The asterisks on Asia’s resilience

Global technology hardware demand and domestic strategic investment should stay robust next year, but provide less additional growth impetus. The withdrawal of this year’s government support will also expose the weakness in underlying household sentiment.

• China is one reason regional growth won’t accelerate next year. Fading stimulus and renewed property weakness have led us to extend its housing correction through 2030, outweighing the regional gains from China’s policy-led manufacturing investments.

• But we think Asia’s investment cycles will prove more resilient than consensus expects. Strategic spending on technology, power, defence, and supply-chain capacity should settle at a high plateau next year. Although high import intensity and physical bottlenecks associated with these sectors will limit near-term gains for domestic employment and incomes, increased sovereign participation and still-benign financial conditions are supportive offsets.

• The region can’t escape the higher global cost of capital, but most Asian economies are better placed to absorb it than in previous investment cycles. Elevated global yields will raise investment hurdle rates and soften credit growth at the margin, but deeper local-currency markets and larger domestic savings pools make a broad sudden stop unlikely; the strain will fall mainly on weaker sovereign and corporate borrowers.