US equities have outperformed their European counterparts in recent years but a valuation gap, and signs of more fiscally expansionary moves in countries such as Germany, have made investors in Asia keener on the continent.

A survey of 300 professional investors in four main Asia-Pacific jurisdictions finds that they think Europe offers the best investment opportunities, shedding light on how the continent may be regaining some of its lustre after a period of sluggish growth.

The findings come in Europe Rising: The 2025 Asia Pacific (APAC) Investor Pulse from BNP Paribas Asset Management. It took views from professional investors in Australia, Japan, Hong Kong and Singapore in August and September.

More than half of respondents believe that Europe now offers some of the best long-term investment opportunities, with particularly strong conviction from investors in Australia (72 per cent) and Hong Kong (61 per cent).

European countries – particularly Germany – are ramping up defence and infrastructure spending to contain Russian military forces; eurozone equities had lagged performance of US counterparts but have narrowed the gap. There’s a significant valuation gap that favours Europe: US stocks trade relatively expensively, with the US S&P 500 Index forward price-earnings ratio of around 22 times earnings, above a 19.9 five-year average. The STOXX Europe 600 Index of major European stocks has a forward PE ratio of over 14 times earnings. The Stoxx Europe 600 has risen 56.3 per cent over the past five years; the S&P 500 has risen more than 95 per cent. 

“After years of US equity dominance, Europe is re-entering the global spotlight – not as a cyclical trade, but as a structurally redefined investment destination,” Mike Nikou, APAC chief executive of BNP Paribas Asset Management, said. “Against a backdrop of attractive valuations, monetary policy clarity, and strategic public spending, European markets are being reassessed by professional investors across Asia-Pacific.”

Three in four respondents (74 per cent) already hold more than 11 per cent of their portfolios in European assets, and 76 per cent plan to increase their allocations over the next 12 months. Results show that Australia (87 per cent) leads the pack – followed by Hong Kong (83 per cent) and Singapore (80 per cent) investors showing the strongest intent to increase exposure significantly, with 60 per cent of the respondents citing Europe as a more attractive ‘investment destination’ than the US.

Professional investors are optimistic about achieving positive investment returns in 2025, with 40 per cent of the respondents expecting to achieve 5 to 9 per cent; and 38 per cent expecting to achieve above 10 per cent.

In terms of expected returns across asset classes, respondents are generally optimistic, expressing the most confidence in gaining better investment returns from developed markets equities (77 per cent), precious metals (77 per cent), private equities – funds (76 per cent) and real estate (76 per cent), compared with the start of 2025.