2024 ended on a surprisingly active note across Asian markets, with Q4 bringing notable divergences in regional performance. Taiwan’s tech sector surge and Singapore’s defensive rally contrasted sharply with Korea’s political turbulence, painting a complex picture of the region’s dynamics. As we begin 2025, this quarter-end report examines these varied market outcomes while spotlighting companies we believe are uniquely positioned to navigate and thrive in this evolving landscape. From Standard Chartered’s expanding Asian franchise to Sea’s digital ecosystem dominance and MediaTek’s AI-driven transformation, we see compelling opportunities amid the uncertainty. We hope you find these insights valuable as you navigate the year ahead.
The MSCI All Country Asia Ex-Japan Index saw a slight recovery in December, returning 0.19% (in USD terms1) for the month, but was down 7.37% over Q4 2024. Relative to the rest of the region, Taiwan and Singapore were the outperformers for the quarter, while the rest of the region delivered negative returns, with South Korea and Indonesia being the worst performers. Sector-wise, Information Technology was the only positive-returning sector in Q4, while Materials and Energy were the worst performers.
MSCI China was down 7.52% in Q4 but saw a recovery in December, returning 2.79% for the month. Throughout the quarter, Chinese equity markets faced downward pressure due to ongoing tariff and policy uncertainties. Investor sentiment remained cautious following the National Development and Reform Commission’s (NDRC) limited stimulus announcements in October but improved following the People’s Bank of China’s (PBoC) recent emphasis on a more supportive monetary policy stance. The December announcement included various tools to enhance countercyclical controls and focused on technology innovation and green finance, aiming to stabilize the real estate and capital markets while improving interest rate policy implementation. China’s manufacturing sector improved in Q4, with the official Manufacturing Purchasing Managers’ Index (PMI) ending at 50.1 in December, marking three consecutive months of expansion.2
MSCI India returned -2.87% in December, bringing returns for the fourth quarter to -10.62%. While economic indicators showed mixed trends throughout the quarter, some positive signals emerged. The services sector demonstrated particular strength, with services PMI rising to a 4-month high of 59.3 in December (vs 58.4 in November) as consumer sentiment remained resilient.3 However, manufacturing showed some weakness, with manufacturing PMI softening by 0.1pt to a 12-month low of 56.4 in December.4 Government capital expenditure growth was also slower than expected, averaging 3.7% in October-November.5 Inflation also remained a key point of focus during the quarter, spiking to a 14-month high of 6.2% y/y in October before moderating to 5.5% in November, while core inflation held steady at 3.7%, suggesting underlying price pressures remain contained.
Korean equities further extended losses in December, with equities returning -7.27%, bringing Q4 returns to -19.16%. The market faced multiple headwinds, including domestic political instability following the martial law controversy and subsequent motion to impeach President Yoon, which drove the Korean Won to its weakest level against the US Dollar since the GFC. Foreign investors maintained selling pressure throughout the quarter, with October alone seeing USD 3.4 billion in net foreign selling of KOSPI-listed stocks. Economic data remained soft, with Q3 GDP growth of just 0.1% q/q, narrowly avoiding a technical recession, while export growth showed continued weakness. In response to the deteriorating outlook, the Bank of Korea cut its benchmark rate by 25 basis points to 3.0% in November and lowered its 2024 GDP growth forecast to 2.2%. The tech sector was particularly impacted, weighed down by disappointing corporate earnings and uncertainty surrounding global trade policies.
Taiwan emerged as the top performer on the index in December, with equities rising 4.34%, and also led the quarter with a cumulative gain of 3.39%. For 2024, the TAIEX was up 28%, marking its best gain since the 2008 GFC. The market’s resilience was primarily driven by sustained AI-related demand, particularly benefiting semiconductor manufacturers and technology suppliers. This tech sector strength was reflected in robust economic data, with Q3 GDP growing 3.97% y/y, supported by an 8.04% y/y surge in exports. Despite a temporary setback in November amid broader market uncertainty, Taiwan’s economic outlook remained positive, with the statistics office raising its 2024 GDP growth forecast to 4.27%, up from its August projection of 3.9%.
Within ASEAN, Malaysia was the region’s top performer in December, gaining 2.74%, while Singapore led the quarter with a 2.92% increase. Singaporean equities experienced a strong rally in November, driven by defensive positioning following the US elections and the market’s perception of Singapore as a relative “safe haven” compared to other Asian exporters. Like Taiwan, Singapore achieved its strongest annual gain in over a decade, with 2024 returns up by 31.99%. This robust performance, particularly in the latter part of the year, was supported by an upward shift in market expectations for US interest rates, which has historically favored Singapore’s market over its regional peers. Conversely, Indonesia was the underperformer in ASEAN, declining by 4.09% in December and 15.14% in the fourth quarter. The Q4 market correction was primarily driven by significant foreign outflows totaling USD 2.1 billion, though these outflows were slightly tempered compared to Q3 2024. Additionally, the decline was exacerbated by shrinking domestic equity mutual fund AUM amid a higher-for-longer interest rate environment, depreciation of the Indonesian Rupiah, and rising government bond yields.
