Decoupling10 March, 2008, 8:25. Posted by Zarathustra
Tags: Asian, Economy, Hong Kong, Markets
Since the US economic slowdown, people around are talking about "decoupling", whether emerging markets can continue their growth in face of economic slowdown in US. The answers are yes or no, different people have their own reasons for the guess.
Today, China officials announced the trade figure for February. The trade surplus declined more than expected, and the export growth was slowest in 6 years. This probably gives us some ideas of how US economic slowdown can impact on China. The Economist published an article "The decoupling debate", which argued that the export of emerging markets would not be much affected as the decrease in export to US would be offset by the increase in export to other emerging countries. There is of course some reality in this argument I think, but the latest fact seems to suggest that the US economic slowdown would inevitably impact economies of emerging countries, and of course, their financial markets. Of course, whether the trend of slowdown of export is yet to be seen, as China was hit by serious snowstorm, which impacted transportations and manufacturing.
The Asian markets seem to be unable to survive in face of the slowdown of US. Most of the market has been performing badly since the beginning of this year, losing more than 20% of market value in these markets. We really have no idea of the actual impact of US slowdown on corporate earnings in China, although my guess is that for many companies, the impact is minimal. However, financial markets would over-react. If you ask me what to do, I would say that I see value from some companies trading in Hong Kong, as the economic prospect in Hong Kong and China still looks bright when you compare to US. This is probably a time which people can get some bargain as long as the world economy won’t deteriorate from here.
Decoupling or not, it is still open to debate.