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Malaysia’s economy grew at a slower pace in Q2 than it did in Q1. Although downside risks for exports have increased, domestic demand should continue to support growth in coming quarters. The upshot is that, provided global demand does not deteriorate …
18th August 2011
India’s latest wholesale price data show that inflation remains uncomfortably high. Meanwhile, we believe that a hard landing for the economy is unlikely. The upshot is that, in spite of the volatility in global financial markets, we still think that the …
17th August 2011
At the time of the earthquake in Japan in March, many governments in the region feared the potential impact on their economies. However, although Taiwan and the Philippines saw demand for their exports to Japan fall, other countries in the region have …
Singapore’s short-term swap offer rates (SOR) turned negative last week, prompting questions as to whether this amounts to an implicit policy easing. We think not. The negative short-term SOR is likely to be a reflection of safe haven flows, rather than a …
Oil prices have slipped back on fears that the world economy may be heading for another downturn. What’s more, our in-house view is that oil prices have further to fall. The impact in emerging Asia of a further fall in oil prices will vary from country to …
16th August 2011
The Bank of Korea (BoK) kept its base rate at 3.25% today, as expected. Volatility in the financial markets and concerns over the outlook for the global economy are likely to keep the BoK on the sidelines for a while. Nonetheless, provided a sharp global …
12th August 2011
Fear is growing in Asia over the outlook for the global economy. Although not our forecast, another sharp fall in global output would see Asia hit hard initially. However, as in 2009, Asia’s strong economic fundamentals should ensure that the region would …
11th August 2011
Bank Indonesia (BI) kept its reference rate on hold at 6.75% today, as expected. Declining headline inflation and greater uncertainty over the outlook for the global economy were the main factors behind BI’s decision. Provided a sharp global economic …
10th August 2011
Even before S&Ps downgrade of US debt on Friday, many governments in Asia had been stepping up efforts to diversify their foreign exchange reserves away from US dollars. However, as long as Asian governments continue to intervene heavily in foreign …
9th August 2011
Despite benefiting from generally better fundamentals, no emerging market (EM) is immune from the deepening problems in the US and Europe. Growth everywhere is likely to slow over the next year and, while Asia should continue to outperform, we are …
Share prices in Emerging Asia registered losses as worries over the global outlook intensified. However, equities in Emerging Asia fell by less than in other parts of the world. This makes sense given that fears over slowing growth are focused elsewhere, …
8th August 2011
Today’s Q2 GDP data for Indonesia confirm that growth remained brisk, underpinned by rising commodity exports and resilient domestic demand. We maintain our view that further monetary tightening at some point makes sense given that the policy rate is …
6th August 2011
Sluggish retail sales have prompted media reports that Australia’s shoppers have gone on strike. However, overall consumer spending has held up much better. The upshot is that we do not expect the Reserve Bank to be unduly concerned. We still forecast …
Emerging Asia is not in any imminent danger of a sovereign-debt crisis: debt levels in most countries are low, while strong growth makes it easier to finance debt burdens. However, another sharp downturn in global growth would potentially be a big problem …
4th August 2011
The Philippines has seen its fiscal deficit fall sharply during the first six months of the year. Although revenue growth has been growing strongly, the fact that government spending has fallen sharply this year is a concern. The budget deficit should …
Purchasing Manager Indices (PMIs) released over the past two days for India, Taiwan, Australia and Singapore all worsened considerably. Manufacturing across Asia is likely to remain subdued for the rest of the year, amid weaker demand for the region’s …
3rd August 2011
In an unexpected move, the State Bank of Pakistan (SBP) at the weekend cut its main policy rate by 50bp to 13.5%. The cut came despite continued strong inflationary pressures, and follows growing concern that the government is putting pressure on the …
2nd August 2011
Policymakers across the region are rightly concerned about the potential consequences of a debt crisis in the US. We believe that the impact on Emerging Asia’s economies of a one or two notch downgrade of US debt by the main debt-rating agencies is likely …
The Reserve Bank of New Zealand (RBNZ) has signalled that its policy rate will soon be raised from a post-earthquake emergency level, provided its worst fears for the global economy do not materialise. We now expect the RBNZ’s cash rate to be hiked by …
29th July 2011
The Philippines’ central bank (BSP) kept its overnight rate on hold at 4.5% today, however, it did still tighten monetary policy by raising the reserve requirement ratio. Although inflation is above the central bank’s 3-5% target, downside risks to growth …
Today’s Q2 GDP data from Korea confirm that the economy grew at a slower pace in the second quarter than it did in the first. Nonetheless, we believe that Korea’s policymakers will continue to focus on tackling inflation even at the expense of slow growth …
28th July 2011
The Reserve Bank of India (RBI) surprised markets with a 50bp rate hike today, lifting the repo rate to 8.0%. With the accompanying policy statement reinforcing the RBI’s hawkish policy stance, we now expect rates to reach 8.5% by year-end and to fall …
27th July 2011
The Monetary Authority of Singapore (MAS) revised up its 2011 inflation forecast last week while data out today show that inflation rose in June. Nonetheless, talk of runaway price pressures looks overdone to us. In addition, external risks have …
26th July 2011
The Philippines’ central bank (BSP) will announce its latest policy decision on Thursday. As with elsewhere in the region, the BSP faces a dilemma as it looks to keep inflationary pressures under control amid growing external risks. Although it is a close …
