Asia’s investment map is splitting into two clear tracks: economies plugged into the artificial intelligence ( AI ) boom and those still leaning on slower domestic demand and fragile consumers.

But beneath the surface of that “two-speed” narrative, a second debate is opening up – whether the long-awaited consumer revival in emerging markets now has the ingredients for a more durable upswing, particularly across Southeast Asia.

Sat Duhra, portfolio manager on the Asia ex-Japan equity team at Janus Henderson Investors, believes the regional divergence has been stark, and not just in equity performance. “North Asia has far outperformed South Asia over the past year,” he says, pointing to Taiwan and South Korea’s outsized gains as global capital crowded into semiconductors and AI-linked hardware.

Yet the split is not purely a tech story. In mainland China and Hong Kong, a hunger for income has driven strong performance in banks, insurers, and high-yield state-owned enterprises ( SOEs ), helped by falling domestic rates and a local bid for dividend-paying equities. In South Korea, meanwhile, gains extended beyond the semiconductor sector as improving shareholder returns and governance reforms bolstered financials.

However, what happens next, and where will the next leg of returns come from, if AI “winners” remain crowded and valuations begin to bite?

A fragile consumer, or a recovery ahead

Duhra is cautious on the near-term consumer outlook across much of Southeast Asia. His on-the-ground read is that household balance sheets in several markets remain strained and that fiscal support is being used more as a patch than a springboard for growth.

“In many of these markets, consumers never really recovered from Covid,” he said. “Savings were depleted, household debt is high, and governments are now stepping in with cash handouts to support spending.”

He points out that Thailand and Indonesia have used cash transfers and other support measures to bolster consumption, while India’s state support has extended into food programmes.

Duhra’s concern is not simply the policy direction, but what it signals about household resilience. “When you’re doing cash handouts and consumers are not spending, it’s not ideal,” he says, adding that South Asia’s growth can look optically better than conditions “on the ground”.

Higher interest rates are another friction point. In Vietnam, he sees a real economy still expanding strongly, but domestic spending softer than in prior boom years after tighter liquidity conditions and a property-market clean-up. “It’s still growing strongly, but it’s not quite the boom environment we saw before,” he observes.

That cautious view on a near-term consumer-led rebound contrasts with a more optimistic argument advanced by Rob Brewis, investment manager of the Aubrey Global Emerging Markets Fund, who believes the consumer setup across emerging markets is improving materially as inflation moderates and the path opens up for lower rates.

In his note, The Coming Consumer Boom in Emerging Markets, Brewis argues that 2025’s market leadership, dominated by IT, materials and commodity-linked exposures, left consumer sectors lagging, despite a strengthening macro backdrop for real incomes. The disconnect, he suggests, may not last.

His core point is straightforward. For most emerging market households, the key prices are food and fuel, not copper and gold. A disinflation trend across many emerging economies is now lifting real wages, while policy rates still sit at restrictive levels, a combination Brewis believes sets the stage for rate cuts and a more supportive consumer cycle.

Disinflation revives consumption

The Asian angle in Brewis’s thesis is important because it reframes the “two-speed Asia” story. The region may be divided by AI exposure and supply-chain positioning, but disinflation and improving real incomes could still lift consumer purchasing power in markets that have felt left behind.

He points to India, where he says rural wage growth is running strongly while rural inflation is comparatively subdued, creating positive real wage growth that can feed into demand for consumer durables, mobility, and even entry-level financial products.

It is a reminder that the “consumer” in Asia is not monolithic, rural and urban cycles can diverge, and policy and food-price dynamics can matter more than the global tech cycle.

Brewis also flags China, where consumer confidence has been weighed down by the property downturn and a cautious spending mindset. Yet he argues the overhang is slowly diminishing and latent spending capacity is rising, citing research indicating household savings have climbed since 2019 even as property’s share of household assets has declined.

If that trend stabilizes, China’s consumption recovery could become less about exuberance and more about gradual normalization, selective spending, but improving from a depressed base.

Duhra’s position is more guarded. He acknowledges China’s equity performance has been powered not so much by earnings growth as by rerating and income-seeking flows. Still, he sees tangible opportunity where cash flows and payouts are becoming more credible, and where domestic buyers are structurally supporting dividend equities.

Taken together, the two perspectives point to a nuanced picture: Southeast Asia’s consumer remains pressured in parts, but the broader emerging Asia consumer may be closer to a turning point than equity market leadership has suggested.

