Market review
Asia Pacific equity markets experienced strong growth over the third quarter of 2025, underpinned by a range of regional dynamics. The Korean stock market surged following the inauguration of a new president in June 2025, which came after the impeachment of the previous leader. Both China and Hong Kong saw strong recoveries, fuelled by increasing investor optimism regarding economic prospects, and optimism over expected US interest rate cuts.
Elsewhere, Southeast Asian countries benefited from ongoing supply chain diversification, as companies sought alternatives to China. Taiwan encountered some volatility as US-China trade tensions eased, but ultimately recovered, supported by sustained demand in artificial intelligence (AI)-related industries.
Overall, the Asia Pacific market demonstrated considerable resilience and strong growth potential, despite ongoing geopolitical uncertainties. Tariffs played a significant role in shaping market sentiment across the region. Heightened US-China trade tensions initially weighed on export-oriented economies such as Taiwan and Southeast Asia. Nevertheless, many countries capitalised on the shift in supply chains away from China, which supported growth in manufacturing hubs such as Vietnam and Indonesia. The recently announced trade truce between the US and China has alleviated some pressures, contributing to a swifter market recovery.
Fund activity
During the quarter, the fund delivered a positive return, although it lagged the benchmark. From a sector perspective, the strongest contributions came from technology, materials and real estate, while gains were partially offset by weaker performance in industrials and consumer staples. At the stock level, overweight positions in Delta Electronics and Alibaba made the largest positive contributions to relative performance, whereas Jio Financial Services and ASX Ltd were the main detractors.
Regarding portfolio changes, we initiated a position in SK Square, and also added holdings in HD Hyundai Heavy Industries and QBE Insurance. We exited our position in Shenzhou International Group due to heightened risks from customer concentration and rising cost pressures. We also sold our holding in China Resources Land, reflecting concerns over China’s property market and tighter regulations. In light of increasing regulatory and environmental challenges, as well as long-term uncertainty surrounding fuel demand, we exited Woodside Energy.
Outlook
In our view, the outlook for the Asia Pacific market remains optimistic, supported as it is by strong domestic fundamentals, attractive valuations, and ongoing structural reforms. Despite external challenges such as US-China trade tensions and global economic uncertainties, we believe that many Asian markets are well positioned to benefit from shifting global supply chains, robust growth prospects, and technological advancements, particularly in artificial intelligence. China’s pro-growth stimulus measures are expected to underpin economic expansion, while India’s growing middle class and digital infrastructure present promising investment opportunities. Valuations across the region remain compelling, with Asia trading at a discount relative to the US, offering an appealing entry point for long-term investors. Nonetheless, it is important to remain mindful of potential risks, including geopolitical developments and currency fluctuations, which could influence market performance.
Important information
Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. Currency fluctuations can also affect performance.
The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice.
This document is issued for information only by Canada Life Asset Management. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available in the literature section.
