A slowdown in Asia's economic growth in 2025, including in China and India, had been expected long before the US election, said Dong Chen, Chief Asia Strategist & Head of Asia Research at Pictet Wealth Management. Trump's sweeping victory has wreaked notable uncertainty and new challenges for the regional economy. The threat of additional tariffs could hit Asian exporters, while the subsiding outlook of the Fed's rate-cutting cycle and a strong US dollar could also put pressure on Asian currencies and asset prices.

Policy responses are likely to vary across Asia, with the Chinese government likely to provide the strongest support to cushion the repercussions of additional tariffs on an economy which is still experiencing a real estate downturn and weak domestic demand, Chen continued. Other Asian responses may be more limited given the prospect of limited Fed monetary easing.

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However, uncertainty surrounding Trump's tariffs and the Chinese government's response remains high. Chen forecast that, under a pessimistic scenario of an additional 60% tariff in the US and insufficient policy response, Chen forecast earnings to plunge 10% and valuations to ebb back to 8.5x near recent troughs, resulting in a negative 24% price return. Under an optimistic scenario with lighter tariffs or stronger policy stimulus, price returns were projected to reach 30%, with most of the additional gains coming from valuation expansion. However, Chen assumed that Trump will only slap a 20% tariff on China as he values stock market performance and views tariff policy as a bargaining chip.

On the other hand, Trump's victory in the US election has altered the landscape, further reducing expectations of Fed rate cuts and leading to a drastic strengthening of the greenback. Historically, this will not be good news for ASEAN stock markets and currencies. Trump's tariffs have also weighed on earnings prospects across the region. As such, Pictet Wealth Management has become more cautious in its view of ASEAN equities and believed that investors need to remain selective in their investments in the region in the short term.