Risk asset trading volatility continued to heighten across regions amidst uncertain, unexpected and frequent policy changes by the US administration. Prices gyrated in response to Trump’s pronouncements of sudden changes to the US tariff measures.  The World Index recovered from last month’s 4.64% fall, gaining 0.74% in what is widely viewed as a relief rally. The MSCI Far East Ex. Japan index declined 0.61%, largely due to Hong Kong market’s decline.  ASEAN equities outperformed relatively with a return of  gaining 2.19% on fund flow into the region. Korea shares (+3.04%) and Philippines shares (+2.82%) were the top performers. The laggards were Vietnam shares (-6.16%) and Chinese H shares (-5.17%). Regional currencies mostly appreciated against the USD. The best performing currencies were Taiwan NT (+3.84%), Korea Won (+3.46%) and Singapore Dollar (+2.78%), while the weaker ones were Vietnamese Dong (-1.59%) and Indonesia Rupiah (-0.14%).

The US markets saw huge trading volatility on uncertainty in economic growth outlook amid the US tariff policies. US data released in April showed signs of economic moderation. The flash composite Purchasing Managers’ Index (PMI) fell to 51.2 from 53.5 in March, with the decline driven by the services sector, which registered at 51.4 compared to 54.4 in March. The manufacturing index rose slightly to 50.7. Dow Jones Industrial Average (DJIA) and S&P 500 Index declined 3.17% and 0.76% respectively, while the Nasdaq Composite gained 0.85%. The growth sector did better with major technology companies releasing positive first quarter earnings. US headline and core inflation rates for March declined, printing below expectations at 2.4% and 2.8% year over year respectively.

The Stoxx Europe 600 Index declined 1.21%. The ECB further lowered the three key interest rates by 25 basis points, as expected, reducing the deposit facility rate to 2.25%. The monetary policy statement viewed the disinflationary process as “well on track” and noted that the “outlook for growth” has deteriorated owing to rising trade tensions. Asset reallocation also favoured the region as global funds shifted away from US markets on geo-political and trade tension, more accommodative money policy and ramped up spending on defence and infrastructure in EU.

Hong Kong and H shares indices declined on profit taking amid China’s strong stance in response to the reciprocal tariff imposed by the US on China. For the month, Hang Seng Index and Hang Seng China Enterprises Index declined 4.33% and 5.17% respectively. Chinese A shares registered a milder decline of 1.06%. China’s GDP grew by 5.4% Year-on-Year in 1Q25, matching the 5.4% Year-on-Year growth in 4Q24 and exceeding market expectations. However, due to the persistent negative GDP deflator, nominal GDP growth was estimated at 4.6%, remaining flat compared to 4Q24. The relatively strong economic growth reflected the contribution of a series of pro-growth policies launched since last September to durable goods sales, infrastructure investment and manufacturing investment as well as the front-loading of shipment before the US reciprocal tariff took effect in early April. However, the property sector continued to weigh on the economy while the endogenous growth momentum of household consumption was insufficient as the average consumption ratio edged down Year-on-Year in 1Q25.

South Korea’s KOSPI Index gained 3.04%. South Korea’s industrial output grew for the second consecutive month in March due to surging semiconductor production. The seasonally-adjusted production index in all industries, which excludes the agriculture, livestock and fishery sector, rose 0.9% in March from a month earlier. Chip production jumped 13.3% on a monthly basis, the highest in 19 months since August 2023.

Taiwan’s TWSE Index declined 2.23%. Taiwan’s economy grew more quickly than expected in the first three months of 2025, buoyed by surging exports as businesses likely front-loaded shipments to get ahead of U.S. tariffs. Advance estimates showed that gross domestic product expanded 5.37% in the January-March quarter from a year earlier, above the market forecast of 3.2% growth. Exports of goods and services surged 20.11% during the first quarter, likely aided by a rush by importers to stockpile ahead of the Trump administration’s tariff  announcement.

Singapore’s STI declined 3.52%. Singapore’s economy expanded 3.8% Year-on-Year in Q1 of 2025, slowing from a 5.0% increase in Q4 2024  and falling short of market consensus of 4.2%, flash data showed. It was the softest growth since Q2 of 2024 amid mounting external headwinds. The Monetary Authority of Singapore (MAS) eased its monetary policy again, following a similar move in January, the first since 2020, amid weaker-than-expected Q1 GDP growth and a deteriorating global economic outlook following the Trump Administration’s tariff policies. Singapore’s non-oil domestic exports (NODX) increased 5.4% year-on-year in March 2025, much softer than market forecasts of a 13.6% surge, easing from a 7.6% rise in the previous month.

