In our new CIO Special we assess the external headwinds and domestic challenges faced by Asian economies in H2 and provide a macroeconomic and asset class outlook.
- Asian economies will face headwinds from continued inflationary pressures and central bank policy tightening, a global growth slowdown and supply imbalances.
- China is expected to emerge from a grinding Covid-19 wave, while in India and Southeast Asia high oil prices and rising inflation will be key themes.
- We remain cautiously optimistic on Asian equities, particularly China. However, Asia fixed income could remain volatile due to a rising interest rate environment.
Asian economies could see further external headwinds, as many of them need to tackle the inflation risks caused by higher oil prices. With inflation elevated, most Asian economies are likely to tighten their monetary policies by raising rates following the path of the Fed. Meanwhile, the external demand slowdown along with the softer DM growth could also affect Asia’s growth. On the other hand, China should see more tangible recovery with more reopening and more stimulus measures. We remain cautiously optimistic on Asian equities (particularly Chinese equities), with the economic recovery and regulations on tech and property sectors likely to be eased. However, Asia fixed income may remain challenging due to the higher interest rate environment with Fed’s steadfast rate hikes.