Emerging Asia's capital markets are starting to stabilise and Asian relatively resilient economies will help them recover as the global crisis ebbs and investor appetite returns, the Asian Development Bank (ADB) said on Apr. 21 in its annual report.
However, the road to recovery for the region's equity, bond and currency markets will not be even given the uncertainty about the length and severity of the current economic downturn, the bank said in the Asia Capital Markets Monitor, an annual publication that assesses the status and challenges for the region 's markets.
Jong-Wha Lee, head of ADB's Office of Regional Economic Integration, said emerging Asia's financial markets were hit harder than expected last year. However, given that many emerging Asian economies will still grow this year while major global economies contract, Asia's financial markets should do better than most other regions going forward.
The report released covers 11 economies of emerging Asia, including the Chinese mainland, China's Hong Kong, China's Taiwan, India, Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
According to the report, net equity outflows from the region slowed significantly in the first quarter of 2009 after a sharp withdrawal of funds in the latter half of 2008, “signaling that foreign investors are far less pessimistic than they were about the region's prospects.”
For the full year, net private capital flows to the region are expected to remain positive, although much lower than in 2007 when inflows hit a record high.
Although most Asian currencies are expected to recover somewhat over the course of the year, further depreciation is possible in the near term amid continued deleveraging and as weaker exports reduce dollar earnings in the region, said the report./.