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

U.S. economic data is weak, with a slower pace of interest rate cuts. The MSCI Europe Index rose 3.5% in February as the central bank cut rates. The Nikkei Index was dragged down by U.S. prospects, but Japan’s fourth-quarter GDP growth exceeded expectations at 2.8%. The Hang Seng Index rose 13.4% in February, with supportive policies from the Two Sessions expected to boost the market. Performance varies across countries, with the U.S. dollar weakening and Asian currencies gaining support.

🇺🇸 United States-Neutral
Weak Economic Data, Slower Rate Cuts
The U.S. economy is experiencing weak data, influenced by unpredictable tariff policies from Trump, leading to consumer concerns about price increases. The Consumer Confidence Index fell from 105.3 to 98.3 in February, marking its largest decline since August 2021. Non-farm employment numbers were below market expectations in both January and February, and the unemployment rate rose to its highest level since November last year. These factors indicate a weakening U.S. economy, exacerbated by a tech stock correction that led to a 4.0% drop in the Nasdaq Composite in February, with a total decline of 2.4% in the first two months. The S&P 500 fell 1.4% in February but rose 1.4% over the first two months.

Regarding interest rate cuts, Federal Reserve Chairman Jerome Powell stated that inflation expectations remain solid, and monetary policy adjustments will depend on Trump’s policies, with no rush to cut rates. Investors should watch the March 20 interest rate decision.

Despite the weak current market sentiment, the upward trend remains intact, and the decline is expected to moderate. In the long term, U.S. stocks remain suitable for long-term investment, driven by national protectionist policies.

🇪🇺 Europe-Slightly Positive
MSCI Europe Index Rises 3.5% with Central Bank Rate Cuts
The MSCI Europe Index rose 3.5% in February, with a total increase of 10.1% from the start of the year to the end of February. This was driven by better-than-expected corporate earnings in the fourth quarter of 2024. The European Central Bank cut interest rates by 25 basis points on March 6, as expected. The ECB noted that deflationary processes are proceeding smoothly, aligning with previous inflation forecasts.

Politically, the German Conservative Alliance won the German election with about 28.6% of the vote, which is expected to boost economic growth in Germany and Europe.

In the Russia-Ukraine conflict, a heated exchange between Ukrainian President Volodymyr Zelenskyy and U.S. President Donald Trump occurred on February 28, leading to Trump suspending military aid to Ukraine. The EU, except for Hungary, pledged to continue aiding Ukraine at a special summit on March 6, complicating the conflict.

Overall, European stocks are performing well, but investors should be cautious about risks related to the Russia-Ukraine situation.

🇯🇵 Japan-Neutral
2024 Fourth-Quarter GDP Revised Downward, Decline Exceeds Expectations; Nikkei Index Remains Stagnant
The Nikkei 225 Index fell 6.1% in February, closing at 37,156 points, with a total decline of 5.5% from the start of the year to the end of February. Japan’s fourth-quarter GDP growth for 2024 was revised downward from an initial value of 2.8% to 2.2%, a drop that far exceeded market expectations. The main reasons for this revision were weak consumer spending and inventory decreases that were more severe than expected. In terms of the yen’s exchange rate, the yen strengthened, with the USD/JPY falling 2.9% in February to 151.

The market is currently focusing on the outcome of the March 14 labor-management wage negotiations (Shunto), where Japanese unions use collective bargaining each spring to demand wage increases and improved working conditions from corporate management. The results will influence the Bank of Japan’s interest rate hike pace, and investors should closely monitor this.

Investors should also be aware that Japan’s export-oriented economy may be affected by U.S. tariff threats, while also paying attention to the potential impact of interest rate hikes on the stock market.

🇨🇳 China & Hong Kong-Slightly Positive
Hang Seng Index Rises 13.4% with Supportive Policies
Although the Hang Seng Index rose only 0.82% in January, it surged 13.4% in February from 20,225 to 22,941 points, driven by economic recovery and the AI industry. In contrast, the CSI 300 Index rose only 1.9% in February, from 3,817 to 3,890 points, with a cumulative decline of 1.1% from the start of the year.

China’s manufacturing activity accelerated, with the Caixin PMI rising to 50.8 in February, exceeding market expectations. However, the overall economic growth is still under pressure.

The Two Sessions were held from March 5 to 10, setting a GDP growth target of about 5% for the year. Additionally, a 2% target for resident consumer price inflation was set, and 1.3 trillion yuan in ultra-long-term special bonds will be planned to issue. The Ministry of Housing and Urban-Rural Development expects new home sales to achieve positive growth in 2024, and the real estate market has stabilized in early 2025. Central government policies are expected to be rolled out after the Two Sessions to support market development.

Hong Kong’s market performed more strongly than mainland China, with increased trading volume, making it worth investors’ attention. However, the U.S. imposed an additional 10% tariff on China on March 4, which will continue to affect China’s export economy.

Asia-Neutral
Diverse Performance, Weaker Dollar, Support for Asian Currencies
The MSCI Asia Index (excluding Japan) rose 1.0% in February, with a cumulative increase of 1.6% from the start of the year to the end of February (same below). The performance of different countries’ indices varied significantly. China’s MSCI Index rose 12.6% due to developments in DeepSeek and AI. Singapore rose 6.1% supported by its 2025 Budget, and Vietnam increased 3.1% due to strong cash flows in mining and rubber sectors. However, Indonesia fell 14.2%, Thailand dropped 11.9%, and India declined 9.5%. The U.S. dollar index fell 0.7% in February, with broad support for Asian currencies.

Overall, Asian currencies and some regional stock markets are strong, but investors need to closely monitor market dynamics due to varying impacts from global trade policies.

－ The End －

中文版：