Navigating Asian Equities: Contrarian Opportunities Amid US Fiscal Crosscurrents

The upcoming US jobs report on July 3 and the pending One Big Beautiful Bill Act (OBBBA) are creating a volatile backdrop for Asian equities, particularly in labor-intensive sectors like manufacturing and retail. While near-term earnings headwinds loom, this environment presents contrarian opportunities for investors willing to bet on mispricings caused by macro uncertainty. Below, we dissect how US fiscal dynamics are shaping valuations and highlight underfollowed stocks positioned to outperform once policy clarity and positive data emerge.

The US Macro Backdrop: A Double-Edged Sword for Asian Markets

The June US payroll data, due July 3, will test whether the labor market's resilience persists amid Federal Reserve tightening. A stronger-than-expected report could reinforce hawkish rate expectations, pressuring Asian currencies and equities. Conversely, a soft reading might ease policy fears, creating a tailwind for risk assets. Meanwhile, the OBBBA—now cleared by the Senate—threatens to disrupt Asian supply chains through its accelerated expiration of clean energy tax credits and its Section 899 penalties on income from "discriminatory foreign countries."

For Asian firms exposed to US fiscal policy—such as exporters reliant on clean tech subsidies or regional banks with USD liabilities—the bill's provisions are a double-edged sword. While long-term benefits like permanent tax incentives for R&D could boost competitiveness, near-term uncertainties are already pressuring valuations. This creates a buying opportunity for investors who believe the Senate-approved OBBBA will be amended to soften its anti-China provisions, or that strong US wage growth will ultimately drive global demand.

Sectors to Watch: Where Mispricing is Most Pronounced

Manufacturing: Balancing Tariff Risks and Tech Tailwinds

The OBBBA's sunset of clean energy tax credits risks disrupting Asian supply chains reliant on Chinese minerals and manufacturing. Yet companies with diversified geographies and strong balance sheets are being oversold.

Zhejiang Yinlun Machinery (SZSE:002126)
- Focus: Thermal management and automotive exhaust systems.
- Why Buy Now: Trading at a 24.8% discount to its intrinsic value, with Q1 sales up 12% Y/Y to CN¥3.42B. The firm's share repurchase program and dividend hikes signal confidence in its ability to navigate US-China trade friction.
- Catalyst: The OBBBA's delayed implementation (if finalized by year-end) and rising demand for EV thermal management systems.

Giga-Byte Technology (TWSE:2376)
- Focus: Computer components and AI hardware.
- Why Buy Now: Despite a 48.3% valuation discount, Q1 revenue surged 11% to NT$65.75B, driven by AI chip demand. The firm's exposure to US semiconductor subsidies (if retained in the OBBBA) could unlock upside.
- Risk: Near-term headwinds from US tariffs on Taiwanese exports.

Retail & Real Estate: Betting on Domestic Growth

Asian retail stocks face headwinds from a stronger USD and rising interest rates, but select names offer asymmetric upside.

Charter Hall Retail REIT (ASX:CQR)
- Focus: Australian convenience and shopping center REIT.
- Why Buy Now: Trading at a 0.3% annual earnings decline projection, despite stable rental income (A$275.6M in Q1). Insider buying by executives signals confidence in its diversified portfolio.
- Catalyst: A weaker AUD (if US rates rise) could boost USD-denominated earnings for offshore investors.

The Contrarian Play: Timing the Turnaround

Investors should position ahead of two key catalysts:
1. US Jobs Report (July 3): A strong wage growth print could alleviate fears of a slowdown, lifting Asian export stocks.
2. OBBBA Finalization (Q4 2025): Senate compromises (e.g., delaying "prohibited foreign entity" rules) could reduce China-related supply chain risks.

Portfolio Strategy:
- Long: Overweight Zhejiang Yinlun (SZSE:002.126) and Charter Hall Retail (ASX:CQR) at current discounts.
- Hedge: Use put options on USD/INR or USD/CNY pairs to offset currency risks.
- Avoid: Chinese clean energy firms exposed to OBBBA's credit sunsets.

Conclusion: Mispricing Now, Rewards Later

Asian equities in manufacturing and retail are being unfairly punished by US fiscal uncertainty. For contrarians, the combination of strong balance sheets, valuation discounts, and sector-specific tailwinds (e.g., EV adoption, AI spend) makes this a high-conviction setup. The July 3 payroll data and Senate-House OBBBA negotiations will be critical inflection points—but for patient investors, the time to position is now.

Stay disciplined, but stay ready.