Most economies in Emerging Asia are likely to record decent growth over the next couple of years. However, with the pace of expansion in the region’s biggest economy, China, set to ease further in 2015-16, regional growth is likely to remain broadly flat at around 6%. Inflation is set to remain very low in the short-term, but is likely to rebound strongly by the end of the year as the downward pressure on inflation from lower oil prices comes to an end. As such, the region is probably nearing the end of its recent rate-cutting cycle. With the US Federal Reserve set to start hiking interest rates later this year, we expect most Asian currencies to lose more ground against the US dollar over the forecast period, although they should continue to appreciate in trade-weighted terms. Asian equities should rise over the medium term, supported by decent growth prospects. Finally, government bond yields should remain fairly low given the backdrop of low local policy rates and the healthy fiscal positions of most governments.
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