These Stocks Powered Asia's Surprising Outperformance Over the U.S. in 2025

It’s been a year of outperformance for Asian equities. The region has generally outstripped returns from U.S. stocks, which would have been a surprise to anyone looking ahead into 2025, at last year’s end.

There was wall-to-wall talk of U.S. exceptionalism heading into 2025. “Frankly, that worries me,” I wrote as we headed into this year.

It’s when everyone is sure that stocks can only move in one direction that they proceed to diverge. And all predictions for 2025 hinged on a strong showing on Wall Street.

There were no bear forecasts among major investment banks. Oppenheimer was the most bullish, predicting a 20.2% leap for the S&P 500, while UBS came in low with an 8.3% forecast.

It hasn’t been a bad year, with the S&P 500 up 17.2% for the year as I write, losing a little ground on its last day of trading. The Nasdaq composite has done better, up 21.2% on the year, while the Dow Jones Industrial Average has lagged, up 13.9%.

Korea Back With a Bang

But last year’s worst performer in Asia, the South Korean market, has come back with a vengeance. The benchmark in Seoul, the Kospi, has finished 2025 with a heady 75.7% advance, after it lost 10.1% last year.

This year’s resurgence has revolved around the two largest listings in Korea. Tech conglomerate Samsung Electronics (KR:005930) doubled and then some in 2025, ending with a 127.0% gain, having entered the year at its lowest levels since 2019. It had lost 33.2% over the course of last year.

Investors at first punished Samsung, which on its own accounts for some 20% of Seoul’s market capitalization, for its slow move into high-end chip production. It lagged in developing the kind of top-flight processors necessary to power the revolution in Artificial Intelligence (AI).

The company played rapid catchup in 2025 in terms of manufacturing High Bandwidth Memory (HBM) chips, securing a deal in July to supply Tesla  (TSLA)  with US$16.5 billion in chips. A glut has also cleared in the cheaper Dynamic Random Access Memory (DRAM) chips used in computers and smartphones, and with smaller rivals switching focus into HBM production, Samsung has been able to raise its DRAM prices as much as 50% late in this year.

Hynix Shares Close to Quadruple

Smaller rival SK Hynix (KR:000660), which makes up around 13% of the Seoul market cap, has been the other main driver of the gains on the South Korean stock market. Hynix shares have almost quadrupled, up 280.3% on the year, as the company built itself into a leader in HBM4 chip fabrication. It counts most of the major AI players among its main customers, most notably Nvidia  (NVDA)  and Apple  (AAPL)  but also the cloud-computing operations of Amazon.com  (AMZN) , Google  (GOOGL) , and Microsoft  (MSFT) .

Taiwanese stocks advanced 26.9%, in the form of the Taiex. Like Seoul, the largest listing in Taipei drove the gains, with Taiwan Semiconductor Manufacturing Co.  (TSM)  (TW:2330) powering ahead 45.5% thanks to its lock on chip-foundry market share.

Hong Kong China Plays in Vogue

Among major markets, Hong Kong has continued to surge. A rally that began in September 2024 overcame the tariff shock in April to end the year up 30.6%. That’s the strongest performance since 2017, adding to the 17.7% advance in 2024 to help redress the four consecutive years of losses prior to that.

There have been multiple factors at work, not least Beijing’s about-turn on Big Tech. China is once again courting its tech entrepreneurs, after a years-long battle to bring them to heel. The easier regulatory climate saw market heavyweight Alibaba Group Holding  (BABA)  (HK:9988) rebound 75.7%, and Tencent Holding  (TCEHY)  (HK:0700) advance 44.0%.

Chinese chipmakers led the way in Hong Kong. Hua Hong Semiconductor (HK:1347), was the top performer in the Hang Seng Tech Index this year, up 243.2%. Horizon Robotics (HK:9660), which specializes in its Journey-branded AI chips for self-driving and automated car systems, notched the second-best showing, up 146.0%, with chipmaker SMIC (HK:0981) also adding 124.7%.

