China holds the key to regional recovery

Turmoil in China’s financial markets has fuelled concerns that its real economy is also on the brink of a crisis, but we expect continued policy support to drive a recovery over the coming months. Stronger growth in China should in turn provide a boost to exports from the rest of the region. With low interest rates and depressed oil prices providing support to domestic demand, most countries should record faster growth this year than in 2015. After a couple of years of big falls, we think most currencies will be fairly stable against the US dollar in 2016. Meanwhile, equity markets look set to strengthen on the back of improving growth prospects and accommodative domestic monetary policy.