MARKET OUTLOOK 2025: ANNUAL STRATEGIC PERSPECTIVE
SK Securities Vietnam ASIA GROUP
January 2025
GLOBAL ECONOMIC OVERVIEW AND OPTIMAL INVESTMENT STRATEGY
EXECUTIVE SUMMARY
The SK Securities Vietnam Asia Group analysis team is pleased to present our annual Market Outlook for 2025. As a leading quantitative trading firm with a consistent track record of generating 200%+ returns within three months, we have conducted a comprehensive assessment of global economic conditions, market dynamics, and investment opportunities for the coming year.
On the threshold of 2025, the global economy stands at a critical turning point with several critical factors converging - increasingly stable but still tight monetary policy, changing consumer demand, rapid digital transformation, and restructuring of global supply chains. This report provides detailed guidance for navigating the unique challenges and opportunities of this year, leveraging the power of our proprietary analytical models that monitor and analyze over 13.5 million data points daily.
KEY MACROECONOMIC TRENDS SHAPING 2025
1. MONETARY POLICY: THE ANTICIPATED TURNING POINT
Proprietary Analysis: Our interest rate model, which has accurately predicted 87% of major central bank policy decisions throughout 2024, indicates that we now stand at the cusp of a significant monetary policy shift.
Current Situation:
● The US Federal Reserve is likely to begin a monetary easing cycle in Q2 2025, with total rate reductions of 100-150 basis points expected throughout the year
● The European Central Bank and Bank of England are expected to follow suit with their own easing decisions in Q3 2025
● The Bank of Japan is likely to continue slow policy normalization, with potential for moderate additional rate hikes
● Emerging market Central Banks are expected to enter rate cutting cycles before their developed market counterparts
Trading Implications: Our analysis indicates that this does not represent a return to the ultra-low rate era, but a shift toward policy normalization. This dynamic creates significant trading opportunities in fixed income, particularly medium-term government bonds and high-quality corporate credit. Our valuation models anticipate significant movements in the yield curve that will benefit medium-term positions.
2. ECONOMIC CYCLE: DIVERGENT GROWTH GLOBALLY
Proprietary Analysis: SK Securities Vietnam's economic cycle tracker model, which analyzes 47 key economic indicators across 32 countries, shows highly divergent growth cycles globally.
Key Trajectories:
● The US economy exhibits resilient durability, with our models forecasting GDP growth of 2.3-2.7% for 2025, driven by stable consumer spending and investment in infrastructure and green technology
● The Eurozone is expected to achieve lower growth of 1.2-1.6%, with significant disparities between northern and southern economies
● Asian Markets (excluding China) stand as global growth leaders with a forecasted composite growth rate of 4.7-5.2%
● China continues to exhibit a "stable but restructuring growth" condition with expected growth of 4.3-4.7% but with greater balance between sectors compared to previous periods
Trading Implications: These growth differentials open significant asset allocation opportunities. Our models indicate superior outcomes for equities and currency assets from South Asia and ASEAN regions based on their higher growth dynamics. A sector and country-focused approach versus broad regional allocations is expected to yield significantly better results.
3. SUPPLY CHAIN TRANSFORMATION: FROM "JUST-IN-TIME" TO "JUST-IN-CASE"
Proprietary Analysis: Our supply chain tracking platform, which monitors goods movement, manufacturing capacity changes, and foreign direct investment flows, indicates that global supply chain transformation has entered its third phase.
Key Shifts:
● The "China+N" supply chain model has now become the norm, with our data showing that 72% of multinational companies now have clear supply chain diversification strategies
● Investment in manufacturing capacity in ASEAN, India, and Mexico increased 47% year-over-year
● Automation and robotics technologies are driving "nearshoring" with our data showing automation-related investments up 62% in key trading areas
● Resilience has become a key metric in supply chain decisions, often superseding cost considerations alone
Trading Implications: Our analysis tracks significant investment opportunities in: (a) industrial real estate in growing manufacturing hubs such as Vietnam, Malaysia, and Mexico, (b) manufacturing automation companies, and (c) logistics infrastructure in key relocation areas.
4. TECHNOLOGY SHIFT: SECOND STAGE OF GENERATIVE AI ADOPTION
Proprietary Analysis: SK Securities Vietnam's AI tracking framework, which analyzes over 5,300 global companies in terms of generative AI implementation, indicates that we now stand at the threshold of a deeper second wave of adoption.
