Position for Asia’s Innovation and Income
Asia remains an important beneficiary of AI’s next phase, as adoption shifts from investment towards monetisation and productivity. The region combines strong digital adoption with world-leading capabilities in semiconductors, advanced manufacturing, automation, healthcare and energy-transition technologies.
China offers scale, cost advantages and rapid domestic adoption. Japan remains a leader in precision machinery, robotics, electronics and automation, while India and selected ASEAN markets provide exposure to software services, digitalisation, manufacturing relocation and long-term infrastructure investment.
Asia is also central to the data-centre build-out. Demand is extending beyond chips into power generation, electricity networks, cooling, energy storage, connectivity and industrial commodities. Japan is expected to lead data-centre expansion in Asia-Pacific, while Malaysia and other Southeast Asian markets should benefit from new investment and supply-chain diversification.
Improving capital allocation offers a further opportunity. Asian return on equity is projected to rise from around 11.3 per cent in 2025 to approximately 17.3 per cent in 2027, supported by higher dividends, buybacks and stronger capital discipline.
Income remains important. Asian investment-grade credit offers resilience, while selected high-yield bonds can provide additional carry with shorter duration.
In the accompanying video, Desmond Kuang, our Asia CIO, discusses how investors can participate in Asia’s structural growth while balancing innovation with income and focusing on quality, differentiation and diversification.