Asian markets are the safe bet for investors this year as the United States struggles to get back on the rails and Europe grapples with a debt crisis, economists say.
Recovery in the US will continue to be weak despite signs consumption may be picking up and balance sheets are improving.
Growth in the world's largest economy may continue to be weighed down by a lukewarm property market and possible cutbacks in government spending.
'The recovery of the US economy is at one-third [the expected] speed,' said Chris Probyn, the chief economist of State Street Global Advisors.
Tracking how US gross domestic product has gone up after every recession over the past century, State Street finds that the deeper the recession, the greater the rebound.
But growth this time is only one-third the speed that would be expected to fit that pattern, because of stubbornly weak property prices.
The US would not launch another round of quantitative easing but the chance of a double-dip recession was low, according to Probyn.
Meanwhile, the European Union has yet to come up with a conclusive plan to bail out its debt-ridden members. Talks on a bond-swap scheme designed to cut Greece's debts have actually halted.
China and other emerging Asian economies, on the other hand, have plenty of room to accommodate appropriate monetary policies to help them shore up their economies.
Bond investors would diversify from the US to China and South Korea in light of the higher yields and an anticipated appreciation of Asian currencies against the US dollar this year, said Frances Cheung, a senior strategist for Asia ex Japan for Credit Agricole Corporate & Investment Bank.
Hong Kong's banking system is expected to see a mild credit tightening in the backdrop to lower deposit growth. Issuers of the so-called dim sum bonds were also likely to face a gradual increase in borrowing costs this year as the loan-deposit ratio tapered off, Cheung said.
But the rise in borrowing costs will be moderated by a fall in interest rates in onshore yuan deposits as Beijing is expected to cut interest rates by 50 basis points this year.
Cheung said dim sum bond issues would rise to 200 billion yuan (HK$ 246 billion) from 120 billion yuan last year as a result of Beijing's policy of promoting the offshore yuan bond market in Hong Kong.
The amount, in US$, Asian nations (excluding Japan) owe European banks, says the Bank for International Settlements