(From
left)
James
Chu,
Chairman
at
KGI
Securities
Investment
Advisory;
James
Wey,
Head
of
International
Wealth
Management
at
KGI;
Cusson
Leung,
Chief
Investment
Officer
at
KGI
Looking
back
over
the
first
half
of
the
year,
Trump
officially
took
office
as
President
of
the
United
States
and
started
a
trade
war.
At
one
point,
he
even
threatened
to
levy
tariffs
on
China
of
more
than
100%,
triggering
massive
market
fluctuations.
Since
then,
many
countries
have
entered
negotiations
with
the
U.S.,
and
positive
signals
have
emerged.
How
will
the
ongoing
tariff
war
affect
global
economic
development?
How
will
the
economic
uncertainty
created
by
Trump’s
policies
influence
interest
rate
trends?
How
will
China
respond
to
the
increasingly
tense
trade
relationship?
And
how
will
China
achieve
economic
growth
targets
amid
external
economic
instability?
Under this backdrop, for the second half of the year, we maintain the “ACE” strategy:
- Alternatives: Gold and other alternative assets are expected to be inflation-resistant and have lower correlation with traditional stocks and bonds.
- Credit Selection: Maintain a preference for high-grade bonds, as the market still presents opportunities to lock in yields.
- Elite Stocks: Diversify investment in quality stocks, balancing the allocation between cyclical and defensive stocks.
Cusson Leung, Chief Investment Officer at KGI, says: “In terms of asset allocation, considering the economic and political developments in the second half of the year, investors can continue to follow the ACE strategy: A is Alternatives. The fiscal conditions of multiple governments have sparked controversy, coupled with central banks diversifying asset allocations and geopolitical instability, which will be favorable to gold prices. C is Credit Selection. We expect downside risks to the economy, thus maintaining a preference for quality bonds. Corporate bonds will provide opportunities to lock in yields. E is Elite Stock. Tariff expectations are anticipated to impact corporate earnings; cyclical stocks and defensive stocks can be balanced in the allocation. Outside the United States, focus on countries with minimal tariff impact or those that have already reached agreements.”
Macro
&
U.S.
Markets
In
2H2025,
the
global
economy
will
enter
a
slowdown
mode,
particularly
in
emerging
markets,
with
the
slowdown
being
most
pronounced
in
the
United
States
among
mature
markets.
In
the
first
half
of
the
year,
U.S.
companies
stockpiled
goods
in
anticipation
of
tariff
wars,
resulting
in
decent
economic
performance.
However,
this
situation
will
not
continue
into
the
second
half,
with
GDP
growth
rates
potentially
falling
below
1%,
averaging
around
1.35%
for
the
year.
The
slowdown
in
the
Eurozone
and
the
UK
will
be
less
pronounced
than
in
the
U.S.,
but
the
negative
impacts
of
the
trade
war
cannot
be
underestimated.
The
economic
outlook
for
Japan
and
China
is
also
bleak.
In the first half of the year, the U.S. economy shone due to strong demand, but this demand is expected to wane in the second half, leading to weaker economic data. The uncertainty of Trump’s policies affects consumer confidence and corporate orders, with labor market data showing a downward trend, further impacting wages and consumption.
The Fed may cut interest rates by 25 basis points in the fourth quarter of 2025 and continue to lower rates by 50 to 75 basis points in 2026. As for U.S. stocks, the likelihood of entering a bear market this year is low, but a decline is possible in the third quarter, with annual profit estimates dropping from 14.1% to below 9%. Investors are advised to focus on defensive and high-quality stocks to weather the economic downturn.
In terms of bond investments, the weakening U.S. economy is expected to drive bond yields lower, with Treasury yields projected to fall to 4.0%-4.3% from the latter half of the third quarter to the fourth quarter. It is recommended to invest in higher-quality investment-grade corporate bonds and consider transitioning to non-investment-grade corporate bonds when the economy hits bottom.
James Chu, Chairman at KGI Securities Investment Advisory, says: “The easing of the trade war has reduced the risk of a U.S. economic recession, but its uncertainty has already affected economic confidence and will put pressure on hard data in the future. The recent rise in the stock market has brought valuations back to high levels. Investors need to be aware of the expiration of the tariff suspension and the subsequent economic and corporate earnings revisions that could bring volatility.”
Mainland
China
and
Hong
Kong
Markets
Since
early
2025,
China’s
economy
has
shown
marginal
improvement
amid
multiple
internal
and
external
factors.
In
the
trade
sector,
after
reaching
a
90-day
short-term
tariff
exemption
agreement
with
the
United
States,
market
expectations
for
the
full-year
GDP
growth
rate
have
risen
from
the
initially
announced
“Liberation
Day”
figure
of
4.2%
to
4.5%
following
the
preliminary
agreement;
on
the
other
hand,
although
exports
to
the
U.S.
continue
to
shrink,
exports
to
ASEAN
and
India
have
increased
significantly,
with
exporters
actively
expanding
multilateral
markets
to
mitigate
external
shocks,
and
the
proportion
of
China’s
exports
to
the
U.S.
continues
to
decline.
