The quiet strength of Asia

By Darius McDermott on 27 May 2026 in Asia/Emerging Markets

Donald Trump returned to the White House from his trip to China largely empty-handed. There was no obvious sign of help with Iran, and no extension to the trade truce due to expire later this year. The much-touted deal to buy Boeing jets proved disappointing, and the summit didn’t produce any agriculture deals. A natural conclusion might be that China just doesn’t need the US like it used to.

Asia’s growing self-reliance

It is a tribute to increasing self-reliance across Asia. Even the impact of the Gulf conflict has not been as severe as expected. Asian economies are undoubtedly reliant on oil and gas coming through the straight of Hormuz, and markets sold off significant in anticipation of a dent to economic growth. Yet while some countries have felt the heat, notably India, it appears unlikely to derail the broader Asian growth story.

He points to news reports that show China has continued to receive oil shipments that other buyers have not, saying: “Across Asia more broadly, governments have been spending billions insulating consumers from higher fuel prices. A Morgan Stanley note from 14 April highlights that while regional oil prices are up around 40%, pump prices increased by only around half of that.”

The new drivers of Asian growth

The gains from the AI infrastructure trend that has been driving markets have extended as strongly to  Asian behemoths such as TSMC and Samsung as to American giants such as Nvidia and Micron. Asia has developed its own self-sustaining AI build-out. Andrew Swan adds:

“What makes this particularly significant is the phase that AI is now entering. As the technology moves from software into the physical world through robotics and humanoids, China’s manufacturing dominance becomes a decisive advantage. This is where decades of industrial capacity meet cutting-edge innovation, and it is difficult to see how competitors can close that gap quickly.”

TSMC, Samsung and SK Hynix are the top holdings in the Man Asia ex Japan fund*. Andrew is not alone. Many fund managers in Asia are leaning into this trend. For example, TSMC is the largest holding in the FSSA Asia Focus fund, and the second largest holding in the GQG Partners Emerging Markets Equity fund*.

Sean Taylor, manager on the Matthews Pacific Tiger fund, believes valuations in this segment are still compelling and the fundamentals remain intact. “South Korea is also benefiting from the global reindustrialisation theme, particularly in defence, energy and shipping.” While Taiwan’s economy is weaker and less diversified, it continues to gain from the global dominance of its companies in the chip foundry sector.

Domestic policy and consumption trends support the region

However, AI is not the only trend driving Asian markets. Taylor points out that investor confidence in South Korean equities has also been supported by government-led capital market “Value-Up” reforms, designed to eliminate the so-called “Korea discount”, and by new policies to nudge retail investors back into domestic equities from overseas equities through tax-advantaged accounts.

The Chinese consumer, for example, is a theme in the FSSA Greater China Growth fund, and continues to support companies across the region. Manager Helen Chen says that in spite of the aggregate weakness in Chinese consumption, there are opportunities in changing consumption patterns, with people spending more on experiences such as leisure, travel and tourism services.

The government continues to try and support consumption growth, with policies to support employment growth and higher minimum wages, says Helen. “We also expect further actions to stabilise the property sector, which should bode well for consumer confidence.”

The drive for electrification is another important area for many Asian economies, supporting their manufacturing sectors. Andrew Swan says the industrial spending environment is strong, and industrials are currently the highest sector overweight on the fund. He said: “We added a new position in CIMC Enric, a Hong Kong manufacturer of transportation, storage, and processing equipment that is widely used in the energy, chemical, and liquid food industries. Structurally, the company stands to benefit from increased demand for energy storage as countries improve energy security.”

India’s underperformance and the broader outlook

India is the one noticeable weak spot. It has been in the eye of the storm on the energy crisis, which has weakened the currency and stock markets. India has also suffered from its perception as the “anti-AI trade”. It has no major AI infrastructure stocks, and its technology sector is more focused on software providers.

Nevertheless, it has brought valuations down to more realistic levels. Sean Taylor says there have been signs of improvement in economic growth and earnings.

While Asia has been seen as vulnerable to the energy crisis, the impact may not be as severe as originally thought, and the impact on markets has been cushioned by the region’s prowess in AI. Asia’s share of global stock markets remains low relative to its economic clout, and it is increasingly a hotbed of innovation. It remains a fertile region for active fund managers.

*Source: fund factsheet, 30 April 2026