The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
ôHeadline inflation rates ratcheted up recently in most Asian economies on high food and energy prices,ö Citi says. ôIf these prices remain at elevated levels, core inflation rates may catch up eventually.ö
A more important risk probably lies with asset prices in Asia, Citi says.
The US Federal Reserve is expected to continue its monetary easing policy and that could mean accelerating capital inflows to Asia at a time when capital inflows within the region are also expected to rise. These could support Asian currencies and asset markets but also raise the risk of asset bubbles, Citi says.
Continued policy easing by the Fed and persistent market volatility could add downward pressure on short-term interest rates in Asia, especially in Hong Kong, Singapore and the Philippines as well as increase the probability of policy rate cuts in India and Indonesia, Citi says.
But that general policy direction could reverse if inflation rates pick up sharply. Citi expects China and Taiwan to raise interest rates in their efforts to fight high inflation.
ôThe Chinese renminbi and Indian rupee should play greater roles accommodating US dollar weakness going forward,ö Citi says.
Citi notes that the rupee has appreciated by 15.4% against the US dollar for the past year, while renminbi appreciation accelerated to an annualised pace of 16.8% for the past month.
Aside from the key risk of inflation, other factors could affect the regionÆs growth over the next two years, notably the threat of a US recession, the return of the bird flu, and persistent high oil prices, Citi says.
Citi joins those who scoff at the idea that Asia is on the verge of decoupling from the US and the rest of the world.
ôDecoupling Asiaö is probably the most popular investment thesis today, Citi notes, adding that the usual evidence supporting this argument includes the growing Chinese economy and increasing intra-regional trade.
ôOur analyses suggest that correlations of economic activities and financial markets in Asian and in the US increased during the past decade,ö Citi says, adding that while intra-regional trade surged, much of it involved trade of intermediate goods.
While Citi believes Asia is not decoupling, it acknowledges that the regionÆs economies have become more robust in terms of debt structure, foreign reserves, current accounts, fiscal balances and financial institutions. ôThey are in better positions to withstand external shocks.ö
Record low borrowing costs in Australia are feeding demand for the country's real estate, with domestic and global investors raising their allocations into the sector.
Experts have a diversified view on the appeal of private assets across the region, but one thing's for certain - inflows are rising, particularly into China and the US.
Malaysia's Armed Forces Fund hires new CEO; Canada's Omers appoints Asia capital markets managing director; HSBC Asset Management creates alternatives unit, appoints CIO as its head; Bank of Singapore names global wealth head; Aware Super hires IFA head; Hong Kong names acting head for MPFA; Schroders adding to Asia ESG headcount; and more.
Asian fixed income assets – including Hong Kong dollar (HKD) bonds – are luring growing numbers of global investors who are striving for reliable and consistent returns amid macro uncertainty compounded by rising inflation and rates, according to HSBC Asset Management.