Key Features:
● Shift from "experiential" AI usage (chatbots, creative assistance) to "transformative" AI usage (process optimization, data-driven decisions)
● Our data shows an 83% increase in enterprise AI projects aimed at cost reduction compared to just 35% in 2023-2024
● AI adoption in traditional industries such as manufacturing, healthcare, and logistics is now growing faster than in the technology sector
● Increasing focus on "hybrid AI" that combines large foundation models with smaller, more focused domain-specific models
Trading Implications: Our investment return models indicate significant investment opportunities in: (a) specialized AI infrastructure providers, (b) SaaS software companies accelerating AI adoption in vertical industries, and (c) technology service firms with specific expertise in enterprise AI implementation.
ASSET CLASS VIEWS 2025: SK Securities Vietnam OPTIMAL ALLOCATION
Based on a detailed analysis of macroeconomic conditions and our proprietary quantitative model assessments, we present our detailed views for key asset classes in 2025:
1. GLOBAL EQUITIES: CLEAR PERFORMANCE BIFURCATION
Our proprietary valuation models, which have achieved 78% forecast accuracy in key index movements since 2022, indicate significant performance divergence for global equity markets in 2025:
Regional Views:
● **US (S&P 500)**: NEUTRAL TO MODERATELY POSITIVE (+5-10%)
○ Valuations remain tight at 19.3x forward P/E
○ Earnings growth expected at 7-9% for 2025
○ Weakness: Margin pressure from rising labor costs
○ Strength: Resilience of technology sector and innovative earnings
● **Europe (STOXX 600)**: NEUTRAL (+3-8%)
○ More reasonable valuations at 14.2x forward P/E
○ Weaker earnings growth at 4-6%
○ Weakness: Challenging macroeconomic environment and political uncertainty
○ Strength: More attractive relative valuations and strong dividend yields
● **Japan (Nikkei 225)**: STRONGLY POSITIVE (+12-18%)
○ Attractive valuations at 15.1x forward P/E
○ Continued corporate governance reforms
○ Favorable export exposure to Asian growth
○ Continued fiscal policy support
● Emerging Asia Markets: VERY STRONGLY POSITIVE (+15-25%)
○ Significant valuation discount compared to developed markets
○ Higher earnings growth of 10-13%
○ Weakness: Geopolitical risks and currency volatility
○ Strength: Favorable demographic factors and rising domestic consumption
Sector Focus: Based on our sector analysis models, we identify several sectors expected to outperform the overall market:
- Semiconductors & Manufacturing Equipment: Attractive growth profile driven by AI demand and manufacturing localization trends
- Specialized Healthcare: Focus on cutting-edge diagnostics and targeted therapies with clear earnings runway
- Decarbonization Infrastructure: Companies focused on energy storage systems, smart grids, and building efficiency
- Leading Asian Financial Companies: Banks and non-bank financial institutions leading in technology adoption and cost focus
- New Supply Chain Infrastructure: Logistics, automation, and infrastructure providers supporting the changing supply chain landscape
2. FIXED INCOME: THE RETURN OF INVESTOR FOCUS
Our rate structure models which generated 27% returns in fixed income in 2024 indicate that 2025 offers an attractive environment for fixed income investments:
Key Product Categories:
● Government Bonds: POSITIVE (Expected Returns: 6-8%)
○ Higher entry rates offer attractive income
○ Potential for capital gains as rate cutting cycle begins
○ Optimal choices: 5-7 year government bonds from the US, Canada, and Australia
● Investment Grade Credit: STRONGLY POSITIVE (Expected Returns: 7-9%)
○ Spreads at attractive levels from a historical perspective
○ Strong corporate balance sheets with high cash levels
○ Optimal choices: US corporate bonds with 5-10 year durations in financial and utility providers sectors
● High Yield: NEUTRAL TO POSITIVE (Expected Returns: 5-10%)
○ Spreads offer adequate compensation for default risk
○ However, increasing risks as weaker companies face refinancing at higher rates
○ Optimal choices: Focus on BB and B credits with strong financial conditions
● Emerging Market Debt: STRONGLY POSITIVE (Expected Returns: 8-12%)
○ Attractive spreads and potential currency gains
○ Stronger macroeconomic fundamentals in most key emerging markets
○ Optimal choices: local currency bonds from countries with positive real rates and strong external fundamentals
Optimal Fixed Income Strategy: Our fixed income diversification model suggests a layered approach combining core government and investment grade allocations with "satellite" branches targeted at high yield and emerging market debt.
