Jingjing: Hello everyone, welcome to our Q2 Asia Trade Floor Update.
Text on screen: Jingjing Huang, Credit Product Strategist
I’m Jingjing Huang, credit strategist. Joining me today is our Asia portfolio manager, Stephen Chang.
Text on screen: Stephen Chang, Portfolio Manager, Asia
Thanks for being here, Stephen.
Stephen: Great to be back.
Jingjing: So Stephen, our latest Cyclical Outlook is titled Layered Uncertainty: Conflict, Credit Stress, and AI. It talks about growth holding up, but also rising pressure beneath the surface. What are the key takeaways?
Stephen: At a high level, global growth has been more resilient than expected. But underneath that headline, outcomes are starting to diverge quite sharply.
Text on screen: “Global growth is holding up, but outcomes are uneven”
A big change this quarter is geopolitics. The conflict in the Middle East raises the risk of higher energy prices, which can push inflation up while slowing growth — and not all regions are affected in the same way.
Jingjing: Including Asia.
Stephen: Yes. Asia feels this quickly because energy exposure varies a lot across countries. At the same time, investment linked to AI and technology is still supporting parts of the region. Put together, that’s widening the gap between who’s coping well and who’s under pressure.
Jingjing: This is the K-shaped economy we discussed last time. How does it shape policy decisions?
Stephen: Policymakers have less room to manoeuvre than in past cycles. Budgets are more constrained, interest rates have little room for cuts given inflation and currency stability, and financial conditions have tightened.
Text on screen: “Policy trade-offs are becoming tighter”
That means shocks can feed through more directly into growth and markets.
Jingjing: And for investors?
Stephen: It brings the focus back to high-quality fixed income and selectivity. Yields are higher than they were a few years ago and we expect some demand weakening ahead, which can help offset some of the inflationary pressure from higher energy prices.
Text on screen: “Selectivity matters more in a diverging market”
And with markets moving differently across countries, active positioning matters much more.
Jingjing: How are these global forces playing out in Asia right now?
Stephen: One useful lens this quarter is the oil shock. When energy prices stay high, currencies often show the pressure first — especially in economies that rely heavily on energy imports. That’s where the contrast between India and China really stands out.
Jingjing: Tell us more about the differences.
Stephen: India is more exposed in the near term. Higher oil prices weigh on growth and inflation, and that can put pressure on the currency. Policymakers have tools to manage this, but the rupee can be sensitive when energy prices stay elevated.
Text on screen: “India: more exposed to higher energy prices”
Text on screen: “China: better insulated from energy price pressures”
China, by comparison, is better positioned. It has more buffers, and higher energy prices tend to pass through less to consumer inflation. As a result, its currency and broader macro picture are generally more stable than many Asian peers in this kind of environment.
Jingjing: And looking beyond India and China?
Stephen: Countries with stronger buffers, or more insulation from energy prices, tend to cope better. Separately, economies linked to the technology and electronics cycle still see support. But where buffers are thinner, the trade-offs become harder — and that’s where markets are more vulnerable. Overall, Asia is becoming much more uneven, rather than moving as a single block.
Jingjing: Let’s end with China. Two Sessions has just concluded, and China is entering its 15th Five-Year Plan. What matters most for investors?
Stephen: The new Five-Year Plan reinforces China’s longer-term focus on productivity, technology, and upgrading its industrial base. That helps explain why exports and industrial activity remain important anchors.
There is also policy intention to increase the consumption share of growth and lift household incomes. The key question is whether the measures being rolled out can deliver sustainable impact.
Text on screen: “Consumption is a policy priority, execution is key”
Jingjing: How does the current oil backdrop affect that picture?
Stephen: Higher energy prices can lift costs for producers, which may help turn China’s producer price index positive and reduce some of the disinflationary spillovers to rest of the world. We expect consumer inflation, however, to remain benign due to other domestic factors.
Fiscal policy is likely to do more of the heavy lifting, while monetary policy stays on the dovish side, relying more on targeted lending programs rather than significant rate changes.
Jingjing: Thank you, Stephen. To wrap up:
- Global growth has been resilient, but differences across countries are widening.
- In Asia, higher energy prices are creating clear winners and losers, and markets are responding accordingly.
- And in China, policy continuity and the new Five-Year Plan reinforce the focus on stability and longer-term growth.
Text on screen: “Global growth is holding up — but unevenly”
“In Asia, higher energy prices are driving divergence”
“In China, policy continuity anchors the outlook”
For more details, please read our latest Cyclical Outlook. Stephen, thanks again — and thank you all for watching.
Stephen: Thanks Jingjing. And thanks everyone for joining us.
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Important information
Program recorded on 09 April 2026.
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