BNY’s Head of Markets Macro Strategy, Bob Savage, reports that Asia-Pacific growth is being bolstered by improving regional PMI momentum, South Korea’s inclusion in the FTSE World Government Bond Index (WGBI), and robust export data, particularly from South Korea, which is expected to show continued growth in March exports, CPI, and industrial production [1]. However, the region faces downside risks due to ongoing geopolitical uncertainty and elevated oil prices, which are weighing on foreign exchange markets [1].
Foreign investors have been reducing their exposure to regional equities, with nearly $20 billion of South Korean equities sold in March and more than $30 billion year-to-date. Taiwan equities also saw significant outflows, with around $11 billion sold in March [1]. Despite these outflows, policy support from regional governments is expected to cushion equities, although it remains negative for regional currencies and fixed income assets [1].
Regional central banks are increasingly relying on macroprudential tools rather than traditional monetary policy to manage risks, reflecting the challenging environment for FX and fixed income [1]. Investors are focusing on risk reduction, given the prevailing uncertainties and energy shocks [1].
Looking ahead, the Asia calendar is led by upcoming data releases, including China and regional March PMI, Japan’s Tokyo CPI and Q1 Tankan survey, and the start of South Korea’s WGBI inclusion, which may influence market sentiment and flows [1].
CONCLUSION
Asia-Pacific growth remains resilient, supported by strong PMI and export data, but regional currencies and fixed income face downside risks due to geopolitical uncertainty and higher oil prices. Policy support may help equities, but investor sentiment is cautious, with significant outflows from South Korean and Taiwanese equities. The market is likely to remain focused on risk reduction and upcoming economic data releases.