Recent findings from Bank of America’s latest Asia Fund Manager Survey indicate a marked decrease in investor confidence across Asia, largely influenced by mounting apprehensions regarding Donald Trump’s administration and the inconsistent recovery landscape in China. Conducted between January 10 and January 16, 2025, the survey captured insights from 214 fund managers responsible for overseeing assets totaling $576 billion. These results unveil a palpable shift in regional preferences and economic outlooks, revealing the precarious nature of current market conditions.
According to the survey data, there is a growing consensus that the economic outlook for the Asia-Pacific region, excluding Japan, is deteriorating. A net 3% of responding managers expect a downturn within the next year, marking one of the gloomiest projections for the region in the past two years. This sentiment aligns with observed drops in profit expectations, which have retracted from last October’s peaks, now conforming more closely to long-term averages. Elevated concerns regarding valuation further complicate the investment landscape, suggesting a cautious approach among portfolio managers.
China: A Worrying Trend for Investors
The most striking observation from the survey is the significant decline in optimism surrounding China’s economic performance. Only 10% of participants anticipate a strengthening economy, a sharp contrast to the 61% optimism recorded just three months prior. This drastic shift underscores the challenges faced by Chinese equities, which are experiencing a surge in bearish sentiment among investors. The propensity to hoard cash among Chinese households and inconsistency in policy measures are cited as key factors contributing to this decline, discouraging many from increasing their exposure to the Chinese market.
Japan: A Silver Lining in Regional Markets
Nevertheless, not all is bleak in the Asia-Pacific investment landscape. Japan’s market has emerged as a favorable alternative, capturing the attention of many survey participants. Approximately 20% of respondents forecast double-digit returns for Japanese equities in 2025, fueled by projections of corporate earnings growth and a stable macroeconomic climate. This positive outlook for Japan marks a significant divergence from the prevailing pessimism surrounding other regional economies.
Furthermore, the survey highlights distinct sector preferences among the fund managers. Semiconductor stocks are currently viewed favorably, trailed by banks and consumer staples, while sectors like real estate and materials lag behind. However, despite these sectoral preferences, BofA analysts caution that investor sentiment remains frail amid the backdrop of uneven recoveries and geopolitical tensions. They assert that implementing strategic positioning will be critical for investors navigating the volatility foreseen in the coming months.
The latest Asia Fund Manager Survey not only illuminates the current state of investor sentiment but also reveals the broader economic challenges facing the region. As Asia grapples with these issues, particularly China’s uneven recovery, the onus will be on fund managers to adapt their strategies accordingly to capitalize on emerging opportunities amidst ongoing uncertainties.