Region expected to slow after prolonged growth
Asian emerging markets have been a big force behind the global economy's growth but they are due for a slowdown after a prolonged expansion, Barclays Capital said yesterday.
The bank recently raised its forecast for regional expansion to 9.1 per cent this year from 8.8 per cent. It, however, reiterated its prediction of a drop to 7.6 per cent growth next year.
'The emergence of capacity constraints in this region is in fact the dominant reason why the region is likely to slow,' said Peter Redward, the head of emerging Asia research at Barclays. 'Asia has reabsorbed nearly all excess capacity created by the recession and that means we cannot continue to grow at the pace that we have done.'
Regional markets including China helped sustain trade and production growth by taking up some of the demand for goods that could no longer find a buyer in sluggish Western economies. But that growth may have hit a peak as the nation's major economic indicators are still below levels recorded earlier in the year.
The purchasing managers' index, which measures manufacturing activity, rose to 53.8 last month, below the 55.7 mark in April. And retail sales growth in August lagged levels seen in February, April and May.
Barclays said emerging-market Asia accounted for 2.1 percentage points of the 4.6 per cent growth rate it had forecast for the global economy this year. It said the region would contribute 1.9 percentage points to the estimated 4.1 per cent growth next year.
Redward predicted better days ahead for the mainland equity market, however, especially as the authorities have initiated policy measures to target property speculation.
'We are going to see funds, which would have gone into property, moving more towards the stock market,' he said. 'We should see a significant rally over the next year.'
The Shanghai Composite Index is one of the world's worst performers this year. It is down 19 per cent so far this year.
CCB International Securities, however, has a more upbeat outlook. It said yesterday liquidity inflows might boost the Hang Seng Index to 26,000 points this quarter. It finished yesterday at 22,639.14.
'Hong Kong and the mainland's stock markets will maintain upside momentum, thanks to their growing economies and internationalisation of the [yuan],' said Peter So, a co-head of research at CCB International Securities.
