As markets digest the implications of America’s political transition, November’s performance across Asia reflects both the challenges and opportunities ahead. This month’s report examines how the region is adapting to evolving US policy signals while highlighting pockets of resilience and growth across different markets. From more measured implementation of US trade policies to emerging domestic growth catalysts, we explore how these dynamics are shaping our investment approach for 2025.
The MSCI All Country Asia Ex-Japan Index fell 3.28% (in USD terms1) over the month of November. Relative to the rest of the region, Singapore was the only country to see positive returns, while the Philippines and Indonesia were the worst performers. Sector-wise, in line with Singapore’s outperformance, Communication Services was the only positive-returning sector, while Materials and Consumer Discretionary were the worst performers.
MSCI China consolidated lower in November, declining 4.48% as negative sentiment from tariff and policy uncertainties weighed on the market. On the positive side, China’s foreign trade saw a significant boost in October, with total exports registering its fastest growth in 19 months, rising 12.7% y/y – a probable inventory restocking ahead of tariff increases. Domestically, multiple cities in China, including Shanghai, Beijing, and Chengdu, handed out new rounds of consumption vouchers in November in a bid to boost consumption into the year-end peak season. The official manufacturing Purchasing Managers’ Index (PMI) improved 0.2pts to 50.3 in November, signaling steady expansion in the manufacturing sector for the second consecutive month.2
MSCI India returned -0.37% in November but outperformed relative to peers thanks to improved economic conditions and corporate earnings. Still, foreign institutional investors (FII) remained net sellers of Indian equities in November, with net outflows of ~USD 2.6 billion (vs net outflows of USD 10.4 billion in October). Goods and Services Tax (GST) collections remain strong, rising 8.5% y/y to INR 1.82 trillion (~USD 21.5 billion) in November, driven by festive demand.3 Meanwhile, inflation remains a key point to watch, with the headline consumer price index (CPI) gaining pace to a 14-month high of 6.2% y/y in October (vs 5.5% in September), largely on account of rising food prices.
Korean equities continued to decline in November, returning -5.73% for the month, as outflows extended from exporters amid uncertainty over Trump’s tariff plans. According to the latest Reuters polls, South Korea’s export growth is expected to have slowed for a fourth straight month in November and reach a 14-month low due to slowing demand.4 This was also reflected in slowing industrial production (IP) growth in October, which decreased by 0.3% from the prior month.5 In response, the Bank of Korea (BoK) lowered the benchmark interest rate by 25bps to 3.0% and also lowered its GDP outlook to 2.2% for 2024 (vs 2.4% forecast in August).
Similarly, in Taiwan, equities fell 4.48% in November amid tariff and geopolitical uncertainty. Despite this, Taiwan’s statistics office expects its trade-driven economy to grow faster in 2024 than previously forecast, thanks to strong AI demand, revising up its GDP forecast to 4.27% for 2024 (vs. 3.9% forecast in August). This was evidenced in Taiwan’s October export figures, where total exports for the month recorded +8.4% y/y to USD 41.3 billion, while export orders rose 4.9% y/y to USD 55.5 billion.6
In ASEAN, Singapore was the outlier across the region this month, with equities returning 8.19%. Flows were most likely driven by defensive positioning following the US elections, as Singapore is perceived as a relative “safe haven” compared to other Asian exporters in the region. Additionally, the stability of the Singaporean dollar and the defensive nature of many local stocks made them attractive during a period of global market volatility. On the downside, the Philippines and Indonesia were the underperformers this month, with equities returning -8.14% and -7.90%, respectively. In the Philippines, 3Q GDP growth came in lower than expected at 5.2% y/y due to successive storms which impacted agriculture and tourism. However, household spending saw an acceleration encouraged by slower consumer price inflation.
Trump’s official return to office is still on the horizon, but early signs of his policy direction are already taking shape. His unconventional, maverick approach is set to usher in significant changes aimed at overhauling the federal government’s structure and operations. For example, the establishment of the Department of Government Efficiency (DOGE), to be led by Elon Musk and Vivek Ramaswamy, signals an aggressive push toward deregulation and federal downsizing. While these reforms may yield positive long-term economic benefits, the rapid pace of change and the dismantling of established practices could lead to near term uncertainty & temporary freeze in spends thereby causing market volatility.
