Invesco's Chief Investment Officer Mike Shiao has released the 2026 Asian equity outlook, highlighting that Asian stocks delivered steady performance in 2025, supported by regional policy tailwinds, robust domestic demand, and AI-driven innovation. Looking ahead, the firm expects the US dollar to continue weakening—a trend historically favorable for Asian equities. A globally accommodative monetary policy environment is likely to encourage capital rotation from US markets to more attractively valued Asian economies.
The report underscores optimism for 2026 Asian equities, citing improving earnings prospects, favorable liquidity conditions, and ongoing structural reforms. This positions the region to capitalize on near-term cyclical opportunities and long-term growth trends, offering compelling investment potential for global investors. While AI-related stocks may face short-term volatility and valuation micro-cycles, Invesco maintains that AI will remain a structural growth theme across Asia. Recent valuation adjustments in software, hardware, and infrastructure sectors reflect strong investor interest, though AI’s application-layer benefits remain underappreciated.
The next phase of growth will be driven by real-world AI adoption, with accelerated implementation in healthcare, finance, manufacturing, and e-commerce expected to unlock productivity gains and earnings upside. Asia’s competitive edge lies in its vast data ecosystems, cost-efficient talent pools, and government-backed digital strategies—key enablers for scalable AI solutions. Invesco favors companies with clear monetization pathways, proprietary technology, and integration capabilities to embed AI across operations. AI adoption could emerge as a critical driver for earnings growth and valuation re-rating region-wide.
Asian markets offer diversified drivers and opportunities. In China, structural growth momentum and clear policy priorities underpin Invesco’s sustained optimism. Domestic consumption remains pivotal, contributing ~60% of GDP growth from 2021–2024, with further upside expected from rising incomes and expansion in services like healthcare, education, and elderly care. Industrial consolidation is alleviating manufacturing oversupply, allowing leaders to leverage advanced technologies for sustainable growth. The upcoming 15th Five-Year Plan emphasizes breakthroughs in core tech, advanced manufacturing, and emerging sectors (e.g., semiconductors, green energy, quantum computing) to reduce foreign supply-chain reliance. Accelerated industrial upgrades and evolving consumer markets, fueled by high-level openness, present fresh opportunities.
India’s equity markets underperformed regional and global peers in 2025, but Invesco anticipates a 2026 inflection. Despite external uncertainties like H1B visa policies and trade frictions, stable consumption and investment trends support improving economic indicators. Recent GST reductions and income tax cuts should ease household burdens and stimulate spending, with effects likely materializing in 2026. Consumer discretionary sectors (autos, travel, jewelry) stand to benefit from policy tailwinds and rising incomes.
South Korea and Taiwan continue to benefit from tech cycle momentum (particularly high-bandwidth memory and semiconductors), driving valuation adjustments. Both are well-positioned to ride rising AI demand, supporting long-term capacity growth. Additionally, South Korea’s accelerated corporate governance reforms—aimed at boosting shareholder value through higher dividends—could enhance its appeal to long-term investors.
ASEAN markets retain attractive valuations and opportunities, though political uncertainties in some countries warrant caution. Singapore shines with abundant liquidity and proactive policies to unlock undervalued sectors, while Malaysia and the Philippines show promise. Malaysia attracts global semiconductor/hardware firms, benefiting from a young demographic, rising incomes, and structural export growth in electronics. The Philippines’ favorable financial conditions and resilient private consumption, driven by urbanization, a youthful population, and remittances, underpin long-term growth.
Beyond near-term headwinds, Asia’s vast domestic demand and evolving innovation ecosystems reinforce sustainable growth. Structural drivers—strong consumption, reform momentum, and tech transformation—bolster regional resilience. Despite global trade challenges, Asian equities are poised to capture near- and long-term opportunities. Valuations remain attractive, with robust earnings growth and persistent discounts relative to developed markets (ex-Japan). Through reforms, innovation, and insatiable domestic demand, Asia offers compelling opportunities.