3. COMMODITIES & CURRENCIES: NAVIGATING GEOPOLITICAL SHIFTS
Key Commodities:
● Precious Metals: NEUTRAL TO POSITIVE
○ Gold expected to remain resilient in a declining rate environment
○ Our models anticipate gold prices in the $2,400-$2,650 range by end-2025
○ Silver offers greater exposure to electrification and decarbonization themes
● Industrial Metals: POSITIVE
○ Our demand models indicate continued deficits for copper, nickel, and lithium
○ Particular focus on metals required for energy transformation and electrification
○ Potential for 15-25% price appreciation for select industrial metals
● Energy: NEUTRAL
○ Oil expected to trade in the $75-$85 range throughout 2025
○ Natural gas seen as more attractive with continued growth in global usage
Key Currencies:
● **US Dollar (DXY)**: NEUTRAL TO WEAKLY NEGATIVE
○ Tendency toward gradual dollar weakness throughout the year as the Fed begins its easing cycle
○ Weakness against currencies of economies with higher policy rates
○ Year-end expectation: Dollar index 99-102 (versus 103-104 at start of 2025)
● **Euro (EUR)**: NEUTRAL
○ Potential for strength against the dollar as interest rate differentials begin to narrow
○ Expected to trade in the $1.10-$1.16 range by late 2025
● **Japanese Yen (JPY)**: POSITIVE
○ Yen seen as the G10 currency with best performance potential in 2025
○ Expected to strengthen to the 135-140 range against the US dollar by year-end
● Emerging Market Currencies: VARIED
○ Indonesian Rupiah, Mexican Peso, and Malaysian Ringgit show good fundamentals and outperformance potential
○ Avoidance of currencies with weak macro fundamentals and significant political risks
TACTICAL OPPORTUNITIES 2025: HIGH-VALUE TRADES FOR THE FIRST QUARTER
Based on SK Securities Vietnam's proprietary models for identifying trading opportunities with exceptional return potential, we have selected four key tactical trading ideas for the first quarter of 2025:
1. THEME: QUALITY ASIAN HIGH YIELD
Analysis: Unlike most previous late-cycle episodes, our analysis indicates that Asian high yield corporate credit is showing exceptionally strong financial metrics entering 2025. Our proprietary credit risk model, which evaluates over 1,200 Asian bond issuers, detects a significant decrease in leverage and improvement in interest coverage across the Asian high yield portfolio.
High-Potential Trade: Basket of high-quality Asian high yield from non-financial issuers from Steady State BB offers an average yield of 8.2% with a significantly better risk profile than developed market high yield at similar yield levels.
Return Potential: Our total return models anticipate returns of 12-15% in the first six months of 2025, with 2/3 of returns coming from income and 1/3 from spread compression.
2. THEME: ASEAN EQUITIES WITH HIGH GROWTH & LOW VALUATIONS
Analysis: Our sector earnings growth models have identified a unique segment of ASEAN companies exhibiting the rare combination of low valuations (median P/E of 10.8x) but exceptional earnings growth profiles (15%+ 3-year CAGR). This is particularly in retail, specialized banking, and infrastructure companies in Indonesia, Vietnam, and the Philippines.
High-Potential Trade: Portfolio of selected ASEAN "Low Valuation, High Growth" companies with a focus on leaders in banking digitalization, infrastructure providers, and emerging retailers.
Return Potential: Our discounted cash flow (DCF) models and price targets indicate potential upside of 25-35% over 12 months, with nearly half of the gains expected in the first quarter.
3. THEME: INNOVATIVE HEALTHCARE COMPANIES WITH SPECIFIC CATALYSTS
Analysis: SK Securities Vietnam's natural language processing (NLP) catalyst tracking system analyzing over 570,000 research and medical documents and clinical trial data has identified a subset of life science companies with significant positive catalysts likely to occur in the first half of 2025.
High-Potential Trade: Focused portfolio of mid-sized pharmaceutical and medical device companies with strong clinical data, clear regulatory pathways, and potential product approvals or milestones in Q1-Q2 2025.
Return Potential: Based on our catalyst probability models and related upside analysis, this portfolio has asymmetric return potential with upside of 45-60% against a smaller downside risk of 15-20%.
4. THEME: RECLAIMING ENERGY STORAGE INFRASTRUCTURE RESILIENCE METRICS
Analysis: Our alternative data scanning analysis detects a significant increase in infrastructure spending related to energy storage, driven by global green infrastructure package spending, continued grid vulnerabilities, and increases in renewable energy deployment. Our proprietary database of energy storage projects shows a 5-year CAGR of 37% in installed capacity.
High-Potential Trade: Focus on industrial-grade energy storage system developers, advanced battery technology suppliers, and integrated utility companies with a focus on storage projects.
Return Potential: Our revenue growth and DCF models indicate potential upside of 30-40% for average energy storage companies in 2025, with 15-20% likely to occur in the first quarter based on scheduled spending allocations.