SINGAPORE (Dec 12): Asian markets have rallied amid the initial euphoria of Donald Trump’s reflationary policies as the next U.S. president, but more changes are likely to be in store when investors step back to reappraise what lies ahead.

Fund house PineBridge Investments has painted a scenario of the investing environment next year, which posits that the catalysts for change in financial markets are present “everywhere”.

“The seeds are being sown for an inflection point in the global economy. The political changes are unmistakable: Both Trump’s win in the US and the UK’s Brexit vote show broad segments of populations are taking any opportunity to reject the status quo,” says Markus Schomer, chief economist of PineBridge.

Even before his swearing-in, Trump has moved markets in unexpected ways. Could more political or economic shocks be in store?

Schomer says geopolitical risks are one of the major themes he will be watching for next year.

“Europe faces the greatest political challenge in 2017. Elections in France and Germany in the spring and autumn, respectively, could change the EU’s most important inter-country relationship [and] the main driving force towards greater European integration,” he says.

In Asia, there could be unsettling changes as well.

However, Asia could be better placed to cope compared with other emerging markets.

“They have the ability to provide more monetary and fiscal support, [unlike] other EMs; they have cheap valuations with superior profitability positions and [equities of] most major emerging Asian countries remain under-owned,” notes Laurence Boone, chief economist and head of research at AXA Investment Managers.

Fund managers at most investment firms tend to agree on a benign view of Asia.

Andrew Swan, head of Asian equities at BlackRock, observes that 2016 has been a year of transition for much of Asia, which offers a positive backdrop for investing in 2017.

“We are increasingly optimistic on Asia given positive signs of reflation and a recovery of nominal GDP growth in China — this plays very positively for the region. Valuations remain below long-term averages and reflect negative sentiment and positioning,” he says.

How will Asian equities fare in 2017?

Find out more in our cover story of Personal Wealth section, “Asian equities in 2017”, in The Edge Singapore (week of Dec 12), available at newsstands now.