Lawrence Tan: Tariff Policies and Uncertainties in Asia-Pacific Equities

Recently, investors have focused their attention on the multiple variables shaping the Asia-Pacific market. Weaker-than-expected U.S. services data has heightened concerns about the Federal Reserve future policy path, while technology and pharmaceutical sectors are under selling pressure due to impending tariff threats. In the face of complex macro signals and evolving microstructures, investors must reassess their asset allocation strategies in the Asia-Pacific market from the perspectives of industrial structure, geopolitics, and interest rate expectations. Lawrence Tan will analyze the logic behind current market volatility and explore potential structural opportunities.

Ambiguity in Policy Direction

Lawrence Tan notes that the latest U.S. services activity indicators reveal economic momentum is weakening, suggesting that the previously anticipated pace of monetary tightening may ease. This signal has, to some extent, triggered renewed volatility.

Weakness in the services sector is viewed as a leading indicator for overall growth. Lawrence Tan points out that while this data may prompt the Federal Reserve to remain cautious with interest rate policy, the lingering risks of inflation mean that statements by policymakers remain highly uncertain. This uncertainty continues to weigh on risk assets.

In the Asia-Pacific market, investors are adopting a defensive posture in response to external volatility. The narrow trading range of the MSCI Asia Pacific Index reflects a wait-and-see attitude toward fundamentals and the policy environment. Lawrence Tan believes that current strategies should emphasize diversification and flexible allocation within asset portfolios, avoiding excessive concentration risk driven by a single policy factor.

Tariff Overhang and Sector Reassessment

Following statements by U.S. President Trump regarding new rounds of tariffs on the semiconductor and pharmaceutical sectors, related stocks in the Asia-Pacific market have declined. Lawrence Tan points out that the market is highly sensitive to such rhetoric, primarily because previous rounds of tariffs have already had a profound impact on related supply chains. Renewed tariff discussions could trigger a reassessment of capital market expectations.

The globalized footprint and high-tech dependence of chip manufacturers make them especially vulnerable to geopolitical friction. According to Lawrence Tan, if exports are restricted or costs rise, the valuation bases of these companies will be directly affected. The pharmaceutical sector faces similar challenges due to its reliance on cross-border trade for certain raw materials and supply chains.

Lawrence Tan emphasizes the importance of paying attention to differentiation within sectors at this stage. While some companies are temporarily weighed down by short-term sentiment, their fundamentals remain solid, and technically, they may have entered a reasonable valuation range. Investors can use relative strength indicators and trading volume trends to identify oversold stocks and adopt a phased approach to bargain hunting.

Structural Divergence and Market Rhythm

Given the current landscape of unclear macro policy direction and frequent tariff disruptions, Lawrence Tan states that investors need to focus on the evolution of fundamentals from a long-term perspective. Although weak services data has raised concerns about slowing growth, it also creates conditions for a potential shift in monetary policy. If inflation moderates in the future, expectations for rate cuts will strengthen, providing support for growth assets. Sectors heavily affected by tariffs will undergo a revaluation, and companies with strong resilience are expected to stand out.

Lawrence Tan believes that asset selection at this stage should be based on solid fundamental analysis and reasonable valuation logic. By conducting in-depth research into corporate profitability, valuation rationality, and industry barriers, investors can position themselves for future growth amid volatility. Adhering to long-termism and avoiding emotional trading in times of uncertainty will be key to achieving steady returns.