Asia - Safe havens from global credit crisis? (Sep 07)

While the recent financial market crisis has cast a shadow over the global economy, the latest data suggest that most of the smaller Asian economies are in good shape to weather the storm. India is continuing to boom, with growth still well above its long-term average. This suggests that it is too soon to sound the all-clear on inflation risks and raises the prospect of a further tightening of monetary policy, most likely in the form of an additional hike in reserve requirements. Meanwhile, rapid credit growth means that the risks to Korean interest rates also lie on the upside. Elsewhere, the recent decision by the Bank of Thailand to leave rates unchanged was a slight surprise. However, with domestic demand still weak, we continue to expect Thai rates to dip further in this cycle.