As we usher in the new year, global markets are keenly anticipating forthcoming policies from the US, which are poised to set the tone for economic dynamics worldwide. A notable development is former President Trump’s invitation to President Xi Jinping to attend his January inauguration. This gesture is particularly significant given Trump’s tariff campaigns against China but aligns with his diplomatic style of maintaining cordial leadership relationships even while pursuing aggressive economic policies. We also saw some evidence of this in Trump’s recent opposition to the TikTok ban legislation scheduled for January 19, requesting a delay until his administration takes office.
For now, market dynamics appear to be caught in a delicate balance. While economic resilience is preventing a significant market downturn, persistent high bond yields continue to create uncertainty. Currency stability has also emerged as a critical focus area going into 2025. The Indian Rupee’s slide to 85 against the USD by end-2024 and the Chinese Yuan’s movement to 7.30 have raised concerns about regional currency dynamics.6 We are closely watching these movements; particularly the Yuan – if it stays firm, then the pressure significantly reduces on other Emerging Market currencies for a competitive devaluation. With an annual trade surplus of over USD 900 billion and the focus on domestic consumption and internationalization of the RMB, unless a significant tariff increase happens, we expect the RMB should continue to be stable.7
While markets navigate immediate concerns around policy shifts, a deeper structural challenge looms in the US economy. Beneath the surface of economic resilience, the US is grappling with significant fiscal challenges. The federal deficit reached USD 1.8 trillion, or 6.4% of GDP, in the FY24 fiscal year – a record level outside of war, recession, or emergency.8 The situation appears set to worsen, as the Congressional Budget Office projects federal debt held by the public will climb from 99% of GDP in 2024 to 122% in 2034.9 This trajectory is driven largely by mandatory spending, which at USD 4.1 trillion is more than double that of discretionary spending and growing faster due to aging demographics and rising healthcare costs, making the path to fiscal sustainability increasingly critical.10
Despite these fiscal headwinds, we see potential for improvement through rising productivity growth. Even a modest increase in productivity could significantly improve the debt-to-GDP ratio to more manageable levels in the coming years. As AI pilot projects transition into large-scale implementations, we may witness a productivity surge reminiscent of the 1920s boom era. If optimistic scenarios of an AI-driven productivity revolution materialize in the latter half of this decade, it could strengthen the US economy’s growth trajectory without triggering inflation. Such a development would have positive ripple effects across emerging markets through increased US import demand, greater investment flows, and technology spillovers, while contributing to broader global financial stability.
For now, however, we expect markets may increasingly question American exceptionalism over the next 6-9 months, given elevated US market valuations, potentially benefiting emerging markets which are trading at their most attractive levels in years.
China is a key market that we think will be interesting to watch over the next two years. As previously noted, we anticipate a more moderate policy approach to the tariff situation than what market participants expect. It’s more plausible that future tariffs will target specific goods that can be feasibly manufactured within the US. The incoming administration is also acutely aware of the domestic economic pressures, including inflation and rising bond yields, and there is a clear intent to avoid policies that could undermine the broader US economic narrative. Once the broader market perception shifts to recognize the tariff situation as more benign than initially feared, we think that investor focus will once again turn back to China.
Meanwhile, over the past five years, Chinese companies have continued to enhance their competitiveness through substantial investments in R&D and technological advancements across various sectors. Some notable areas of progress include sectors such as solar energy, EVs, consumer electronics, etc. These advancements have not only boosted the domestic economy but have also made Chinese companies attractive compared to global peers. Many of these firms are currently trading at valuations that are a fraction of their US counterparts, presenting compelling investment opportunities as markets recalibrate in the coming quarters.
Indian equity markets experienced a notable pullback in late 2024, a natural consolidation following the remarkable 3-5x gains witnessed across many stocks in the preceding three years. While this correction phase is likely to continue, particularly in the small and mid-cap segments, India’s fundamental growth story remains intact. With real GDP growth expected to maintain a robust pace of 5-6% p.a., India stands out among major economies. The government’s fiscal prudence, healthy foreign exchange reserves, and relatively stable currency provide a solid foundation for medium-term investment prospects, even as markets work through their current adjustment phase.
The recent market correction has created selective opportunities, particularly in large-cap segments. We have increased exposure to the IT and pharmaceutical sectors and will maintain a bias towards large-caps for the next 5-6 months. This period of price discovery should also present attractive entry points in select mid-cap companies, particularly within industrials, consumption, and financial services sectors. These segments continue to benefit from India’s structural growth drivers while offering more reasonable valuations following the recent market adjustment.
