Commercial property sentiment improved in Q4 but remained weak and below average
Infrastructure spending could support growth to different extents, which in turn will support equity inflows.
Build it and they will come
For sure, some Asian countries have already got an early start – Singapore has been adding capacity and reach to its intra-city train system, and China has begun to do the same for its regular and high-speed inter-city network – but other countries have a much larger gap to bridge.
The economies in the lower half of the chart below generally could use some sprucing up of their infrastructure facilities while those in top half generally have relatively strong infrastructure capacity and need to be more selective about spending. This is especially so for those in the top left quadrant, where fiscal deficits are already substantial. Those in the bottom right have the need to spend and the wherewithal to do so.
Across the economies in the bottom half of the chart, almost all have budgeted increases in fiscal expenditure. Not all are letting that feed into budget deficits though – the Philippines for example is looking at raising taxes to keep the deficit in check but still fund increased spending on infrastructure. China, Indonesia and Thailand though are widening their deficits marginally, at least partially to fund more infrastructure investment. All this will very likely translate into increased demand for industrial metals and other hard commodities, which should at least support prices for these. As geographically the nearest large commodity exporter, Australia is well positioned to benefit from this robust demand. The Year of the Rooster might afford Australia something to crow about!
For full analysis, download report: FX Strategy Thematic – Asia’s road out of Globalization’s retreat (PDF, 1.7MB)
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