Risks proliferate but Asia has some silver linings

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SINGAPORE (Oct 29): The rising risk aversion among global investors has been the product of geopolitical and economic risks that are not specific to Asia, yet they have taken a toll on Asian equities and currencies in the past two weeks. The unrelenting flow of bad news has not helped the mood. The serious deterioration in US-Chinese ties and the potentially grave implications for Middle East stability of the shocking murder of Saudi dissident Jamal Khashoggi have unnerved investors. Continuing worries about trade wars and the further slowing of the global economy, especially in China, have added to the sense of foreboding among investors.

Our take is that some trends are indeed of concern, but that the overall picture for emerging Asian economies remains reasonably good through 2019. The headwinds to economic growth will cause some slowing, but the impact will be contained. Asian countries are also likely to successfully limit the depreciating pressures on their currencies. Moreover, over time, we could even see some positives emerge from recent developments, such as a stepped-up pace of production relocation from China to Southeast Asia.

How much downside to economic growth in 2019?

There certainly have been signs that the global economy is losing momentum. The latest Organisation for Economic Co-operation Development lead indicator is pointing to deceleration in the coming six to nine months. Purchasing manager surveys show weakening order books while lead indicators for export demand point to... (Click here to read the full story)