February 2025 Outlook: United States-Slightly Positive | Europe-Neutral | Japan-Neutral | China & Hong Kong-Neutral | Asia-Neutral

Donald Trump officially took office, with policies and tariff measures being variable. China’s DeepSeek shocked the U.S. technology sector; Negotiations in the Russia-Ukraine war have made progress, but Europe is still affected by tariffs; The Bank of Japan raised interest rates, with the inflation and interest rates both reaching new highs; DeepSeek revitalized the Hang Seng Index to above 21,000 points. Tariff policies between China and the U.S. are worth noting; The U.S. dollar hovers at a high level, and China-U.S. trade relations are the main uncertainty for the Asian economy.

🇺🇸 United States-Slightly Positive
Trump Officially Took Office. Policies and Tariff Measures Are Variable. China’s Deepseek Shocked the Technology Sector.
The Nasdaq Index and the S&P 500 Index rose by 1.6% and 2.7% respectively in January. Among them, the performance of finance and basic materials sectors were better, mainly due to the support of high interest rates and tariff policies on the stock prices of related companies. However, the technology sector was under pressure due to the impact of China’s artificial intelligence company DeepSeek on U.S. technology stocks.

After taking the oath of office, Trump issued a number of policies and signed various executive orders, officially establishing the Department of Government Efficiency led by Tesla CEO Elon Musk. The market is particularly concerned about tariff policies. Trump announced a 10% tariff on Chinese products and recently imposed a 25% tariff on all imported steel and aluminium. Although this policy may benefit domestic U.S. companies, it will also increase production and consumer costs.

In terms of interest rates, due to the consumer price index in January being slightly above the long-term target of 2% year-on-year, the Federal Reserve maintained the current interest rate at 4.25% to 4.50% in January, and it is expected that the pace of interest rate cuts will slow down this year.

Although the rise in U.S. stocks has slowed down, it is expected that Trump’s policies will benefit the development of domestic U.S. companies and alleviate the fiscal deficit. Therefore, the U.S. stock market is expected to be supported, and the outlook remains optimistic.

🇪🇺 Europe-Neutral
Negotiations in the Russia-Ukraine War Have Made Progress but Are Still Affected by Tariffs.
Although the European economy still faces resistance, benefiting from overall retail sales growth and increased consumer spending, European companies’ performance reports exceeded expectations, leading to a 6.4% rise in the MSCI Europe Index in January. The European Central Bank cut interest rates by 0.25% in January, marking the fifth rate cut since June last year, in line with market expectations. The central bank stated that European inflation is gradually falling and is expected to meet the target this year. The market expects the central bank to implement further easing policies, with a projected additional rate cut of 70 basis points in 2025.

Regarding the Russia-Ukraine war, the situation has eased. Trump stated that he has had conversations with Russian President Vladimir Putin and emphasized that the U.S. has been communicating with both Russia and Ukraine. Ukrainian President Volodymyr Zelenskyy also indicated that if Trump can successfully facilitate negotiations, Ukraine is willing to exchange territories with Russia, which is favorable for the development of European stock markets.

However, Germany will hold new federal parliamentary elections on February 23 this year, increasing political uncertainty. Additionally, Trump intends to impose tariffs on products exported from the EU, which is expected to pressure the European export economy, especially the automotive industry. Investors need to closely monitor related information.

🇯🇵 Japan-Neutral
The Central Bank Raised Interest Rates. Japanese Inflation and Interest Rates Both Reached New Highs.
The Nikkei 225 Index dropped 0.8% in January, closing at 39,572 points, and weakened in February, currently hovering between 38,500 and 39,000 points.

Japan’s core inflation rate in December rose to 3% to 16-month high, indicating a continued upward trend in prices. The Bank of Japan raised interest rates by 0.25% on January 24, the largest increase since February 2007, bringing the rate to a 17-year high of 0.5%. The Bank of Japan stated that if economic and price trends meet expectations, it will continue to raise interest rates to achieve the 2% inflation target with appropriate monetary policy.

In terms of economic data, Japan’s composite PMI in January was 51.1, above the boom-bust line for the third consecutive month, but Japan’s export economy may be threatened by U.S. tariffs. Trump has stated that if the U.S. trade deficit with Japan cannot be balanced, tariffs will be imposed on Japanese imports, which will pressure Japan’s export economy.

🇨🇳 China & Hong Kong-Neutral
Deepseek Revitalized the Hang Seng Index to Above 21,000 Points. Tariff Policies Between China and the U.S. Are Worth Noting.
The Hang Seng Index rose from 20,060 points to 20,225 points in January, an increase of 0.8%. This upward trend was mainly driven by China’s AI system DeepSeek, which prompted the market to reassess the value of technology stocks and application sectors.

Additionally, the market is looking forward to the pilot programs for long-term stock market investment from insurance funds to be launched in the first half of 2025, with a fund size of no less than 100 billion yuan. At the same time, the market expects the third session of the National People’s Congress on March 5, 2025, to discuss policies to counter Trump’s impact and stimulate domestic demand, further supporting the Hang Seng Index.

It is worth noting that the 10% tariff imposed by the U.S. on Chinese products took effect on February 4, and China immediately announced countermeasures. However, this will impact China’s export economy. Investors need to closely monitor China-U.S. trade policies to make appropriate allocations.

Asia-Neutral
The U.S. Dollar Hovers at a High Level. China-U.S. Trade Relations Are the Main Uncertainty for the Asian Economy.
The MSCI Asia Index (excluding Japan) rose by 0.6% in January. China-U.S. trade relations will be the main external uncertainty for the Asian economy this year, with analysts pointing out that countries like China, Vietnam, Brazil, and India will be more susceptible to U.S. tariffs.

Market trends varied across Asian countries. South Korea’s exports were driven by electronic components, with the MSCI Korea Index rising by 4.9% in January. In contrast, Thailand’s tourism industry was hit due to a scam incident in Myanmar, leading to a decrease in Chinese tourists for safety reasons, causing the MSCI Thailand Index to fall by 4.5% in January.

In terms of exchange rates, the U.S. Dollar Index appreciated by 7.1% in 2024. Although it slightly retreated at the beginning of 2025, the dollar is expected to remain strong this year, putting continued pressure on Asian currencies. Asian investors need to make prudent adjustments.

－ The End －

中文版：