Assessing the Resilience of Asian Equities Amid Escalating Sino-US Trade Tensions

The escalating Sino-US trade tensions of 2025 have intensified scrutiny over the resilience of Asian equities. As global supply chains fragment and protectionist policies gain traction, defensive sectors-those providing essential goods and services-have emerged as critical areas of focus for investors. These sectors, including healthcare, utilities, and consumer staples, are not only less sensitive to macroeconomic volatility but also benefit from policy tailwinds in key Asian markets. This analysis evaluates the valuation metrics of these sectors and identifies geographies where government support is fortifying their long-term appeal.

Undervalued Defensive Sectors: A Valuation Deep Dive

Defensive sectors in Asia are currently trading at attractive valuations relative to historical benchmarks. According to Siblis Research, the healthcare sector has a trailing price-to-earnings (P/E) ratio of 21.37, while utilities stand at 20.39 and consumer staples at 24.12. These figures suggest that healthcare and utilities are trading near or below their historical averages, which typically hover around 22.0 and 21.5, respectively, as shown in the same dataset. Consumer staples, though slightly above its average of 25.0, remains a stable play given its consistent earnings growth and inelastic demand.

The undervaluation of these sectors is further underscored by their role as safe havens during periods of economic uncertainty. For instance, healthcare's P/E ratio reflects strong investor confidence in its essential services and recurring revenue streams, even as trade tensions disrupt discretionary spending, a pattern visible in the Siblis Research figures. Similarly, utilities benefit from steady demand for infrastructure and energy, supported by long-term government contracts and regulatory frameworks. These metrics position defensive sectors as compelling opportunities for investors seeking downside protection in a volatile market.

Policy Support: China, India, and the Regional Contingency

Asian governments are increasingly deploying fiscal and structural policies to shield defensive sectors from trade war fallout. In China, the 2025 fiscal policy emphasizes proactive stimulus, with a raised fiscal deficit-to-GDP ratio and expanded government bond issuance targeting healthcare, utilities, and consumer staples, as described by China Studies. Over ¥4.5 trillion has been allocated to social security, public health, and consumer incentives such as trade-in programs for electronics, signaling a commitment to domestic demand. These measures aim to offset the drag from U.S. tariffs while reinforcing the resilience of essential industries.

India's 2025-26 Union Budget similarly prioritizes defensive sectors, albeit with a focus on fiscal efficiency. While social sector spending remains constrained (accounting for 17% of total expenditure), the budget includes targeted investments in healthcare infrastructure, such as Day Care Cancer Centres and expanded medical education, a shift noted by The Diplomat. Additionally, capital expenditure of ₹11.21 lakh crore is directed toward infrastructure development, aligning with the Atmanirbhar Bharat initiative to reduce import dependence and bolster domestic manufacturing, a point also highlighted in analyses of regional fiscal policy. These policies not only stabilize essential services but also create long-term value for investors in utilities and consumer staples.

Japan, South Korea, and Vietnam are adopting complementary strategies. Japan's "pragmatic pluralism" approach involves deepening ties with ASEAN and pursuing infrastructure projects to mitigate U.S. tariff impacts, according to regional strategic assessments. South Korea is offering emergency support to its auto sector and exploring monetary easing, while Vietnam streamlines bureaucracy and diversifies trade partnerships. Collectively, these efforts highlight a regional shift toward self-reliance, with defensive sectors serving as linchpins for economic stability.

Strategic Implications for Investors

The confluence of undervalued defensive sectors and robust policy support presents a compelling case for Asian equities. Investors should prioritize markets where fiscal stimulus directly targets essential industries, such as China's healthcare and consumer staples or India's infrastructure-driven utilities. Additionally, diversifying across geographies-leveraging Japan's economic diplomacy, South Korea's innovation, and Vietnam's trade adaptability-can further mitigate regional risks.

However, challenges persist. The absence of P/B ratio data for key markets like China and India underscores the need for caution, as asset valuations may not fully reflect long-term fundamentals; comprehensive P/B datasets are available from sources such as NYU Stern. Investors must also monitor the pace of trade negotiations and their impact on sector-specific policies.

Conclusion

As Sino-US trade tensions reshape global markets, Asian defensive sectors offer a rare combination of affordability and policy-driven resilience. By aligning investment strategies with the fiscal priorities of China, India, and other regional players, investors can capitalize on undervalued opportunities while navigating the uncertainties of a fragmented global economy.