional as one could expect from an untested maverick. Since his installation as US President in January, Trump is wasting no time in implementing his tariff policies. His broad and unconventional use of tariff policies can have major and wide reaching impact on both the US and many other countries. It will heighten volatility across markets and weigh on sentiment.
In Asia, the focus is on the pace of China’s economic recovery which has been weaker than expected. The Chinese property sector continues to face severe 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 various measures to help the economy. In further moves to address the economic situation, the Chinese government announced in September a slew of monetary, fiscal and policy measures to stimulate investment and consumption, enhance liquidity and restore confidence in the property and financial markets. The Chinese government remains constructive on policies to spur economic activities to achieve economic growth target. While the move has boosted market sentiments, the longer- term effectiveness remains to be seen and will be closely watched. It may take time for the initiative to bear fruits. Market observers believe that more stimulus measures could be expected down the road.
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 the US policies post the US Presidential election, the historically high market valuations in the US, the continuing geo-political tension in Europe, Middle East and in East Asia, 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, China equities are under-owned and their favourable valuation offer potential upside, particularly following the recent rounds of significant policy change initiatives.
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.
This article is solely for information purposes. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The information contained herein does not have any regard to the specific investment objectives, financial situation or particular needs of any person. Investors may wish to seek advice from a financial advisor before making any investment decision. Past performance is not indicative of future results. An investment is subject to investment risks, including the possible loss of the principal amount invested.