Asia-Pacific economies such as the Philippines are expected to continue to perform well, with near- and long-term prospects still rosy despite distress in China’s financial markets.
Think-tank Capital Economics said in a note to clients this week that there were few signs that the recent crash in China’s equity markets would lead to weakness in real economic conditions.
“Even if the selloff in Chinese mainland equities continues for a while, we doubt it will have a major adverse effect,” the firm said on Thursday.
Chinese stocks have fallen by nearly a third since mid-June, officially signaling the start of a “bear” market. As a result of the decline in Chinese stocks, which carry a significant weight in the region’s Morgan Stanley Capital International (MSCI) index, Asia-Pacific equities on average have declined by 15 percent.
However, Capital Economics said stripping out the effects of Chinese shares, other Asian equities have “actually risen by 2 percent since mid-June.”
The firm added that stock markets in countries that have strong links to China, either via supply chains, such us South Korea and Taiwan, or commodities (Chile and Peru), have not been noticeably weak.
“We see little risk that it would trigger a rout of other emerging equity markets, either in the near future or further down the road,” Capital Economics analyst David Rees said.
For its part, Standard & Poor’s (S&P) said more forceful moves by Chinese policymakers to stabilize Asia’s biggest economy would protect other markets in the region. While slowing, economic growth in the region should remain at healthy levels.
“Some signs of stabilization in top-tier cities are appearing following an increasingly forceful policy response, including a debt-restructuring operation for local governments,” S&P said.
This week, S&P said India might overtake China as the continent’s fastest-growing economy. Southeast Asian markets, meanwhile, also face slowing growth.
For 2015 and 2016, S&P sees the Philippine economy growing by 6 percent. The projection was lower than the credit rater’s previous forecast of a 6.1-percent expansion in 2015 and 6.3 percent for 2016.
Indonesia, the biggest of this group, has seen growth slide closer to 5 percent from an average of about 6 percent in the post-financial crisis period. Growth in Thailand has recovered from the 2014 coup but remained subdued.
Malaysia has taken a hit to its terms of trade as Asia-Pacific’s only oil-exporting nation. “And even the Philippines, one of the star performers, has hit a soft patch,” S&P said.