Investing in Asia-Pacific Equities: Opportunity and Complexity

Asia-Pacific represents approximately 35-40% of global GDP and is home to several of the world's most important economies — China, Japan, India, South Korea, Australia, and Taiwan among them. Yet most internationally mobile Western investors are significantly underweight the region, either through home bias or through reliance on market-cap-weighted global indices that underrepresent Asia-Pacific relative to its economic weight. Understanding the distinct opportunity and risk profiles within the region is essential for building a genuinely global portfolio.

The Asia-Pacific Universe

Asia-Pacific is not a homogeneous investment destination. It encompasses:

• Developed markets — Japan, Australia, Singapore, Hong Kong (MSCI World eligible)
• Emerging markets — China, India, South Korea, Taiwan, Indonesia, Thailand, Malaysia, Philippines, Vietnam
• Frontier markets — Bangladesh, Pakistan, various Pacific island economies

The equity market characteristics, liquidity, governance standards, political risk, and valuation levels vary enormously across these markets. A single "Asia-Pacific ETF" contains exposures with very different underlying characteristics.

India: The Standout Structural Opportunity

India has emerged as the most compelling structural growth story in global emerging markets. The investment case rests on several foundations:

Demographics and domestic consumption. India surpassed China as the world's most populous country in 2023. More importantly, its demographic pyramid is young — the median age is approximately 28, versus China's 38. A young, growing workforce and rising disposable incomes drive domestic consumption across consumer goods, financial services, healthcare, and housing.

GDP growth. India has grown at 6-7% annually in recent years, making it one of the world's fastest-growing major economies. The IMF projects India to be the world's third-largest economy by GDP by the early 2030s, overtaking Japan and Germany.

Technology and services excellence. India's IT services sector — Infosys, Tata Consultancy Services, Wipro, HCL Technologies — serves global multinationals with world-class software services and is now integrating AI into its offering. The services export sector generates substantial foreign exchange and provides currency support.

Manufacturing diversification. The "China plus one" strategy — global companies reducing supply chain concentration in China — is directing new manufacturing investment to India. Apple is manufacturing iPhones in India; Samsung, Foxconn, and others are expanding Indian production. The Production Linked Incentive (PLI) schemes are accelerating this trend.

Market performance. The Nifty 50 and BSE Sensex have delivered very strong long-term returns. The Nifty 50 has compounded at approximately 12-14% per annum over 20 years.

The risks. Indian equities are expensive — a consistent feature of the market that reflects its quality premium. Infrastructure bottlenecks (power, logistics, urban congestion) constrain growth. Corporate governance at smaller companies can be weak. Political risk, while modest under stable central government, is a consideration. Currency risk: the Indian Rupee has depreciated gradually against sterling and the USD over the long term.

How to invest in India. iShares MSCI India UCITS ETF; Xtrackers MSCI India Swap UCITS ETF; Franklin India Fund (active); Ashoka India Equity Investment Trust (LSE-listed, active).

China: The Complex and Discounted Opportunity

China is the world's second-largest economy and home to extraordinary businesses — including Tencent, Alibaba, Meituan, PDD Holdings, and BYD — that are globally relevant. Yet investing in Chinese equities requires accepting a set of risks that have multiplied significantly since 2021.

The regulatory crackdown. In 2021, the Chinese government launched a sweeping regulatory campaign targeting its largest technology companies: fines and operational restrictions on Alibaba, restrictions on Didi's IPO, limitations on online gaming for minors (affecting Tencent), and the effective elimination of the for-profit online education sector overnight. The message to investors was clear: no Chinese company is safe from regulatory intervention if it conflicts with state policy priorities.

The property crisis. China's property sector — which directly and indirectly represents approximately 25-30% of GDP — entered a prolonged crisis from 2021 as the "three red lines" policy restricted highly leveraged developers' access to financing. Evergrande (once the world's most indebted property company) defaulted; Country Garden, Sunac, and others followed. The resulting drag on consumer confidence and bank balance sheets has been a significant headwind to the broader economy.

Geopolitical risk. US-China tensions over technology (semiconductor export controls), trade (tariffs), and Taiwan create a genuine risk of sanction escalation that could affect foreign holdings in Chinese companies. The MSCI's continued inclusion of Chinese equities in its indices provides a floor of institutional demand, but the risk of forced portfolio liquidation cannot be dismissed.

The valuation case. Chinese equities, as measured by the MSCI China Index, trade at approximately 10-12x forward earnings — among the cheapest valuations of any major equity market globally, compared to 20-22x for the US and 18-20x for India. This deep discount may reflect: (a) genuine risk that justifies low valuations; (b) excess pessimism that represents an opportunity for patient contrarian investors. Both arguments can be made.

