Episode Details

Our Chief Asia Economist Chetan Ahya and Chief China Equity Strategist Laura Wang unpack Asia’s broadening economic recovery and focus on China’s path to market stability in 2026.

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Laura Wang: Welcome to Thoughts on the Market. I'm Laura Wang, Morgan Stanley's Chief China Equity Strategist.

Chetan Ahya: And I'm Chetan Ahya, Chief Asia Economist.

Laura Wang: Today – our 2026 macro outlook for Asia with a particular focus on China's equity market.

It's Wednesday, December 10th at 10am in Hong Kong.

Chetan, as 2025 draws to a close; and if we try to remember what we were thinking about this time last year, I think, probably a lot of the market participants were expecting headwinds going into 2025 on the exports and trade front. But turns out that Asia's export growth is tracking at 8 percent this year so far. What's your explanation for this surprise?

Chetan Ahya: Well, yes, Laura, you know, we were all concerned that there will potentially be tariffs, especially on China. And therefore, we were concerned that [the] regions’ exports may be affected negatively. However, what has happened is that tech exports have driven the strength in the overall exports for the region. And that is all because of the story on AI and tech development that we have all been watching.

But the good news is that non-tech exports will recover in 2026. In fact, that's the key call we are making – that from early next year, you will see that improvement in the U.S. domestic demand that helps Asia's exports. And at the same time, we are expecting that bulk of this tariff-related uncertainty would be behind us. And so those are the two factors we think will support this recovery in non-tech exports in 2026.

Laura Wang: That's great. How significant is the shift in exports from tech to non-tech?

Chetan Ahya: Well, we think that's very important for [the] regions’ economic outlook. Because when you think about the tech exports recovery, it was helpful to keep [the] regions’ overall exports growth strong, but it did not have the broader multiplier effect on the economy. So, for example, when you think about the tech exports, it tends to be more capital intensive, and we don't see much benefit on job growth.

I think the best example I can give you is when you look at the Taiwan economic numbers. We've seen very strong GDP growth year-to-date. But at the same time, consumption numbers have been very weak. And so, non-tech exports recovery is very important for the broader economic recovery, and that is precisely what we expect in 2026. You will see that broadening out of growth with follow up in CapEx, job growth, and consumption recovery.

Laura Wang: Your work suggests that Asia inflation will pick up modestly in 2026. What factors are behind this trend?

Chetan Ahya: Well, as the non-tech exports recovery materializes, you should see improvement in capacity utilization across the board in the region. That should reduce the disinflationary pressures that we've been seeing year-to-date. And at the same time, we are expecting that the disinflationary pressures that the region was facing from China is also going to ease in 2026.

Laura Wang: How will Asia central banks respond to keep inflation within their comfort zones? And what does this mean for monetary policy across the region in 2026?

Chetan Ahya: Well actually, there's not much concern about keeping the inflation within the central bank's comfort zone because what we've seen year-to-date in Asia is that Inflation has been