Malaysia’s KLCI gained 1.76%. Malaysia’s economy is expected to moderate with the leading index recording 112.4 points in February, according to the Department of Statistics Malaysia (DOSM). Malaysia’s inflation rate eased to 1.4% in March 2025, slightly lower than the 1.5% recorded in February, according to DOSM. The Consumer Price Index (CPI) increased to 134.1 points in March, up from 132.2 points in the same month last year.

Thailand’s SET Index gained 3.38%. Thailand’s consumer confidence index fell for the second straight month to 56.7 in March 2025, down from 57.8 in February, the lowest level since October 2024. The decline reflects weak economic recovery, high living costs, and concerns over U.S. tariffs. Fund flows into the region boosted the market sentiment.

Jakarta Composite Index continued to recover. It gained 3.93% on short covering as investors’ sentiment improved on surprising tax revenues collection. Indonesia tax revenues increased 9.1% Year-on-Year in March, though the YTD collections were down 18.1%. Tax revenue in March reversed the declines in January (- 13.4% Year-on-Year) and February (-9.1% Year-on-Year) which were attributed to teething problems with a newly introduced tax filing system. Minister of Finance Sri Mulyani said she wanted to provide assurance that tax revenues are still on track. CPI rose to 1% year- on- year (Feb -0.1%), due to expiration of electricity tariff discounts for pre-paid customers. Core inflation remained stable at 2.5%.

The Philippines PSE Index gained 2.82%. The Central Bank of the Philippines cut its benchmark interest rate by 25 basis points to 5.5% at its April 2025 policy meeting, in line with market expectations. The move was driven by easing inflation, with consumer prices rising just 1.8% year-on-year in March, the slowest pace since May 2020 and below the central bank’s 2% to 4% target range. The annual inflation rate in the Philippines slowed to 1.8% in March 2025 from 2.1% in the previous month, pointing to the lowest reading since May 2020.

Vietnam’s VN-Index declined sharply by 6.16% amid concerns over the impact of the reciprocal tariff imposed on the country by the US which is highest among the ASEAN countries. Vietnam Stock Exchange’s new KRX trading system officially came into operation. The new system will shorten the trade settlement cycle, improve liquidity and reduce counter-party risks, and offer a wider range of functionalities and lay the groundwork for the introduction of new products and services. The objective is to strengthen Vietnam’s stock market infrastructure.

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 broad ranging and stiffer than expected tariff policies, market expectation has been negative and US inflation and interest rate outlook turned less dovish. The tariff announcements and the inconsistent and frequent policy changes have led to heightened market gyrations and volatility. The US market had made good gains in the period following Trump’s election win, but has since undergone major corrections following a host of factors, including the emergence of a rival AI platform in China that appeared to be able to achieve similar results as the likes of ChatGPT with a lot less resource inputs and chip investments, and increasing concerns about the economic and consumer impacts of Trump’s tariff policy. Any adverse change in the US economic growth trajectory, the US inflation outlook and consumer sentiments, with their consequential effect on corporate earnings would have significant impact on the market.

During his Presidential election campaign, Donald Trump had also pitched to bring about a quick cessation to the Russia-Ukraine war should he be elected 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.  An end to the Ukraine conflict would be positive for the equity markets. It remains to be seen if Trump and his Administration will succeed in orchestrating a cessation of the conflict in Ukraine.  If this does come about, it would change the geo-political situation in Europe and elsewhere.

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. Trump is wasting no time in implementing his tariff policies. His broad and unconventional use of tariff policies has major and wide reaching impact on both the US and many other countries.  It has heightened volatility across markets and weighed on sentiment.  The broad sweep of tariff changes announced on April 2, evoked much consternation, both from within and without the US, and triggered significant falls in stock markets worldwide. The full ramifications are yet to be known. From reports, countries are engaged in negotiations with the US on bilateral tariffs and trade.  All eyes are on what these negotiations will settle on.

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 can only exacerbate the economic situation. 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. More can be expected in the wake of the new US tariff situation.  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. The focus will be on addressing the challenges in the property market, lifting consumer sentiments, 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. This can result in further trading volatility for risk assets. Longer-term, higher tariffs may result in corporate margin erosion and slower earnings growth outlook. Consumers may have to pay higher prices, and this translates to higher inflation rate.

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 from China.

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.