Against
this
backdrop
of
external
challenges,
the
Chinese
government’s
four
economic
priorities
include:
(1)
maintaining
liquidity
in
the
banking
system,
(2)
boosting
consumer
confidence,
(3)
supporting
innovation
and
technology
to
drive
high
value-added
production
strategies,
and
(4)
expanding
trade
alliances
beyond
the
U.S.
China-U.S. relations will continue to play out in a “periodic tension and relaxation” new normal. Facing U.S. escalating high-tech export controls, China is accelerating the strengthening of domestic supply chains, diversified trade strategies, and independent R&D to promote core technology autonomy and control. The continued growth of gold reserves highlights the value of this safe-haven asset in uncertain environments. Regarding the Hong Kong stock market, the Hang Seng Index has performed strongly since the beginning of the year, reflecting sustained overseas capital allocation to Chinese assets and rising risk appetite. Overall, in the second half of 2025, China’s economy will continue to recover driven by policy support, domestic demand rebound, and manufacturing transformation and upgrading. However, attention should remain on uncertainties such as China-U.S. friction, geopolitical issues, and international demand fluctuations.
Hang
Seng
Index
target
price
in
the
second
half
of
2025
is
25,500
points
We
previously
set
a
target
of
23,200
points
for
the
first
half
of
2025,
when
the
biggest
downside
risk
was
Trump’s
tariff
policies.
Considering
the
above
factors,
we
believe
the
Hong
Kong
stock
market
will
reflect
more
positive
factors
in
the
second
half,
which
is
also
reflected
in
the
market’s
upward
revision
of
earnings
per
share
estimates
for
the
Hang
Seng
Index.
We
raise
this
year’s
Hang
Seng
Index
target
price
to
25,500
points,
corresponding
to
an
estimated
price-earnings
ratio
of
about
11
times,
with
potential
growth
of
6.3%
in
the
second
half
(as
of
June
17,
2025),
and
a
total
annual
increase
of
27.5%.
In
terms
of
sectors,
we
are
optimistic
on
industry,
Internet,
raw
materials,
telecommunications,
healthcare
and
utilities,
including
13
selected
stocks.
Cusson Leung, Chief Investment Officer at KGI, says: “Overall, in the second half of 2025, China’s economy will continue to recover driven by policy support, domestic demand rebound, and manufacturing transformation and upgrading. However, attention should remain on uncertainties such as China-U.S. friction, geopolitical issues, and international demand fluctuations. The Hang Seng Index year end target is at 25,500 points, with a positive outlook on 6 sectors and 13 stock picks.”
Taiwan
Market
Trump’s
erratic
tariff
policies
have
caused
significant
volatility
in
the
Taiwan
stock
market
during
the
first
half
of
the
year.
However,
with
the
recent
easing
of
the
trade
war
and
stable
short-term
AI
demand,
the
Taiwan
stock
market
has
seen
some
recovery.
Looking
ahead,
we
believe
the
negative
impact
of
the
trade
war
will
gradually
become
evident,
potentially
leading
to
downward
adjustments
in
the
Taiwan
stock
market
before
the
third
quarter.
Nonetheless,
a
moderate
correction
could
help
stabilize
the
market
in
the
fourth
quarter.
Despite
the
temporary
agreement
between
the
U.S.
and
China,
high
tariffs
continue
to
affect
economic
growth
and
inflation
pressures.
Given
the
close
economic
ties
between
Taiwan
and
the
U.S.,
tariff
impacts
could
lower
Taiwan
stock
market
profits.
If
adverse
factors
can
be
absorbed
in
the
third
quarter,
the
market
is
likely
to
stabilize
in
the
fourth
quarter,
with
AI
demand
remaining
a
crucial
support
for
the
Taiwan
stock
market.
James Chu, Chairman at KGI Securities Investment Advisory, says: “The demand for AI in the short term remains stable, supporting a continued rebound in the stock market. However, the trade war and exchange rate impacts have increased the uncertainty of corporate earnings. Early stockpiling has made the normally slow season in the first half of the year less sluggish for the Taiwanese stock market, but it may lead to a less prosperous peak season in the second half of the year.”
Singapore
Market
In
2H25,
Singapore’s
economy
is
expected
to
experience
cautious
growth
due
to
global
trade
uncertainties
and
a
challenging
external
environment.
While
sectors
like
wholesale
trade,
manufacturing,
finance,
and
insurance
provide
some
support,
geopolitical
tensions
and
protectionism
weigh
on
sentiment.
Inflation
remains
manageable,
but
the
labor
market
shows
signs
of
strain.
Trade
activity,
boosted
recently
by
tariff
suspensions,
is
expected
to
moderate.
Looking ahead, growth is influenced by external factors such as U.S. trade policies and China’s recovery. The government has revised growth expectations downward, but strengths in electronics and financial services persist. Strategic investments in AI, digitalization, and green technologies aim to future-proof the economy. Risks remain from potential trade conflicts and weakening global demand. Domestic measures to boost innovation and stabilize the property market are anticipated to support growth, though challenges for businesses and households may arise. Overall, Singapore’s economy is positioned to remain steady with limited near-term upside.
Chen Guangzhi, Head of Research at KGI Singapore, says: “Amid increasing global macroeconomic uncertainties, Singapore will further underscore its strengths in political and economic stability. Therefore, we remain cautiously upbeat about the outlook in 2H25.”
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