DBS Bank’s research team projects a resilient economic outlook for Asia and ASEAN in 2026, despite global trade tensions. The year is concluding with companies experiencing relief after initial fears about international trade.
US trade restrictions have varying impacts, with different rates and exemptions that remain subject to negotiation. The consumption habits of US consumers have not suffered, resulting in strong export growth from many Asian countries to the US.
Trade Outside The United States
The concept of Trade Outside the United States (TOTUS) represents a key factor in Asia’s economic resilience. Countries such as Malaysia, Singapore, and Vietnam have witnessed record foreign direct investment, with expectations for continued growth in 2026 and beyond.
Favourable monetary conditions, along with stable food and fuel prices, contribute to the positive outlook. As the region enters the new year, the sense of anxiety has diminished significantly.
As we close out 2025, the widespread fear about a global trade collapse has not materialized, creating a backdrop of cautious relief. This environment of reduced anxiety suggests that market volatility may continue to decline in the coming weeks. We believe selling options to collect premium could be a viable strategy, taking advantage of lower expected price swings as we enter the new year.
The resilience is partly fueled by surprisingly strong US consumer spending, as last week’s US November retail sales report showed a 0.8% rise, beating forecasts. Asian exporters have benefited directly, with countries like South Korea reporting a 12% year-on-year jump in exports to the US last month. Consequently, we see opportunities in buying call options on export-heavy indices in markets like Taiwan and South Korea.
Investment Flow Recalibration
We are seeing a significant recalibration of investment flows, with foreign direct investment (FDI) finding a new home in Southeast Asia. For example, Vietnam’s recently released data shows that disbursed FDI through November has already set a new annual record for 2025. This trend supports bullish positions on ETFs that track the markets of Vietnam, Malaysia, and Singapore.
The growth in trade outside the United States, or TOTUS, is a key factor insulating the region from direct geopolitical pressures. This mirrors the pattern we observed in the years following the 2018 tariff implementations, which ultimately accelerated supply chain shifts benefiting the ASEAN bloc. This underlying strength reinforces our view that long positions in regional currency futures, such as the Singapore Dollar, are well-supported.
Favorable monetary conditions, with both food and fuel inflation remaining low across most of the region, provide a stable foundation. This suggests regional central banks are unlikely to pursue aggressive monetary tightening in the near term. For derivative traders, this underpins the case for strategies that benefit from stable or rising equity prices, such as bull call spreads on major ASEAN indices.
