Market Review January 2026
Risk assets continued to head higher going into the final month of the year as Fed reduced interest rate by 25 bps in December. The World Index gained 0.73% in December. The MSCI Far East Ex. Japan index recovered, gaining 3.24%, driven by North Asia markets, in particular Korea and Taiwan markets. Within the Asia region, ASEAN equities’ gain was a tad lower at +3.04%, led by Vietnamese (+5.82%) and Malaysia (+6.68%). The performance of regional currencies was mixed against the USD. The best performing currencies were Malaysia Ringgit (+1.78%) and Thai Baht (+1.96%), while the weaker ones were Taiwanese NT (-0.08%) and Philippines Peso (-0.54%).
Performance of US indices diverged with cyclical and value-oriented sector faring better than technology sector. The Fed’s 25 bps cut in interest rate kept investors’ sentiment positive. For the month, Dow Jones Industrial Average (DJIA) gained 0.73%. The S&P 500 Index and Nasdaq Composite corrected 0.05% and 0.53% respectively. As for economic data, a softening inflation data and strong retail sales during the holiday season suggest resilient economic activities. The core PCE inflation had fallen to 2.4% in November, moving closer toward the Fed’s 2% target. The November headline CPI came in at +2.6%, also softening. Retail sales surprised, up 0.8% mom, pointing to robust holiday spending. The private sector added 41k in December compare to economists’ consensus expectation range of 48k to 50k indicating that US job market is entering 2026 with softening momentum. The wage growth remained the same at +4.4% YoY.
The Stoxx Europe 600 Index added 2.73% from prior month, driven by investors’ optimism over growth prospect [in the Eurozone] as inflation fighting regime ended. The ECB cut rate by 50 bps in December, exceeding the consensus forecast of 25 bps. The Eurozone Q4 GDP growth came in at -0.2% QoQ. reinforcing the case for further ECB support.
Hong Kong and H shares indices corrected in December. Hang Seng Index and Hang Seng China Enterprises Index declined 0.88% and 2.37% respectively. Chinese A shares gained 2.28%. Chinese economy continued to face headwinds. China November manufacturing PMI showed only a mild recovery on a low base. Since PMI reflects MoM changes, November’s 0.2ppt increase (to 49.2%) following October’s sharp 0.8ppt drop signals only marginal improvement. It remained in the contractionary stage.
South Korea’s KOSPI Index recovered strongly, gaining 7.32% in December on strong performance of key index counters driven by AI theme. South Korea’s inflation rate continued to moderate in December. The consumer price index (CPI) in December rose 2.3% from year earlier. The foreign reserves fell for the first time in seven months in December amid increased volatility in the foreign exchange market that prompted authorities to take a series of market stabilization measures.
Taiwan’s TWSE Index gained 4.84% on technology sector strength. Taiwan exports continued to show strength with orders reaching US$72.92bn in November, up 5.1% MoM and up 39.5% YoY, exceeding the median estimate of 32%, as well as the previous month’s 25.1% growth. Orders for ICT products were particularly strong, followed by electronics products. Taiwan’s unemployment rate fell for a third consecutive month in November to 3.33%, down 0.03 ppt compared to the prior month, signaling continued stabilization in the labor market. The figure marked the lowest jobless rate in the past 25 years.
Singapore’s STI continued to move higher, gaining 2.70% Singaporean economy accelerated significantly in Q4 2025, posting a strong 5.7% YoY expansion fuelled largely by a massive 15% surge in the manufacturing sector. This growth was led primarily by the biomedical and electronics clusters, signalling a robust recovery in trade reliant industries. While construction growth slowed slightly to 4.2%, the services sector remained steady, helping push full-year GDP growth to 4.8%, up from 4.4% in 2024.
Malaysia’s KLCI gained 4.71% on strong currency gain. The external economy remained a key driver for the economy as Malaysia’s export value reached RM1.45 trillion for the period of January to November 2025. Compared with January to November 2024, exports rose by nearly 6.1%. The strong exports also contributed to official reserve assets rising to US$124.12 billion as at November 2025, compared to US$116.22 billion as at end 2024. It helps to support the Ringgit strength.
Thailand’s SET Index gained 0.24% on short covering. Domestic consumption remained weak. Private consumption in Thailand fell 0.3% month-on-month in November 2025, reversing the 1.3% growth in October. The decline was mainly due to weaker spending on non-durable goods, reflecting lower fuel sales and reduced electricity usage. Durable goods consumption also contracted, in line with fewer motorcycle registrations and lower passenger car sales. Thailand’s Parliament was dissolved, paving the way for a new general election to be held on 8 February 2026. The market viewed the development with caution, hoping to see a reset of the political landscape in Thailand.
Jakarta Composite Index continued to strengthen with a 1.62% gain. Indonesia S&P Global Manufacturing PMI slipped to 51.2 in December from November’s 53.3, though it is the 5th consecutive month of expansion. Growth in new orders slowed, but capacity pressure persisted, driving rise in backlogs. Input cost inflation remained high, with higher raw material prices and supply shortage cited.