ASEAN markets present compelling opportunities across two key themes: the rise of digital platforms and the continued evolution of regional manufacturing hubs. Digital champions like Sea and Grab have emerged as dominant forces by building comprehensive ecosystems that address the region’s unique needs. Their success, for example, in integrating e-commerce, gaming, food delivery, ride-hailing, and financial services demonstrates the power of network effects in driving customer retention and operational synergies across multiple verticals.
Elsewhere, manufacturing increasingly serves as the economic bedrock for many ASEAN economies. While potential US trade tensions pose risks, they may also paradoxically benefit the ASEAN region. The possibility of substantially higher tariffs on Chinese imports relative to other countries could accelerate the ‘China+1’ manufacturing diversification trend, supporting ASEAN’s growing share of global manufacturing value-added. Vietnam stands out as a particular beneficiary of this shift, given the country’s strategic investments in manufacturing infrastructure, competitive labor costs, and robust supply chain networks. Moreover, Vietnam’s recent removal of prefunding requirements for institutional investors in late 2024 marks significant progress toward an emerging market upgrade, which could trigger substantial foreign inflows in the coming years.
Each quarter, we highlight a select number of companies that showcase exceptional growth potential. These stocks on our conviction list represent opportunities we believe will deliver substantial value over the coming years. Here are the standout stocks we’re featuring this quarter.
Standard Chartered Bank (SCB) is a leading global bank with a distinctive competitive advantage in Asia, where it generates more than two-thirds of its business and profits.11 With over 650 branches across 53 markets, the bank has built a particularly strong presence in Hong Kong and Singapore, which together contribute more than 50% of its Asian business.12
What sets SCB apart is its superior business mix compared to peers. While traditional banks typically derive 70% of revenues from interest income, SCB’s balanced model generates about 50% from non-interest income, primarily through its Financial Markets (30% of revenue) and Wealth Management (10%) divisions.13 This diversification not only provides resilience against interest rate cycles but also delivers higher-quality, capital-light earnings that boost returns.
The bank’s return profile is on a clear upward trajectory, with Return on Tangible Equity (ROTE) expected to reach ~12% by FY26, marking the fourth consecutive year of improvement.14 This growth is underpinned by the strong positioning in wealth creation markets across Asia, continued market share gains in Financial Markets, and a resurgent Wealth Management business that has returned to double-digit growth.
Trading at near-record low valuations despite achieving near-decade high returns, we believe SCB offers a compelling opportunity to capture Asian growth through a well-diversified and increasingly efficient franchise.
Sea stands as Southeast Asia’s leading digital ecosystem, commanding a dominant position across e-commerce, gaming, and digital financial services. Through its Shopee platform, Sea controls 50-60% of Southeast Asian e-commerce, while successfully expanding into Taiwan and Brazil, demonstrating its ability to replicate its winning formula in diverse markets.15
What makes Sea exceptional is its three-pronged growth engine. Shopee’s marketplace is experiencing robust 42% y/y GMV growth, reaching USD 25.1 billion in Q3 2024, while steadily improving profitability through rising take rates and advertising revenue.16 The gaming division, anchored by Free Fire’s 100+ million daily active users, provides stable, high-margin cash flows that fund growth initiatives. Meanwhile, the digital financial services arm is rapidly scaling with over 24 million active loan users and 60% year-over-year growth, showcasing Sea’s ability to cross-sell services across its ecosystem.17
Improving economics and strong cash position, positions Sea uniquely to continue investing in growth while competitors face funding constraints. Trading at attractive valuations despite its market leadership and improving profitability, we believe Sea offers investors exposure to Southeast Asia’s digital economy through a company with proven execution capabilities and multiple growth vectors.
MediaTek stands as Asia’s largest and one of the world’s leading fabless semiconductor companies, dominating the smartphone processor market alongside Qualcomm. The company is seeing strong momentum in its flagship 5G chips, where average selling prices (ASPs) are over 4x higher than mainstream chips. With AI integration driving higher semiconductor content, MediaTek’s flagship chip ASPs are expected to rise another 10-20% in 2025, significantly boosting margins and profitability.18
Beyond smartphones, MediaTek is executing a strategic expansion into high-growth markets. Its automotive chip business is poised for substantial acceleration from 2026, while entry into the AI-server ASIC market through a major hyperscaler win opens new growth avenues. Additionally, the company is well-positioned to capitalize on the Windows on Arm opportunity and is reportedly collaborating with NVIDIA for PC market chips.
With strong engineering talent, proven execution capabilities, and multiple growth drivers beyond its core business, we believe MediaTek represents a unique opportunity to capture the semiconductor industry’s next growth phase.
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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.
The fund managed by Shikhara holds the securities mentioned under “Quarterly Conviction Calls” section in the article.
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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.