- Hong Kong’s retail sales rose 16 percent year-over-year in December, the fastest pace in 20 months and ahead of market expectations. The growth was thanks to improving employment and a 14 percent year-over-year increase in tourist arrivals from mainland China.
- South Korea’s exports jumped 47.1 percent in January from a year earlier, the highest growth rate in more than 20 years, as the continued global recovery drove external demand for autos, appliances and electronics.
- Chile’s economic activity expanded by a higher than estimated 3.9 percent year-over-year in December, the country’s highest growth in 15 months, due to a rebound in services and retail sales.
Weaknesses
- China’s official Purchasing Managers’ Index moderated to 55.8 in January from 56.6 in December, partly due to seasonal factors.
- Fitch described Hungary’s fiscal prospect as uncertain ten weeks ahead of the country’s general elections and remained undecided whether to increase its credit rating outlook.
- Emerging market equity funds saw a $1.6 billion outflow in the week ended February 3, the biggest liquidity exodus in 24 weeks. The outflow came amid rising concerns on the sovereign debt situation in such European countries as Greece, Portugal and Spain.
Opportunities
- While China’s city population has been consistently growing in the last decade, over 40 percent of the counties in central China still have an urbanization rate of merely 20-30 percent. According to CEBM, consumer spending can be boosted by more than 45 percent when the urbanization rate rises by 10 percentage points to the 30-40 percent range. Expanded urbanization, especially in inland China, remains one of the policy solutions for stimulating domestic demand and bodes well for consumer plays in the long term.
Threats
- The current rally in the U.S. dollar may continue to be a headwind for investors in Asia given the longstanding negative correlation between the U.S. dollar and Asian equities.
