Key Points
- Our disciplined research approach paid off in 2025, with strong calls in semiconductors, China, and Japan helping our clients achieve strong investment outcomes.
- Structural growth themes and undervalued opportunities continue to drive our strategy, as we focus on innovation-led sectors and markets where fundamentals are improving faster than sentiment.
- Looking ahead to 2026, our “Home Ground Advantage” anchors our positioning, combining selective global exposure with high-conviction opportunities in Singapore, China, and Asian semiconductors.
In 2025, investors were repeatedly warned to brace for the worst.
Tariffs returned. Trade wars intensified. Geopolitical tensions rose. Global stocks crashed. Fears of recession and stagflation resurfaced.
At several points, it felt like a major downturn was inevitable.
Yet by year-end, many global markets were sitting near record highs. Japan, Europe, and Singapore all reached new peaks. The US market, while not the strongest performer, remained remarkably resilient.
Looking back, while we did not get every call right, the majority of our views played out as expected. More importantly, our willingness to adjust positioning as conditions changed helped us manage risks and capture opportunities.
The calls that mattered most in 2025
Semiconductors and AI: The defining theme
Our strongest call of the year was in semiconductors.
From the outset, we viewed artificial intelligence (AI) not as a short-term hype cycle, but as a structural driver of long-term demand for high-quality chipmakers. Even after downgrading the broader US equity market mid-year, we maintained an attractive stance on semiconductor stocks.
This proved decisive.
Semiconductors emerged as the single most profitable theme of the year, with the VanEck Semiconductor ETF (NASDAQ:SMH) ending 2025 with total returns of 40.4% (in SGD terms), supported by strong earnings visibility and sustained AI investment.
China: The dark horse that delivered
China entered 2025 as one of the most under-owned markets globally.
Sentiment was weak. Allocations were low. Confidence was fragile.
We identified China as a tactical “dark horse,” contingent on improving policy support for the private sector. As clearer signals emerged, we upgraded our view mid-year.
China subsequently outperformed the US, validating our contrarian stance.
Our recommended products – iShares Core MSCI China ETF (HKEX:2801), iShares Hang Seng Tech ETF (HKEX:3067), and Fidelity China Focus A-SGD Fund – ended the year with total returns of 22.8%, 16.2%, and 19.0% respectively (in SGD terms).
Japan: Structural opportunities pay off
We remained bullish on Japan, particularly small-cap equities, as its economic transformation and ongoing corporate governance reforms gained traction.
Japan went on to hit record highs, outperforming the US, with our recommended Xtrackers Nikkei 225 UCITS ETF 1D (LSE:XDJP) and the Eastspring Investments - Japan Dynamic AS SGD delivering total returns of 22.4% and 21.3% respectively in 2025 (in SGD terms).
Meanwhile, small-caps also delivered exceptional returns, with the Janus Henderson Horizon Japanese Smaller Companies A2 USD delivering 22.9% in total returns over the year.
One partial miss was our bullish view on the JPY, which did not materialise.
Areas for improvement
Every investment year offers lessons.
We began 2025 constructive on US equities but downgraded our view in March as trade and stagflation risks intensified. While we did not anticipate the full scale of the trade war, this early adjustment proved timely as the US underperformed for the year.
In Europe, although the region ultimately outperformed the US, our stance could have been more assertive given improving valuations and policy support.
In currencies, we were right on the USD, SGD, and MYR, but less accurate on the JPY and EUR.
These experiences reaffirmed a core principle: successful investing requires humility, adaptability, and a constant willingness to challenge both our own views and prevailing market consensus.
Our top ideas for 2026
As we move into 2026, we see opportunities increasingly emerging closer to home and within select Asian growth engines that combine improving fundamentals with attractive valuations.
These are our highest-conviction ideas for the year ahead.
1. Singapore: The start of a multi-year rally
If there is ever a good time to buy Singapore equities, it is now.
After several years of muted returns, Singapore equities regained momentum in 2025, supported by improving earnings, rising market participation, and meaningful policy initiatives to strengthen market depth and competitiveness.
Importantly, Singapore equities continue to trade at a valuation discount relative to regional and global peers. As market depth improves and investor confidence strengthens, this long-standing gap may begin to narrow.
We believe 2026 marks the early phase of a multi-year rally for Singapore equities, offering both capital appreciation and income opportunities for long-term investors.
Investors can capture this opportunity through the Amova Singapore Dividend Equity SGD Fund and the Amova Singapore STI ETF (SGX:G3B). For investors seeking broader exposure beyond the STI, particularly in the small to mid-cap sector, the LionGlobal Singapore Trust Acc SGD offers a compelling alternative.
2. China: Long-term earnings opportunity
China’s rally still has room to run.
Policy support for the private sector, particularly in technology and innovation-driven sectors, has become more consistent and constructive. AI investment is also accelerating.