On a positive note, a key stabilizing factor emerges in Trump’s nomination of Scott Bessent to lead the US Treasury. Bessent brings a wealth of experience and a pragmatic approach to the table, which is reassuring amidst global economic apprehensions. As we had postulated in last month’s note, Bessent’s candid articulation of Trump’s tariff strategy also suggests that the proposed tariffs (60% on China and 10-20% on other nations) are a strategic negotiation tool, rather than definitive trade policy positions. In an interview with Fox News following the election, Bessent emphasized that these tariffs are designed to achieve broader foreign policy objectives, ranging from opening foreign markets to US exports to addressing illegal immigration and curbing fentanyl trafficking. This could actually be a positive, as many of these agenda items are a win for both sides.
Additionally, the implementation strategy for new trade policies appears to be more measured than what campaign rhetoric suggested. Rather than immediate high tariffs, Bessent points to a gradual phase-in over two to three years. This incremental approach would help minimize inflationary pressures and provide businesses with the necessary time to adapt and recalibrate their operations, supply chains, pricing strategies, etc.
With all this said, the moderated approach to trade policy could particularly benefit non-US markets as fears of an immediate trade war diminish. However, near-term policy risks still remain during this transition period. In response, Asian economies may take more proactive measures to protect their interests, potentially driving regional growth irrespective of the broader US policy upheavals.
In China, we maintain a cautiously constructive stance on equities while acknowledging the significant headwinds in 2025-26. The combination of potential US tariffs and persistent deflationary pressures could weigh on GDP growth, particularly as higher tariffs may exacerbate overcapacity issues. However, this external pressure could catalyze a long-awaited pivot in China’s growth model. If export and manufacturing weakness threatens the government’s 5% growth target, policymakers still have substantial dry powder to stimulate domestic demand – a shift they’ve not needed to take just yet. The key to unlocking this transition lies in policy stimulus potent enough to boost consumer confidence and spending. With relatively low interest rates and modest central government debt, Chinese policymakers have ample room for both monetary and fiscal stimulus.
Moreover, while near-term challenges are significant, we see potential for technology-driven productivity gains that many investors underestimate. Ironically, increased US pressure through sanctions or export restrictions may accelerate China’s technological self-sufficiency drive, spurring greater domestic investment in strategic capabilities. This combination of policy flexibility and technological advancement potential keeps us constructive on select opportunities in the Chinese market, particularly in sectors aligned with domestic consumption.
Recent market dynamics in India have validated our selective approach, with a notable correction particularly pronounced in the small and mid-cap segments. We have been worried about the rapid growth in unsecured retail credit over the past year, and thankfully, the Reserve Bank of India stepped in to curtail lending growth before it became a bigger problem. We’ve also been careful to avoid sectors where increasing competitive intensity could hurt profits. Consequently, we stayed clear of momentum-driven mid and small-cap companies with weak business models and instead focused on increasing exposure to relatively resilient sectors like IT, select banks, and tourism. This strategy has served us well over the past two months, providing valuable downside protection during recent market turbulence.
In other news, the political landscape in India continues to evolve favorably, with the BJP’s victory in the Maharashtra state elections strengthening Prime Minister Modi’s position. This electoral success not only provides Modi with the political capital needed to pursue further reforms but also helps establish a floor for market sentiment. The BJP’s effective coalition-building and demonstrated electoral strength suggest a supportive environment for continued market stability and policy continuity.
Drawing parallels with Trump’s first term, when ASEAN benefited from trade diversion, we anticipate significant opportunities in the region during his second term once tariff policies crystallize. ASEAN markets are currently trading at attractive valuations and remain under-owned by global investors while offering superior nominal growth prospects compared to most global markets heading into 2025 and beyond. We are focusing our research efforts on markets with resilient domestic demand drivers, particularly the Philippines, Vietnam, and Indonesia, while maintaining exposure to the region’s leading digital economy players that operate across multiple ASEAN markets.
Our portfolio positioning emphasizes economies with strong domestic drivers, healthy fiscal positions, and favorable debt-to-GDP ratios. We are particularly drawn to markets that have seen underinvestment over the past five years and stand to benefit from infrastructure growth and China+1 diversification. Given our expectation of higher interest rates for longer and potential economic slowdown from delayed monetary policy impacts, 2025 is likely to deliver more modest returns, making capital preservation all the more critical.
Within this framework, we see compelling opportunities in several key themes. Travel and tourism stands out as a robust sector, with consumers increasingly prioritizing experiential spending. Our exposure includes dominant online travel agencies that are achieving meaningful scale benefits and extending their footprints beyond their home markets. Another promising theme is the growing demand for software customization, particularly as companies move from hardware acquisition to large-scale AI implementation. Indian IT services companies are well-positioned to capture this opportunity, given their established expertise and active upskilling of their workforce in AI.