Inflation remains a concern across most of the region. Central banks in Taiwan and Thailand have hiked their policy rates in recent weeks, while the central bank in Malaysia increased its reserve requirement ratio. More policy tightening is likely this …
22nd July 2011
Growth in remittances from Overseas Filipino Workers (OFW) to the Philippines has slowed since the 2008-09 global crisis. However, we believe that remittances growth is likely to stabilise rather than worsen further in the remainder of 2011. The upshot is …
20th July 2011
Emerging Asia’s currencies have strengthened against the US dollar so far this year in large part because local policymakers have allowed appreciation to combat inflation. However, with inflation set to peak by the end of the year across the region and …
19th July 2011
Today’s price data from India show that both headline and core inflation rose further in June. What’s more, we expect the headline rate to reach double-digit levels in the third quarter. While growth appears to have slowed, there is little reason to …
15th July 2011
Singapore’s advance estimate of GDP in the second quarter shows that the economy contracted due to weakness in the manufacturing sector. However, the expansion should resume in the second half of this year in spite of weaker global conditions. We still …
The Bank of Korea (BoK) held its base rate at 3.25% today, as expected. Nonetheless, the policy rate is still below pre-crisis levels, while core inflation has further to climb. The upshot is that the base rate is likely to be hiked in August or …
The Bank of Thailand (BoT) raised its repo rate by 25bp to 3.25% today, as expected. Fiscal policy is likely to be looser under the incoming government than the outgoing administration. The upshot is that we expect more monetary tightening this year. We …
14th July 2011
Bank Indonesia (BI) kept its reference rate at 6.75% today, as expected. Declining headline inflation and greater uncertainty about the outlook for the global economy were the two main factors behind BI’s decision to keep rates on hold. Nonetheless, …
13th July 2011
The US government announced on Sunday that it has suspended $800m in military aid to Pakistan amid a further deterioration in the relationship between the two countries. The announcement is clearly a blow to Pakistan’s fiscal consolidation plans. However, …
12th July 2011
Singapore’s latest GDP figures will be released on Thursday and are likely to show that the economy contracted in the second quarter. However, this should be seen in the context of strong growth earlier this year. The expansion should resume in the second …
The Central Bank of Sri Lanka (CBSL) kept its policy rates on hold today, as expected. Growth slowed at the start of the year due to heavy floods, while headline inflation has been trending lower and is likely to continue doing so. The upshot is that the …
9th July 2011
Bank Negara Malaysia (BNM) kept its policy rate at 3.0% today whereas both we and the consensus had anticipated a 25bp hike. Malaysia’s central bank instead opted to raise its reserve requirement ratio by 100bp to 4.0%. The chance that BNM stays on the …
8th July 2011
The Reserve Bank of Australia (RBA) held its cash rate at 4.75% today, as was widely anticipated. A run of poor economic data has prompted market participants to expect that the next move in the cash rate is likely to be down. We disagree, although we …
6th July 2011
Manufacturing output across Emerging Asia is likely to grow at a sluggish pace in the near term given the weakness in global demand. However, output and orders continue to rise in most countries in both Emerging Asia and elsewhere, albeit at a slower …
5th July 2011
This report is only available as a PDF. Click to download. … Manufacturing growth to slow, but not sharply …
Most of emerging Asia should continue to grow rapidly for at least another decade, and much longer if the right policy choices are made. The key exception is China where, despite a bright long-run outlook, structural reform is needed sooner rather than …
Fears of a widespread bubble in emerging markets look overdone, but there are growing signs that rapid capital inflows are stoking problems in several countries. We think the biggest risks lie in Turkey and Brazil, where the threat of a sharp downturn in …
2nd July 2011
Inflation remains high across much of the region and policy rates have moved up in India, Korea, Taiwan and Thailand in recent weeks. More policy tightening is on the way in Asia. However, concerns over capital inflows and the risk of inflating asset …
1st July 2011
Taiwan’s slow pace of interest rate hikes is likely to continue into next year against a backdrop of strong economic growth and lingering property price concerns. … Taiwan’s slow tightening cycle still has far to …
The relative valuations of emerging market equities and bonds are no longer as attractive as they have been in the past. But the fears of overheating and hard landings that have held many back so far this year are generally exaggerated or at least …
Policy rates across Emerging Asia are likely to rise further towards pre-crisis levels in the coming months. However,tightening cycles should end next year with rates below their 2008 peaks. Most currencies in the region are likely to appreciate against …
The strength of the recent surge in India’s exports is partly a result of the rise in prices of commodities, and particularly metals. As such, we expect export growth to moderate in the coming months. Nonetheless, the long term trend for total export …
28th June 2011
Singapore’s small, open economy is susceptible to weakening global conditions, but we believe that growth will prove to be resilient this year. Strengthening domestic demand and intraregional links should ease the blow from softer conditions in the West. …
21st June 2011
The Philippines’ central bank (BSP) unexpectedly left its overnight rate at 4.5% today, but it did tighten policy settings by hiking its reserve-requirement ratio. Growth in 2011-12 looks set to be above levels seen over the past decade, while core …
17th June 2011
The Reserve Bank of India’s (RBI) decision to raise its repo rate by 25bp to 7.5% from today was widely expected following the further rise in inflation in May. We now expect inflation to peak at close to 11% in Q3 before falling, more gradually than the …
