Zelter identifies Japan as a key focus area due to a convergence of opportunities: a private equity angle in corporate carve-outs, a massive pool of retirement capital seeking yield, and a financing need for Japanese companies expanding internationally.

Unlike previous years dominated by a single theme, 2026 will require a more nuanced approach. Performance will be driven by a range of factors including country-specific fiscal dynamics, the end of rate-cutting cycles, election outcomes, and beneficiaries of AI capex. Investors must move from a single macro view to a multi-factor differentiation strategy.

The powerful earnings growth story for North Asian markets like Korea and Taiwan is driven by the durable AI theme, not cyclical factors. Their role as essential suppliers of semiconductors for the AI supply chain provides a structural tailwind that should endure beyond the current geopolitical conflict, assuming a global recession is avoided.

The current investment thesis in Asia favors capital expenditure beneficiaries over consumer stocks. Japan's market is rich in companies aligned with major themes like AI tech diffusion and the energy transition, making it a more attractive allocation than emerging markets, which are more heavily weighted toward consumer and services.

The longest manufacturing recession on record (3 years of ISM below 50) is reversing. The combination of interest rate relief, 100% accelerated equipment depreciation, and reshoring trends is creating a powerful setup for capital-intensive industries to experience a significant boom.

North Asian markets (Korea, Taiwan) are dramatically outperforming South Asia (Indonesia) due to a dual dynamic. North Asia is insulated from energy price shocks by its wealth and buffer stocks, while also being the primary beneficiary of the global AI technology boom, a trade South Asia largely lacks.

The massive energy requirements for AI computing are forcing Asian economies to accelerate investments not just in tech, but in renewables, grid infrastructure, and energy security. This creates a secondary investment boom in the energy sector directly catalyzed by the growth in AI.

The artificial intelligence boom is creating a full industrial upgrade cycle that extends far beyond software. Investment in AI necessitates a massive physical infrastructure buildout, including data center cooling, expanded power grids, communication networks, and critical minerals, benefiting industrial stocks.

While AI-driven tech exports boosted 2025 growth, they are capital-intensive with limited job creation. The expected 2026 recovery in non-tech exports is more significant as it will drive broader economic benefits like job growth, capital expenditure, and consumer spending across the region.