What happened in 2023?
Historically, Asia has benefitted from China’s strong growth and the FED’s loose policy. In 2023, both went in the opposite direction. China’s recovery was domestic-led and service-centric. What seemed to be strong, pent-up demand post lockdown ended up fading quite quickly, and didn’t translate into positive growth for the majority of countries in the region. 

More broadly, manufacturing conditions and global trade declined in 2022 and have yet to recover. Global financial conditions were also challenging, with higher US interest rates and a stronger dollar impacting monetary policies worldwide. 

As such, countries that have historically closely tracked US performance, like Taiwan and Korea thanks to their exposure to technology and specifically the AI supply chain, performed relatively better. Meanwhile, countries which were commodities or China dependent all suffered. India remained a relative bright spot due to its structural growth story and as it benefitted from EM flows shifting away from China as it become the focus of geopolitical risk considerations. 

What’s in store for Asia in 2024?
Asia has idiosyncratic stories, but remains tied to global exports, global PMIs and global financial conditions. 
We are entering 2024 with a lot of hope, despite a backdrop of uncertainty, including concerns around overall moderating growth and its resulting impact on countries’ policy approach, election risks (Taiwan kicks off in January, followed by Indonesia in February, Korea in April, India in May and the US in November), and ongoing concerns around China’s geopolitical situation, its lacklustre growth outlook and defaults within its real estate sector.