Capital inflows, limited jobs

If Southeast Asia’s consumer has been slower to accelerate, Duhra believes one reason is that the much-heralded supply-chain relocation has not delivered the labour-market dividend investors may have expected.

In earlier waves of regional investment, China-based manufacturers built facilities and supplier networks that created jobs and broader spillovers. More recent models, he argues, can be lighter-touch: “They ship all the parts and they just assemble it there,” he says, citing EV-related assembly footprints where value-added and employment impact can be limited.

Data centre investment is another example. Countries such as Malaysia may attract capex tied to AI infrastructure, but job creation can be modest relative to the scale of spending. The result is that GDP prints and capital inflows do not always translate into household income acceleration, at least not quickly.

Brewis’s response to this risk is effectively to broaden the frame. Even if AI infrastructure is capital-intensive, he argues the longer-term winners are adopters and users, and ultimately consumers, once productivity gains filter through and interest rates fall.

Beyond the AI trade

On positioning, Duhra says his team began reducing technology exposure earlier this year, banking on profits after strong performance and recognizing that volatility was likely to rise. Geopolitics and macro uncertainty, including energy-market risk, were part of that decision.

The fund remains constructive on Asia’s core semiconductor champions, arguing their earnings power reflects genuine scarcity and structural demand. “What companies like Samsung, SK Hynix and TSMC do, no one else can do,” he says, noting that the supply chain is not only about AI but also autos, smartphones, and broader computing infrastructure.

But he sees the next phase of returns as increasingly driven by “second-derivative” beneficiaries, the enablers around the AI build-out rather than the headline chip names themselves.

These include power generation, grid and utility exposure, telecommunications linking data centres, and commodity inputs such as copper and aluminium. Many of these sectors also offer higher dividends and more reasonable valuations than high-multiple technology.

That framing has a bridge to Brewis’s consumer thesis: once the “picks and shovels” phase peaks, markets tend to widen their attention to the broader economy. The question is timing, and whether consumer confidence and rates move fast enough to be felt in 2026.

Governance tailwind

Both views converge more clearly on governance and capital discipline as a structural tailwind for Asia’s equity attractiveness.

Duhra points to South Korea’s accelerating corporate reform story, which he argues has bipartisan durability and is translating into shareholder-friendly actions. Crucially, he sees these governance dynamics spreading beyond North Asia.

Thailand has seen companies lean into payouts, including special dividends, while Indonesia’s state-linked reform efforts are pushing for higher dividend distributions across parts of the SOE complex.

Even in China, he notes policy pressure on low-valuation SOEs to justify capital allocation and improve shareholder outcomes.

The common thread is a growing emphasis on dividends, buybacks, and capital management, a stark change from a decade ago. “Fifteen years ago, companies in Asia barely talked about dividends,” Duhra says. “Now, it’s a central topic.”

Singapore sits at the crossroads of these themes – capital discipline, governance, and a policy push – to improve market depth. Duhra is constructive on the direction of travel, arguing the approach has been measured and has the backing of senior policymakers. He also highlights a cultural point that matters to institutional investors: the degree to which market stakeholders actively seek investor feedback and adapt market design accordingly.

Combined with strong capital returns from Singapore’s banks, dividends alongside buybacks, the market is increasingly presenting itself as a credible “income-plus-quality” allocation within Asia.

Two investment ideas

For global investors looking to diversify beyond US mega-cap tech firms, Asia’s opportunity set is widening. AI-linked champions remain central to global supply chains, but governance reforms and income dynamics are reshaping the investable universe.

The open debate is whether the region’s consumer is about to reassert itself. Duhra’s caution reflects real household constraints and uneven job creation in parts of Southeast Asia.

Brewis’s optimism argues that disinflation, improving real incomes, and the prospect of lower rates can revive consumers across emerging Asia, and that markets may be under-pricing that possibility after a year dominated by AI, semiconductors, and commodities.

In other words, Asia may still be two-speed, but investors in 2026 could be forced to hold two ideas at once – the AI build-out is real, and the consumer cycle may be quietly rebuilding behind it.

However, while Asia’s structural themes, AI-driven capital flows, governance reform, and a potential consumer recovery remain intact, near-term market direction may now be shaped by the Iran crisis, which has since added fresh uncertainty to global markets, particularly around energy prices and geopolitical risk.