Asia investor optimism dwindles on US policy uncertainty, China’s struggles- BofA

Investing.com– Investor sentiment in Asia has dampened as markets seek clarity on Donald Trump’s administration policies and navigate China’s uneven economic recovery, according to Bank of America’s (BofA) latest Asia Fund Manager Survey.

Conducted from January 10-16, 2025, the survey gathered responses from 214 participants managing $576 billion in assets, revealing shifting regional preferences and economic outlooks.

BofA’s report noted a softening economic outlook for the Asia-Pacific (APAC) region excluding Japan, with a net 3% of respondents expecting the economy to weaken over the next 12 months. This reflects the second-weakest growth sentiment for the region in two years.

Furthermore, profit expectations have moderated from October’s highs to align with long-term averages, while valuation concerns remain elevated, BofA analysts said.

In China, optimism significantly declined, with just 10% of respondents anticipating economic strengthening, a sharp drop from 61% in October.

Investor patience has been tested by faltering market gains, and structural bearishness toward Chinese equities has surged to near all-time highs, analysts wrote. Most survey participants indicated reluctance to increase exposure to China’s market, citing cash hoarding by households and uneven policy outcomes as factors

On the other hand, Japan emerged as a favored market, according to BofA. Around 20% of respondents forecast double-digit returns for Japanese equities in 2025, supported by expectations of corporate earnings growth and a stable macroeconomic environment.

Semiconductor stocks led sector preferences regionally, followed by banks and consumer staples, while real estate and materials lagged.

BofA analysts suggest global investors remain cautious, particularly in light of uneven economic recoveries and geopolitical uncertainties. They emphasized that strategic positioning will be essential to navigating the volatility ahead.