The U.S. interest-rate cuts are also “imported” into Hong Kong via the Hong Kong dollar’s peg to its U.S. counterpart. That has also supported the market, and driven gains in the likes of insurer Ping An (PNGAY) (HK:2318), up 41.3% and benefiting from a regulatory change directing assets into the stock market, and bank HSBC  (HSBC)  (HK:0005), up 61.7%, as it deepened its emphasis on its Asian operations.

Mainland Markets Outdo U.S. Peers

Mainland China’s markets have not sold off as hard as Hong Kong stocks, and their rally this year has also been more restrained. Still, the 21.2% gain in the CSI 300 index of the largest listings in Shanghai and Shenzhen outdid most regional peers, with a handy outperformance over the S&P 500 to boot.

That may come as a surprise to the China hawks calling for tough tariffs on the world No. 2 economy. Beijing has played a long game in drawing out negotiations on trade as long as possible, and has secured a series of truces in any trade war. U.S. tariffs, while elevated at 20% on Chinese goods, are no worse than most regional peers.

China has won concessions from Washington on chip imports. Meanwhile, Chinese companies have re-routed production and assembly through Southeast Asia to avoid the worst of the extra import taxes into the United States. 

Strong Tokyo on Weak Yen

Tokyo stocks also outdid their U.S. counterparts, despite all the tension on trade. The broad-market Topix rose 23.7% on the year, while the blue-chip Nikkei 225 added 28.1%, its export-heavy makeup benefiting from the continued weakness of the Japanese yen. It remains at ¥156.74 to the U.S. dollar, the same level where it started the year, despite briefly strengthening to ¥140 in May.

You have to go back to the start of 2022 to see the Japanese currency closer to “normal” levels of ¥115. The very gradual raising of Japanese interest rates coupled with expected easing from the U.S. Federal Reserve should result in a weaker U.S. dollar and stronger yen, but the change in Japan is gradual in the extreme. For Japanese consumers contending with inflation north of the central bank’s target 2.0% rate since April 2022, it would be welcome to see import costs fall if the currency does correct course.

Performance has been spotty for markets in Southeast and South Asia. The Straits Times in Singapore gained 22.7%, setting records during the year as commodities traders and the city state’s tech companies advanced. But there were also solid gains for domestic players such as the city’s property developers.

Pacesetters and Laggards

While the smaller, volatile frontier markets in Vietnam (up 40.5%) and Pakistan (up 48.9%) were the region’s pacesetters, there have been marked declines for the stock markets in Thailand (down 6.3% on the year) and the Philippines (down 7.6%). Both were among the world’s worst showings, with domestic corruption scandals in both Manila and Bangkok weighing on confidence.

Indian stocks generally lacked direction, with the Nifty 50 eking out a 10.1% gain, and the Sensex up just 8.6%. As I said in my last column, a bear-market correction bottomed in March, but issues such as the 50% tariff on shipments into the United States have weighed heavily on Indian equities.

Inflation eases in India but causes Australian concern

Indian stocks could rally as a series of interest-rate cuts take effect, and revisions to the Goods and Services tax feed through. While Indian equities have stabilized, geopolitical concerns have outweighed some positive domestic trends, such as the easing of inflation. That perennial bugbear has fallen from 5.2% heading into this year to just 0.7% as of November.

There were also paltry gains for the markets in Australia, where the ASX 200 nudged up 6.3%, and New Zealand, where the NZX 50 barely made it into the green for the year, to the tune of a 3.7% gain. Both markets are weighted toward “Old World” industries such as mining. Inflation is also rearing its head in Australia in particular, on the rise since June, meaning the Reserve Bank of Australia more likely to raise rates than lower them with its next change.

This year has seen Korean stocks come off the region’s worst performance in 2024 to notch the most impressive gains for 2025. The AI revolution is likely to propel Asia’s tech-heavy markets higher, but the region’s laggards may provide solid diversification should semiconductor and cloud-computing plays correct.

At the time of publication, McMillan had small positions in NVDA, AAPL, BABA, TSM and MSFT.