Complete Property Market Updates of Singapore

June 21, 2008

Economist sees signs of Asia decoupling from US economy

Filed under: General,Market Watch,Singapore Economy — Propertymarketupdates @ 7:18 pm

Bank strategist points to strong growth in China and India despite weaker US consumer demand

STRONG first-quarter growth in major Asian economies has lent greater credence to the theory that Asia’s economic performance is no longer as closely tied to the United States’ fortunes as it once was.
 
Strong growth in China, India and other emerging economies, along with improvements in investment spending in Asian markets like Singapore, has cushioned the region from the impact of flagging US consumer demand.

This is the view of Deutsche Bank’s chief Asian strategist, Dr Chua Hak Bin, who said in a weekly report that first-quarter data largely supported the theory that Asia has ‘decoupled’ from the US.

‘Gross domestic product growth has held up relatively well, coming in above expectations for most of Asia.’

This included growth in China at 10.6 per cent, Hong Kong at 7.1 per cent, Singapore at 6.7 per cent, Indonesia at 6.3 per cent, and South Korea at 5.7 per cent.

By contrast, the US posted anemic first-quarter growth of 0.6 per cent.

Dr Chua said: ‘First-quarter growth for Thailand, Malaysia, Taiwan and India will be released this week and, again, will likely come in on the strong side of expectations.

‘What looks like a mild, rather than severe, US recession is also limiting the fallout.’

He believes that the global credit crunch appears to have had only a limited impact on Asia thus far, as evidenced by the region’s two major financial centres.

‘Hong Kong’s foreign currency loan growth has accelerated sharply to 48.6 per cent in March, while overall loan growth is holding up and running at 18.7 per cent.

‘Singapore’s offshore loan growth shows a similar acceleration to 43.3 per cent in March, while domestic loan growth continues to climb steadily to about 23.9 per cent,’ he said.

He attributed this resilience to the region’s bank-centred financial system and aggressive US Federal Reserve rate cuts, which probably sheltered most Asian companies from the brunt of the credit crunch.

And while many governments have shifted their attention to surging global and domestic inflation, largely driven by more expensive oil and food, Dr Chua was more optimistic.

‘We would caution against being overly pessimistic about the impact from oil. After all, Asia has not sunk into a bust cycle despite oil prices having tripled over the past three years.

‘On the contrary, pockets of high-growth activity have emerged across Asia because of the oil boom,’ he said.

Robust GDP growth in region

DR CHUA Hak Bin, Deutsche Bank’s chief Asian strategist, said Asia’s gross domestic product growth has held up relatively well in the first quarter.

This included growth in:
China: 10.6 per cent
Hong Kong: 7.1 per cent
Singapore: 6.7 per cent
Indonesia: 6.3 per cent
South Korea: 5.7 per cent

By contrast, the US posted first-quarter growth of only 0.6 per cent.

Dr Chua also predicted that first-quarter growth for Thailand, Malaysia, Taiwan and India, which will be released this week, will likely come in on the strong side of expectations.

Source : Straits Times – 27 May 2008

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