Asia-Pacific: A real diversifier for US equity risk

Asia-Pacific equities offer a broad, lower-risk diversification alternative to concentrated US equity exposure.

• The region combines shareholder-friendly reforms in Japan and Korea with strong domestic demand in India and ASEAN, while supporting global AI and energy-transition manufacturing.
• The MSCI AC Asia ex-Japan Index is concentrated in Taiwan at 30.7%, Korea at 23.3% and China at 23.0%, whereas the broader MSCI AC Asia-Pacific Index allocates 29.6% to Japan, 18.9% to Taiwan, 14.4% to Korea, 14.2% to China, 8.4% to Australia and 7.8% to India.
• Information technology represents 46.4% of Asia ex-Japan versus 33.9% of broad Asia-Pacific, making the latter less exposed to the Taiwanese and Korean technology cycle.
• Over three-, five- and ten-year periods, Asia-Pacific had annualized volatility more than two percentage points lower than Asia ex-Japan and a maximum drawdown 7.77 percentage points smaller.
• Japan adds governance reform and buybacks projected to exceed USD 100 billion in fiscal 2026, while Australia adds resources, financials and high-payout defensives alongside the growth engines of India, ASEAN, Korea and Taiwan.

Takeaway: Investors seeking to diversify a concentrated US position should consider broad Asia-Pacific rather than Asia ex-Japan, while recognizing that the historical risk differences and returns are not guarantees of future performance.