Intense domestic competition has forced companies to focus on efficiency, innovation, and cost discipline. Over time, this has produced globally competitive leaders. China now holds dominant positions in areas such as electric vehicles, solar panels, rare earth processing, 5G infrastructure, batteries, and is also catching up rapidly in AI and healthcare.
Many leading Chinese firms still generate most of their revenue domestically, with relatively low overseas penetration. As more of these firms successfully expand internationally, their revenue base and profit margins could grow meaningfully over time. This transition – from domestic champions to global competitors – represents a powerful long-term earnings opportunity.
For investors seeking exposure to this long-term opportunity, we recommend the LionGlobal China Growth Fund, a Greater China equity strategy offering diversified exposure to China, Taiwan, and Hong Kong. For broad China equity exposure, investors may consider the Fidelity China Focus Fund and the iShares Core MSCI China ETF (HKEX:2801). Those seeking targeted exposure to China’s innovation and digital economy may consider the iShares Hang Seng Tech ETF (HKEX:3067), which focuses on leading technology and internet companies.
3. Asian semiconductors: A smarter way to play the AI boom
While US semiconductor stocks performed exceptionally well in 2025, valuations in parts of the sector have become increasingly demanding. For investors who may have missed out on this rally, there is still a compelling way to play the AI boom: Asian semiconductors.
Asian semiconductor firms form the manufacturing backbone of the global semiconductor supply chain. Although demand for AI chips remains extremely strong, the main constraint today is supply rather than design. TSMC’s near-monopoly position in AI chip manufacturing and disciplined capacity expansion have resulted in ongoing shortages, supporting strong pricing power and margins. A similar situation exists in the memory market, where Samsung Electronics and SK Hynix dominate high-bandwidth memory production. This conservative approach has preserved pricing power and earnings resilience.
Valuation is another important advantage. Despite their strategic importance, many Asian semiconductor firms trade at significantly lower valuation multiples than US peers.
As such, we believe Asian semiconductor stocks offer a cheaper and earnings-backed way to participate in the ongoing AI boom. In addition to investing in leading companies such as TSMC, Samsung, and SK Hynix, investors may also consider the Global X Asia Semiconductor ETF (HKEX:3119) for diversified exposure to Asia’s semiconductor leaders.
4. Internet stocks: A rare buying opportunity
We believe the current market environment presents a rare opportunity in high-quality internet companies, driven by a growing disconnect between short-term price volatility and long-term fundamental strength.
Recent sell-offs in major technology leaders such as Microsoft and Amazon were triggered by investor concerns over rising capital expenditure. However, these pullbacks have compressed valuations to more attractive levels, even as underlying business performance remains robust.
Unlike the dot-com era, today’s infrastructure spending is supported by tangible demand and strong order backlogs. Microsoft and Amazon are expanding capacity because customers are already waiting, rather than in anticipation of uncertain growth.
Within the software segment, leading incumbents such as Adobe and Salesforce are also trading near multi-year lows, despite benefiting from high switching costs and proprietary data. Adobe, specifically, not only has industry-leading margins, but also offers legal indemnity for its AI-generated content – a critical "moat" for enterprise clients that generic AI tools cannot match.
At current valuations, internet stocks represent either a rare long-term opportunity or a potential value trap. However, given the extent of recent declines, downside risks appear more limited, while upside potential could be substantial if fundamentals continue to play out.
That said, selectivity remains crucial. A focused approach on high-quality market leaders is key. For diversified exposure, investors may consider the Invesco NASDAQ Internet ETF (NASDAQ:PNQI), which provides broad access to leading internet companies.
From track record to home ground advantage
Our focus remains unchanged: stay disciplined, stay selective, and stay grounded in fundamentals. This research-driven approach served us well in 2025, and we believe it will continue to guide us in 2026 and beyond.
As we move into the year ahead, we see some of the most compelling opportunities emerging closer to home. Meanwhile, short-term volatility within the internet sector has created opportunities in businesses with durable competitive advantages.
By combining global opportunities with a clear home ground advantage, we aim to help our clients build resilient portfolios that are positioned not just for the year ahead, but for long-term success.
Related articles:
iFAST 2026 Investment Outlook: Home Ground Advantage
Singapore 2026 market outlook: Policy tailwinds set the stage for equity gains
Upgrade to 3.5 Stars: Chinese equities set to extend their rally into 2026
Global X Asia Semiconductor ETF and the Asian semiconductor supply chain hegemony
SaaSpocalypse: Software stocks crash on AI disruption fears – But is the market overreacting?
Declaration:
This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.
For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities. The analyst who produced this report holds positions in VanEck Semiconductor ETF, iShares Hang Seng Tech ETF, and Global X Asia Semiconductor ETF.
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