Asia: Rally disconnecting from economic cycle – RBS
|Vaninder Singh, Research Analyst at RBS, suggests that Asia has been a clear beneficiary of the recent round of global risk-seeking behaviour.
Key Quotes
“While the rally does have more legs, in our view, we also think it is starting to lose its fundamental underpinnings. Asia’s economic cycle is starting to slow anew and, in this context, its financial assets are beginning to look overbought.
A trigger for a full correction, however, may not arrive until late-Q4. We believe a renewed slowing of China’s growth, or convergence of its financial risks, later this year may initiate a sell-off.
When such a scenario unfolds, we would prefer countries with endogenous growth drivers over those more exposed to global growth, i.e. long INR, IDR and PHP vs. short SGD, KRW, TWD and THB.”
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