In essence, our positioning during this uncertainty corridor is to focus on resilient businesses – companies with proven execution capabilities that can deliver growth even in a slower economic environment. This defensive yet opportunistic positioning reflects our cautious outlook while maintaining exposure to structural growth opportunities.
For sophisticated investors only. For informational purposes only. The information presented in the material is not, and may not be relied on in any manner as legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy an interest in any investment product or any other entity sponsored or managed by Shikhara Investment Management. This material doesn’t constitute and should not be considered as any form of financial opinion or recommendation.
This material is prepared by Shikhara Investment Management LP (“Shikhara”). This material does not constitute an offer to sell or the solicitation of an offer to buy in any state of the United States or other U.S. or non-U.S. jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such state or jurisdiction.
Investment involves risk. Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the investment product will generate a return and there may be circumstances where no return is generated. Investors could lose all or a substantial portion of any investment made. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the investment product and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Shikhara’s investment products are suitable only for sophisticated investors and require the financial ability and willingness to accept the high risks and lack of liquidity inherent in Shikhara’s investment products. Prospective investors must be prepared to bear such risks for an indefinite period of time. No assurance can be given that the investment objectives of any given investment product will be achieved or that investors will receive a return of their investment.
Certain of the information contained in this material are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements.
Certain information contained in this material is compiled from third-party sources. Whereas Shikhara has, to the best of its endeavor, ensured that such, information is accurate, complete and up-to-date, and has taken care in accurately reproducing the information, Shikhara takes no responsibility for the accidental publication of incorrect information, nor for investment decisions taken based on this material. Neither Shikhara nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and nothing contained herein should be relied upon as a promise or representation as to past or future performance of any investment product or any other entity.
The contents of this material are prepared and maintained by Shikhara and has not been reviewed by the Securities and Exchange Commission of the United States.
This website is published exclusively for the purpose of providing general information about the management services carried out by Shikhara Investment Management LP, Shikhara Capital (Hong Kong) Private Limited and its affiliates (collectively “Shikhara Investment Management” or “Shikhara”). The information presented on the website is not, and may not be relied on in any manner as legal, tax, investment, accounting, or other advice or as an offer to sell or a solicitation of an offer to buy an interest in any investment product or any other entity sponsored or managed by Shikhara Investment Management. This website doesn’t constitute and should not be considered as any form of financial opinion or recommendation.
Shikhara Investment Management LP is currently an Exempt Reporting Adviser that is exempt from registration as an investment adviser with the U.S. Securities and Exchange Commission and Shikhara Capital (Hong Kong) Private Limited has been approved by the Hong Kong Securities and Futures Commission. This website does not constitute an offer to sell or the solicitation of an offer to buy in any state of the United States or other U.S. or non-U.S. jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such state or jurisdiction.
Investment involves risk. Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the investment product will generate a return and there may be circumstances where no return is generated. Investors could lose all or a substantial portion of any investment made. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the investment product and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Shikhara’s investment products are suitable only for sophisticated investors and require the financial ability and willingness to accept the high risks and lack of liquidity inherent in Shikhara’s investment products. Prospective investors must be prepared to bear such risks for an indefinite period of time. No assurance can be given that the investment objectives of any given investment product will be achieved or that investors will receive a return of their investment.
Certain of the information contained in this website are statements of future expectations and other forward-looking statements. Views, opinions, and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance, or events may differ materially from those in such statements.
Certain information contained in this website is compiled from third-party sources. Whereas Shikhara Investment Management has, to the best of its endeavor, ensured that such information is accurate, complete, and up-to-date, and has taken care in accurately reproducing the information, Shikhara Investment Management takes no responsibility for the accidental publication of incorrect information, nor for investment decisions taken based on this website. Neither Shikhara Investment Management nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and nothing contained herein should be relied upon as a promise or representation as to past or future performance of any investment product or any other entity.
The contents of this website are prepared and maintained by Shikhara Investment Management and has not been reviewed by the Securities and Exchange Commission of the United States or the Securities and Futures Commission of Hong Kong.
The Shikhara logo and name are trademarks of Shikhara Investment Management LP, registered in Hong Kong, the People’s Republic of China (PRC), Australia, the United Kingdom and the European Union and pending registration in the United States.