APAC Financial Markets Spotlight – February 2025

While many APAC markets continued their monetary easing, central banks in Australia, Taiwan and Malaysia kept rates on hold, while the Bank of Japan hiked for the first time since July 2024. Resilient global growth and concerns about inflation weighed on bond returns and saw a stronger USD, resulting in broad weakness in FX across APAC. Equity markets were mixed led by Taiwan and Japan over 3M ending 31 Jan 2025.

Key highlights:

• Over the last three months, the direction of monetary policy continued to diverge in APAC as growth outlooks differed and US-China trade tensions raised uncertainty. More hawkish central banks included Japan’s BoJ, which hiked rates further, and Australia’s RBA, which kept rates on hold. By contrast, Korea, Indonesia and Philippines eased. This has led to a divergence of equity performance.
• Uncertainty around US trade policy not only affects China’s economy but also increases risks to growth in economies with higher export exposures such as Singapore, Malaysia, Thailand, Taiwan and Korea. APAC government bond spreads to US Treasuries (UST) narrowed, especially in China, where yields fell given intensifying downside risks to the region’s economic outlook.
• Japan's economy showed resilience with firmer wage growth and consumption. The BoJ raised its policy rate, leading to higher JGB yields and Financials stocks outperforming. In Australia and New Zealand, diverging monetary policies saw the RBA holding rates steady while the RBNZ cut rates amid negative q/q GDP growth. Australian Banks rallied.
• China's government focused on boosting domestic demand and combating deflationary pressures, but geopolitical uncertainties and structural challenges weighed on the growth outlook. The rally in Chinese and Hong Kong equities seen in 3Q24 faded as a result.
• India saw a policy rate cut and fiscal supports to boost consumption. The performance of Korea and Taiwan equities diverged further. ASEAN countries such as Indonesia and Philippines cut rates further, weighing on their Financials stocks and overall equity performance. The Monetary Authority of Singapore eased, but Singapore’s rates are more correlated with US rates, helping Singaporean Financials to outperform.

This report, published quarterly, delves into the major macroeconomic, fixed income, equity and FX market events shaping the APAC financial markets, leveraging our exclusive databases and platforms such as FTSE Russell indices across asset classes, LSEG Workspace, Lipper fund flows and many more.

From key market movements to emerging trends, this report provides insights on how those critical drivers impact different asset classes across individual APAC markets. This report also discusses the interplay between the APAC markets and global events, helping navigate the complexities of today’s financial world.

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