The first half of the calendar year has been a case of struggling USD strength and rallying China equities. Shanghai Composite Index rose from 3165 to the peak at 5166 in mid-June. The benchmark index has since crashed and is now testing 4000. The Chinese authorities want a “slow bull” as the landscape points to several key themes such as: RMB internationalisation; swings in Fed’s rate hike expectations; and, greasy Greece situation.

Key highlights:

• Greece risks, China stockmarket fallout and MERS situation in Korea have been added to the list of economic risks for Asia.
• Policy easing and extra fiscal stimulus are expected policy responses, rendering weaker FX a complementary policy tool in coming months.
• We made downward revisions to Asian FX forecasts for H2 2015.

For full analysis, download report: Essential Asia: Head(winds) or Tail(risks) (PDF, 599 KB)