For most internationally mobile investors, maintaining a small, deliberate China allocation (5-10% of emerging market exposure, if any) at current discounted valuations is a risk trade with asymmetric upside potential, rather than a core long-term holding.

Japan: The Governance Reform Story

Japan is covered in depth in our dedicated guide, but the key themes warrant summary here. The TSE corporate governance reform programme — requiring companies trading below book value to present improvement plans — has been a catalyst for significant capital returns to shareholders through buybacks and dividends. Combined with very low valuations relative to global peers and a weak yen that is competitively advantageous for Japanese exporters (Toyota, Sony, Nintendo, Keyence, Fanuc), Japan has been one of the strongest-performing developed equity markets of 2023-2025.

The structural question is whether the governance improvements represent a permanent regime change in Japanese corporate culture or a temporary episode of reform compliance. The evidence so far points to genuine cultural shift, but long-term investors have been disappointed by previous Japanese reform efforts that did not persist.

South Korea and Taiwan: Technology Concentration

South Korea and Taiwan are heavily technology-weighted markets with distinctive geopolitical risk profiles.

South Korea is dominated by Samsung Electronics (semiconductors, consumer electronics) and SK Hynix (memory semiconductors) — two companies that together represent a large share of the MSCI Korea Index. LG Electronics, Hyundai Motor, and POSCO round out the large-cap universe. Korea's market is well-governed by emerging market standards, with strong accounting transparency. The geopolitical risk from the Korean Peninsula is priced into valuations — Korea consistently trades at a "Korea discount" relative to peers.

Taiwan is perhaps the most geopolitically sensitive equity market in the world. Taiwan Semiconductor Manufacturing Company (TSMC) is the world's most important single company in the technology supply chain — it manufactures most of the world's most advanced semiconductors for Apple, Nvidia, AMD, and others. Taiwan's geopolitical situation (the PRC's claim to sovereignty over the island and the associated military risk) is a genuine tail risk for investors. The "Taiwan discount" exists but is partially offset by TSMC's irreplaceable strategic position.

Southeast Asia: The ASEAN Growth Story

Southeast Asia's major economies — Vietnam, Indonesia, the Philippines, Thailand, and Malaysia — collectively represent a significant and growing economic zone with younger demographics, rising middle classes, and significant manufacturing investment.

Vietnam has been a primary beneficiary of supply chain diversification from China, with Samsung, Intel, and many other technology manufacturers establishing or expanding operations. It is one of Asia's fastest-growing economies.

Indonesia — the world's fourth most populous country — has a large domestic consumer market, significant commodity wealth (nickel, coal, palm oil), and an increasingly attractive investment environment under the Prabowo Subianto government.

Access to these smaller ASEAN markets is best achieved through regional ETFs (iShares MSCI EM Asia ETF, Vanguard FTSE Emerging Markets UCITS ETF) or dedicated Southeast Asia funds (Stewart Investors Asia Pacific Sustainability Fund; Aberdeen Asia Focus Investment Trust).

Building Asia-Pacific Exposure

A practical framework for internationally mobile HNW investors:

Core Asia-Pacific allocation (via a diversified regional ETF): iShares Core MSCI Pacific ex-Japan UCITS ETF or iShares MSCI AC Far East ex-Japan UCITS ETF.

India-specific allocation (to capture the distinct India growth story): iShares MSCI India UCITS ETF or an active India fund such as Franklin India or Ashoka India Equity Investment Trust.

Japan allocation (via dedicated Japan fund or ETF if not already included in global portfolio): covered in our separate Japan equities guide.

China (optional, risk trade): small allocation via iShares MSCI China UCITS ETF at current discounted valuations, sized appropriately to the investor's risk tolerance.

Active regional exposure for broader depth: Stewart Investors Asia Pacific Sustainability; Pacific Horizon Investment Trust (Baillie Gifford-managed, LSE-listed).

The total Asia-Pacific allocation for a globally diversified portfolio might range from 10-20% of the equity allocation, depending on the investor's risk appetite, existing regional exposures, and conviction on individual country stories.

How Global Investments Can Help

Our advisory team includes specialists in Asian equity markets who can help clients navigate the distinct investment characteristics, governance standards, and geopolitical risk profiles of the major Asia-Pacific markets. We help clients build deliberate, appropriately sized regional allocations — particularly in India, where the opportunity is compelling but valuation discipline is essential — and advise on the most appropriate vehicle (ETF versus active fund, UCITS versus offshore) for each client's tax and regulatory situation. Investments can fall as well as rise; currency movements can significantly affect returns for non-local investors; seek professional financial advice before making investment decisions.