The Philippines PSE Index recovered on bargain hunting after a few months of correction, gaining 0.51%. The easing inflation gave the Philippines Central Bank (BSP) confidence to deliver its fifth straight 25 bps cut in December, bringing the policy rate down to 4.5%. Manufacturing PMI sank to a four-year low of 47.4, unemployment ticked up to 5% in October, net FDI inflows slid 25.8% YoY, and approved building permits plunged over 22%.
Vietnam’s VN-Index gained 5.53%. The Vietnamese manufacturing sector continued its expansion in December 2025, although the S&P Global PMI eased to 53.0 from 53.8, signalling a modest slowdown in momentum. While production and new orders extended their growth streak to eight months, the pace was tempered by supply chain disruptions stemming from recent storms and flooding. Despite these logistical headwinds, manufacturers increased hiring to tackle backlogs. Business sentiment rallied to its highest level since March 2024, as firms bet on improved weather conditions and stronger demand to drive future capacity.
For 2026, the shift of market focus to dovish monetary stance particularly in the US will likely be supportive of risk assets in near term. The Fed reduced rates by 25 bps in December. However, there is much uncertainty as to whether there will be a further acceleration of reduction in 2026, which if it does, will provide tailwinds into the new year. The market is still divided on impact of higher tariffs on macro variables such as inflation and economic activities. US corporate earnings, especially in the technology sector, continue to be key pillar to hold up risk assets. US market valuations are at historical high, and the high valuation is supported by strong capital expenditure drive for AI. But, questions are starting to emerge as to whether the humongous expenditures in AI will generate the anticipated returns. The semiconductor and AI investment cycle may move into a more difficult phase as investors will start to be more discerning with regard to their return on investment. The supply and demand dynamic in the semiconductor cycle, on the margin, with supply capacity gradually improving at a time when global demand soften on lower GDP growth outlook, can potentially result in headwinds for the industry.
Geo-political developments as well as policy directions in the major economies, in particular US and in China, remain on our radar screen. The market is still watchful of developments in Trump’s tariffs for the key trade partners. The US Supreme Court is expected soon to render its widely anticipated ruling on the legality of the Trump Administration’s reciprocal tariffs. The market is also attentive to other US policy pronouncements that would have major fiscal, financial and economic implications. Investors, by and large, appear to be comfortable with Trump’s “Big Beautiful Bill” that has been signed into law, notwithstanding that it will substantially increase US federal deficit and government debt. Meanwhile, new geo-political fissures have opened up with the recent US military raid and capture of Venezuela President, Nicolas Maduro Moros, and the repeated utterings by President Trump of his intention to bring Greenland within the US fold, militarily if necessary. These developments further heightened tension in global politics. In the near term, the US mid-term election to be held in the later part of 2026 may change the balance of power in the US Congress, and have significant impact on US policies in the remaining years of Trump’s term. These developments will create uncertainties for investors.
In Asia, the focus is on the pace of China’s economic recovery which has been weaker than expected. The tariff issues with the US and continuing efforts to broaden restrictions on sales of tech equipment and services to Chinese entities can only exacerbate the economic situation in China. The Chinese property sector continues to face challenges, and any sign of stabilization and growth will have positive catalyst for China’s economy and risk assets. The Chinese government continues to bring forth various measures to help the economy. The Chinese government remains constructive on policies to spur economic activities to achieve economic growth target. The various measures have boosted market sentiments. However, the longer- term effectiveness on China’s economy continues to be closely watched. It may take time for the initiatives to bear fruits. The focus will be on addressing the challenges in the property market, lifting consumer sentiments and consumption, and countering the effects of the new US tariffs.
On external trade, countries with high export dependency for growth in the Asia region including ASEAN will face significant challenges arising from the US tariff policies. The disruption in supply chain realignment may result in temporary mismatch in corporate earnings delivery against market expectation during the initial stage of tariff implementation. To-date, while ASEAN countries’ exports to the US have been impacted by the tariffs, these countries have been able to mitigate the impact on the economic growth through trade diversifications.
While interest rates have started to be eased, there remains headwind for risk assets, including the impact of the still high interest rate on business and economic activities, uncertainties in US policies post the US Presidential election, the still rising and historically high market valuations in the US, the geo-political tension in various parts of the World, and the still slower than expected economic growth in China. However, in the investment space we are in, we believe there is room for cautious optimism. After years of prolonged sell down, and despite the upticks in recent months, China equities are under-owned and their favourable valuation offer potential upside, particularly following the recent rounds of significant policy change initiatives from China. Also, the prospect of further softening of the US dollar could see increasing funds flow out of US assets which could be beneficial for emerging markets including China and ASEAN.
We continue to apply our strategy of focusing on identifying fundamentally healthy companies with low valuations, low leverage, high growth, robust management and a strong track record, and adherence to our investment philosophy of “Never Fully Invest at All Times” which has served us well over the years.
We thank you once again for your continued faith in us and hope to remain good stewards in our endeavour to protect and grow your capital.