European bourses and emerging markets led by China are the most interesting investment options amid high global volatility because these markets have ample growth potential, say fund managers.
Aberdeen Asset Management said China's accelerating economic recovery and expected policy easing, as well as India's impressive growth momentum, are pivotal drivers for the region.
These dynamics are projected to fuel robust earnings per share (EPS) growth of 12-14% for Asian companies in 2025, said the firm.
"Asian markets are still deeply discounted, representing opportunities for significant fund inflows, especially when US equities face growing concerns over elevated valuations and tax policy uncertainties," said Pruksa Iamthongthong, deputy head of equities for Asia-Pacific at Aberdeen.
Aberdeen maintains a positive outlook on emerging markets, driven by China's gradual recovery and anticipated policy measures to address domestic pressures such as the real estate slump and low inflation, she said.
Trade policies under US President Donald Trump continue to exert pressure. On Feb 1, Trump imposed a 25% tariff on imports from Mexico and Canada, then backtracked soon after. He also slapped a 10% tariff on Chinese goods. Aberdeen views these actions as part of a broader negotiation strategy, with further clarity on US tariff policies expected later this quarter.
The asset manager also expects the March 2025 sessions of China's National People's Congress and other economic conferences to provide more details on stimulus measures.
"China has shown resilience in past trade conflicts, with exports strengthening and gaining global market share. Many Chinese companies have adjusted their supply chains, shifting production to Southeast Asian countries, including Thailand, to mitigate tariff impacts," said Ms Pruksa.
China's economic slowdown affected Asian equities, causing underperformance compared with the US market. However, India and Taiwan stand out, supported by strength in information technology.
India benefits from a large consumer market capable of supporting supply chain adjustments, she said.
Aberdeen projects EPS growth of 10-12% for Asia, with China at 11-14% and India at 16%. Asian equities are trading at a 30% discount to global markets, marking the highest discount in a decade, which presents attractive valuations, noted the asset manager.
Aberdeen suggests three themes for investment in Asia: innovation in tech and advancements in artificial intelligence (AI); globalisation; and a continuation of the supply chain shifts seen during the pandemic. Ongoing diversification is expected to expand across industries, depending on US trade policies.
The asset manager anticipates fund inflows into emerging markets as investors seek alternatives to the expensive US equity market.
The clarity of US tax policies will be a key determinant for these flows, said Ms Pruksa.
MFC Asset Management said the European stock market has continued to recover, helping the profits of banks and brand-name businesses to grow better than expected.
While European stock prices are still cheap and trading remains below the 10-year average, investors should buy for the long term, said MFC, noting US technology stocks have adjusted downwards due to concerns about China's low-cost DeepSeek AI.
MFC recommends gradually investing in quality stocks worldwide and diversifying investments in various industries.