Balance sheets and fiscal strength bolstered Asia against recession

Following a 70% rally from the lows of March, Asian equities' outperformance gap versus the rest of the world has widened even further, resulting in 31% outperformance for the first seven months of the year.

Although Asia has not escaped the global recession, it was clear the region would be the least likely casualty of the financial crisis thanks to strong balance sheets and fiscal strength. China, for example, was able to engineer a V-shaped recovery through massive fiscal stimulus and policy-directed bank lending of RMB7.4tn in the first half of 2009 alone. While we are cautious on asset-quality deterioration in the banking sector, the pace of lending has nonetheless been impressive. Surging car and property sales represent just some of the signs that a recovery is underway, despite the s...