Asian economies caught in 'whirlwind' of sluggish global demand

Growth momentum is obviously slowing.

According to OCBC, after a euphoric first quarter, market optimism and consumer confidence have taken a nose-dive, especially towards the end of the second quarter.

The catalysts for the rethink appear to be twofold, namely the threat of a twin withdrawal of liquidity by the US FOMC as well as China’s PBoC amidst the domestic self-engineered liquidity squeeze.

Here's more from OCBC:

It is clear from the recent export, manufacturing and PMI data releases that Asian economies are being caught in the whirlwind of tepid global demand conditions, and while domestic demand will continue to provide a buffer, the headline growth momentum is inevitably slowing.

While we are not pessimistic about Asian economies and are still penciling in a very modest recovery going into the second half of the year, the odds appear to be somewhat stacked against a growth outperformance for Asian economies.

Moreover, with the US economy gaining some traction, lifting the broad USD and also longer-dated US Treasury bond yields, it is precautionary to expect some capital outflow and liquidity reversal from the region, which may dampen Asian asset market performance as well.

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