The year 2025 offered early signals on AI, governance and liquidity, showing where disciplined capital is heading next

AFTER two years of volatility, 2025 brought a reset for South-east Asia’s technology and investment markets. Falling interest rates, a weaker dollar, and the reopening of initial public offering (IPO) markets in Hong Kong and India stabilised sentiment across the region. 

While conditions have not fully recovered, the year brought clearer signals on where capital is flowing, how risks are being assessed, and which businesses are better positioned for the next phase of growth.

AI investment remains dominant but highly concentrated

Artificial intelligence (AI) dominated global investing in 2025, capturing roughly half of total funding. Investment activity was highly concentrated, with fewer than 10 companies raising nearly 80 per cent of total AI funding, much of it through rounds exceeding US$500 million. This underscores the growing advantage of large-scale players operating across models and applications.

While Chinese innovations like DeepSeek demonstrated technical resilience, the US continued to absorb a disproportionate share of global AI capital. This concentration raises competitive risks for smaller players challenging model-to-application platforms such as OpenAI and Anthropic.

In South-east Asia, high interest in AI-related opportunities struggled to translate into investable outcomes. Leading founders continued to gravitate towards the US market, while valuations often moved ahead of revenue growth, keeping investment activity selective.

Governance standards face renewed scrutiny

Early in the year, the eFishery scandal unsettled the Indonesian venture ecosystem and prompted limited partners to question governance practices. While such incidents are not unique to South-east Asia, similar cases elsewhere highlight the additional diligence required in emerging markets.

Founders may not always be familiar with venture-backed governance expectations and may make short-term decisions that create longer-term risks. 

Investors respond by demanding reference checks beyond founder-provided contacts, robust whistle-blower mechanisms, and on-site verification. In private markets, credibility is difficult to rebuild once lost. 

Trade tensions and S-E Asia’s positioning

While new US tariffs initially triggered market anxiety, the region adjusted more quickly than expected. Most South-east Asian economies adapted to a new baseline of roughly 20 per cent tariffs, even as supply-chain reconfiguration continued.

Indonesia’s decision to join Brics in January 2025, followed by progress towards a Comprehensive Economic Partnership Agreement with Europe in September, reflected a pragmatic diversification of alliances. At the same time, “China plus one” manufacturing strategies continued to favour South-east Asia, even as India faced greater tariff-related pressure.

IPO reopenings and the return of exit visibility

The reopening of IPO markets in 2025 marked a turning point for Asia’s private-capital ecosystem. After several muted years, public markets, led by Hong Kong, re-emerged as credible exit venues, restoring liquidity and valuation benchmarks.

In South-east Asia, local listings also regained relevance. The Fore IPO on the Indonesia Stock Exchange highlighted the growing depth of domestic capital markets, and reduced reliance on overseas exits. 

Hong Kong’s revival, particularly in consumer listings, stood in contrast to the more uncertain environment facing Asian companies in US markets, reinforcing its role as a bridge between global capital and Asian growth companies.

The bar for public listings has risen. Markets increasingly reward scale, profitability and strong governance over pure growth narratives. This has prompted founders and investors to prepare earlier and operate with greater discipline. Regional exchanges are therefore likely to play a larger role as primary exit venues.

Financial platforms, retail investors, and market depth

Rising retail investor participation across Asia supported stronger trading volumes and market liquidity in 2025. In Indonesia, growing domestic participation strengthened confidence in local markets and highlighted the importance of digital brokerages and capital market infrastructure in broadening access to investing. 

Similar trends emerged elsewhere. In India, digital brokerages benefited from buoyant retail demand. Together, these dynamics pushed the Jakarta Composite Index to record highs by year end. As participation broadens, local capital markets are becoming deeper and less reliant on external flows.

Climate reality, capital constraints, and adaptation

Climate risks intensified in 2025, with super typhoons in the Philippines and severe flooding in Indonesia and Thailand. In Indonesia, floods disrupted agricultural supply chains for coffee, palm oil, and pulp and paper.

Despite this, climate tech investment remained relatively limited, accounting for about 16 per cent of total funding in the first half of 2025, said DealStreetAsia. Global momentum softened amid policy delays, reduced funding from development finance institutions and shifting US priorities.

Within the region, energy security moved higher on the agenda as data centres drove demand for power and water. Indonesia’s removal of subsidies for two-wheeler electric vehicles (EVs) created near-term headwinds, though adoption continued to build. 

Chinese EV brands led by BYD gained further market share, while Vietnam’s VinFast committed US$1 billion to expand manufacturing in Indonesia. Capital is increasingly flowing towards solutions that improve resilience, efficiency and energy security.

Stabilisation and the shift towards growth equity

The defining feature of 2025 for South-east Asia’s startup ecosystem was stabilisation. Across portfolios, companies returned to fundamentals, improving margins, tightening cost control, and, in some cases, reaching cash-flow positivity. 

Select businesses were still able to attract meaningful capital, as shown by quick-commerce player Astro, which raised more than US$50 million in a round led by Amazon.

At ACV Capital, we increased our focus on growth equity, reflecting a maturing ecosystem where profitable, scalable businesses are emerging alongside earlier-stage innovation. The next phase of growth is likely to reward discipline over speed, reinforcing South-east Asia’s transition towards a more balanced private-capital ecosystem.

Looking ahead

Despite tariffs, climate disruptions and geopolitical uncertainty, South-east Asian economies showed notable resilience, with gross domestic product growth of around 4.5 per cent and inflation close to 2 per cent. The year brought greater clarity around governance standards, exit pathways and capital discipline.

The opportunity exists. Investors and founders must pursue it with patience, rigour and conviction.

Source: The Business Times

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