MAS names sustainability head; Malaysia’s EPF appoints COO and CFO; GIC PE head for SEA leaves; State Super hires new exec; Hesta appoints chief growth officer, chief Debby Blakey appointed to corporate governance board; ex-BlackRock exec joins IQ-EQ in Singapore; HSBC AM builds direct real estate team; ex-Vanguard head of distribution joins LGIM; Sanne names Singapore head; and more
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
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
Insto roundup: GPIF staff say J-Reits more attractive than traditional assets; Hong Kong's strict Spac criteria
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.