Growth rebounds, central banks turn more hawkish

Economic growth across Emerging Asia rebounded strongly last quarter, with several countries, including Thailand, Singapore, Malaysia and Korea all growing at their fastest pace in a number of years. With economic growth improving, policymakers have started to sound more hawkish. Over the past month the central banks of Korea and Malaysia have indicated that they are likely to hike rates soon. But while we think it is only a matter of time before both countries hike rates, the pace of tightening is likely to be very gradual. Whereas financial markets are pricing in four rate hikes in Korea over the next year and three in Malaysia, we are forecasting just two rate hikes in Korea and only one in Malaysia.