Asia slowdown to resume

Morgan Stanley's Andy Xie thinks the slowdown in Asia is set to resume.

Growth momentum in Asia may have stabilized in the past two months as reflected in the July export data. The downtrend, however, will resume soon, in our view, as oil prices have risen further and more countries remove energy subsidies.

Also, the rising Fed funds rate is becoming a stronger headwind for Asia overtime. The Fed is raising interest rates in a strong economy enjoying a buoyant property market. However, most Asian economies are not as strong as the US's and could not handle the high Fed funds rate as well.

Recent data from Asia have been mixed. In Singapore, manufacturing output in July fell by 2.3 percent on a seasonally-adjusted month-on-month basis while in Taiwan, export orders received by Taiwan's manufacturers and traders in July slowed to an annual rise of 8.71 percent in July while its industrial production index fell by 1.13 percent from the corresponding figure of last year and its manufacturing production index fell by 1.34 percent. On the other hand, Hong Kong's GDP grew 6.8 percent in real terms in the second quarter and first quarter growth was revised up to 6.2 percent.

Meanwhile, Japan appears to be continuing its very gradual recovery from deflation, according to another Reuters report.

The core nationwide consumer price index (CPI), which excludes volatile fresh food prices, was down 0.2 percent from a year earlier, government data showed on Friday... On a seasonally adjusted basis, the core CPI was flat from June... Core CPI for the Tokyo area, compiled a month ahead of the nationwide index, fell 0.3 percent in August from a year earlier, matching economists' forecasts.