Economic growth across Emerging Asia has continued to ease. However, this is just a return to what is normal and can be sustained rather than the start of a severe and prolonged downturn. Most of the slowdown, we judge, has already come through and the regional upswing should regain traction soon. Accordingly, curbing inflation and averting asset bubbles will stay the top policy priorities. We expect more interest rate hikes, more curbs on capital inflows, and further currency appreciation. A bubble in residential property is the biggest asset market threat, with Singapore, Taiwan, and India, most at risk. Equities look set to rise further with 15-20% gains likely, we forecast, across Asia to end-2011. But North Asian markets will probably rise more than ASEAN and India equities.
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