The headwinds and tailwinds for Asian assets

Stabilising economic and corporate earnings growth, improving macro stability and overall accommodative local macro policies have provided a positive anchor for Asia ex Japan assets in the face of elevated global and developed market growth, policy and political risks.

Support has also come from benign global liquidity and policy backdrop. A more aggressive Federal Reserve hiking cycle remains a risk, especially if it is driven more by inflation fears than growth. Higher US yields may reduce the relative attractiveness of Asia ex Japan assets and pose a challenge to some economies through higher external funding costs, tighter domestic liquidity/capital outflows, and FX volatility.  But our view of a very gradual normalisation of US interest rates, paired with accommodative European and Japanese monetary policy, should continue to support assets, pa...