Asian equities currently benefit from several strong tailwinds. High exposure to the build out of artificial intelligence (AI) drove double-digit earnings growth in 2025 across many countries and will likely support further earnings growth. In addition, the weak US dollar typically leads to periods of Asian and emerging market equity outperformance.

Beyond this positive macroeconomic backdrop, the JAGI portfolio managers also note several themes that are influencing stock selection in the portfolio: Korea’s corporate governance improvement, the localisation of China’s technology industry and avoiding exposure to businesses that could be most negatively impacted by AI.

Korean valuations reflect “Value Up” programme

Semiconductor companies Samsung Electronics and SK Hynix are key Korean players in the global build out of AI and contributed to the strong performance of the Korean equity market in 2025. JAGI benefited from a large active position in Samsung Electronics and an overweight position to Korea vs. the benchmark. However, the portfolio’s lack of exposure to SK Hynix, due to its relatively high valuation, detracted from performance in 2025.

JAGI’s overweight position in Korea goes beyond the strength of Korean technology stocks. Hyundai Motor, Korea’s largest automaker and one of the top 10 holdings in the portfolio, has a strong robotics business that is now starting to be appreciated by investors. In addition, Korea’s “Value Up” programme is improving corporate governance and shareholder returns in the Korean equity market and has been leading to increasing dividend payouts and share buybacks. The portfolio managers believe that the momentum from the Value Up programme and strong earnings will continue to drive returns in Korean equities.

Although valuations for Korean stocks have increased, particularly in some technology stocks, JAGI’s portfolio managers compare valuations with other Asian markets. By contrast to Korea, the Taiwanese equity market is trading at an all-time high, while Indian equities still look expensive, but growth has slowed. In this context, JAGI’s portfolio managers believe that many Korean stocks still look attractive, given their growth prospects and potential for corporate governance improvements.

China’s technology localisation vs. AI disruption

China is actively supporting the growth of its domestic technology companies. Rather than focusing on leading-edge technology, China is creating products that are good enough to scale its massive local build-out. For example, China’s wafer fabrication equipment market is forecast to increase by 50% in five years, which could double the size of the market opportunity for local manufacturers and triple their sales. JAGI’s strategy is to invest in China’s domestic champions in technology, equipment, materials and factory automation, which can gain market share and contribute to improving the supply chain.

In contrast, while JAGI maintains a large position in Tencent, which is positively exposed to the growth of AI, the portfolio managers are cautious on some of the smaller ecommerce companies in China, which face a highly competitive market and may be more vulnerable to AI disruption.

Additional sectors across countries that the portfolio managers believe may face competition from AI include high-fee or labour-intensive financial services businesses, such as tax accounting and insurance brokerage, software as a service businesses, legal services, online travel booking and some professional services, such as advertising or human resources. India’s Tata is an example of an IT services company where revenue growth has already been declining and supports JAGI’s lack of exposure to the major Indian IT services companies.

Portfolio performance and positioning

The portfolio’s largest position is Taiwan Semiconductor (TSMC), which is also the largest active position and contributed strongly to returns in 2025, along with Delta Electronics, another Taiwanese technology company. Despite these large positions, the portfolio actually has less exposure to Taiwan than the benchmark (due to not owing a number of smaller technology companies) and a neutral position in technology stocks.

JAGI has more exposure to Australia than the index largely from an off-benchmark position in Telstra, a high-quality telecommunications company offering stable income, and a new position in BHP, a well-run mining company with high-quality assets and that pays out a lot of cash to investors.

Although JAGI is underweight the Indian market, one holding in India is HDFC Asset Management. Financial saving in India is shifting from gold and deposits to market-linked investments, in part due to the rise of systematic investment plans. Mutual fund penetration in India is well below the global average, providing HDFC with an opportunity to capitalise on its strong brand and good performance across its platform to grow assets.

Holdings in two Indonesian banks, Bank Central Asia and Bank Mandiri, also detracted from performance in 2025; the stocks underperformed as the Indonesian economy slowed much faster than expected.

Earnings growth set to provide support to Asia’s markets

JAGI’s track record highlights the portfolio’s ability to perform in a variety of market environments and generate alpha through stock selection across sectors and regions. JAGI’s portfolio managers believe that earnings growth drives markets over the long term, which is good news for investors in Asian equities, as earnings growth looks robust, supported by many companies that will benefit from the build-out of AI, the growth of China’s tech industry and the current US dollar weakness.

The companies mentioned above are for illustrative purposes only, their inclusion is no recommendation to sell or buy.

Summary Risk Indicator

The risk indicator assumes you keep the product for 5 year(s). The risk of the product may be significantly higher if held for less than the recommended holding period.

Investment Objective:

The Company aims to provide total return from investing in equities quoted on the stock markets of Asia, excluding Japan. The Company will have a diversified portfolio of Asian stocks comprising around 50 to 80 investments. The Company typically invests directly although it may also take positions in pooled vehicles to gain exposure to such companies. The Company aims to pay, in the absence of unforeseen circumstances regular quarterly dividends each equivalent to 1% of the NAV at the end of each quarter. The Company also has the ability to use gearing up to a maximum level of 20% of net assets to increase potential returns to shareholders. Gearing may magnify gains or losses experienced by the Company.

Risk Profile:

Exchange rate changes may cause the value of underlying overseas investments to go down as well as up.

Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and systems. Shares may also be traded less frequently than those on established markets. This means that there may be difficulty in both buying and selling shares and individual share prices may be subject to short-term price fluctuations.

External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds and income could decline at the same time, or fluctuate in response to the performance of individual companies and general market conditions.

This Company may utilise gearing (borrowing) which will exaggerate market movements both up and down.

This Company may also invest in smaller companies which may increase its risk profile.

The share price may trade at a discount to the Net Asset Value of the Company.

The Company may invest in China A-Shares through the Shanghai-Hong Kong Stock Connect program which is subject to regulatory change, quota limitations and also operational constraints which may result in increased counterparty risk.

Image source: Gettyimages