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Bernstein analysts remain optimistic about Asian markets for the second half of 2025, citing strong foreign capital inflows, improved corporate earnings, and supportive policy environments. The brokerage is especially bullish on South Korea and India, while maintaining a neutral stance on China.
Asia ex-Japan outperformed U.S. equities in the first half of the year, and Bernstein expects this trend to continue. South Korea led the region, with the KOSPI index soaring over 30% year-to-date. The liberal party’s presidential victory in 2025 ended a period of political instability, further fueling market optimism. Bernstein advised investors to “double down on Korea,” pointing to attractive valuations, an anticipated upgrade cycle, and sustained foreign investment despite recent inflows.
Indian equities also drew positive sentiment, driven by robust economic growth and a strong earnings outlook. However, Bernstein cautioned that valuations were becoming stretched as the Nifty 50 approached record highs.
China and Hong Kong equities showed resilience despite macroeconomic and geopolitical pressures. Yet Bernstein maintains a neutral position on China due to weak macro trends, lackluster foreign interest, and a continuing earnings downgrade cycle, coupled with limited policy support.
Elsewhere, Taiwanese stocks may have rallied too far, with foreign flows nearing their peak. Singapore and Hong Kong remain appealing for value and yield-seeking investors. Indonesia and Malaysia, while underperforming, show early signs of recovery in earnings and valuations.
Despite early-year headwinds from U.S. President Donald Trump’s trade tariffs, Asian markets rebounded strongly in Q2, with valuations nearing multi-year highs. Easing U.S.-China trade tensions also supported the rally, though uncertainties around future tariffs persist.
