Investors warned on threats to Asian markets

Markets in Asia have survived Brexit with relatively few losses, according to global investment manager Alliance Bernstein, however investors should be wary of slow growth.

Investors in Asia are breathing a collective sigh of relief following the UK referendum, with the region appearing to have survived Brexit with relatively few losses.

However, a new report by AllianceBernstein (AB) has cautioned that the fallout might not be over just yet, flagging some signs that the region’s economies might be in for future trouble.

According to the report, exports outside of technology have been “lacklustre” and investors should remain cautious of slow growth.

“We believe that investors should remain on guard against risks of weak regional exports, as well as slower growth and reform glitches in China,” it said.

“Overall, we continue to consider poor export prospects as a key factor behind a continuation of benign growth and modest inflation, which both point to more policy easing – both monetary and fiscal policies in most countries.”

“This scenario implies lower government bond yields in the coming year.”

While Asian markets so far have proven to be fairly resistant to the uncertainty experienced internationally, a weakening Chinese economy would threaten that stability.

Chinese economic data from June indicated faltering housing investment, according to the report.

“This has reinforced our long-held view that, once housing investment slackens, the Chinese economy will be standing on just one leg, supported solely by the government’s infrastructure spending, as private sector demand remains sluggish.”

However, it wasn’t all bad news, with the region recognised for having navigated the current economic climate well.

The report credited the People’s Bank of China with “making China’s currency management much more transparent” which had in turn helped investor confidence.

It went on to state that central banks in Malaysia, Taiwan, Indonesia and South Korea have been particularly proactive in easing their monetary policies, and economic fallout as a result, while strong currency showings by the South Korean won, Indonesian rupiah and Japanese yen have all helped steady the region.

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