Capital flows back to developed world
ASIA'S role as the world's growth engine is waning as economies across the region weaken and investors pull out billions of dollars.
The Indian rupee fell to a record low on Monday, Thailand is in recession and Indonesia's widest current-account deficit pushed the rupiah to its lowest level since 2009.
Chinese banks' bad loans are rising and economists forecast Malaysia will post its second straight quarter of sub-5 per cent growth this week.
The clouds forming in Asia as liquidity tightens and China's slowdown curbs demand for commodities and goods are fuelling a sell-off of emerging-market stocks, reversing a flow of money into the region in favour of nascent recoveries in the United States and Europe.
Emerging markets from Brazil to Indonesia have raised borrowing costs this year to try to aid their currencies as the prospect of reduced US monetary stimulus curbs demand for assets in developing nations.
"The eye of the storm is directly above emerging markets now, two years after it hovered over Europe and four years after it hit the US," said Mr Stephen Jen, co-founder of hedge fund SLJ Macro Partners in London.
Almost US$95 billion (S$121 billion) was poured into exchange-traded funds (ETFs) of US shares this year, while developing-nation ETFs saw withdrawals of US$8.4 billion, according to data compiled by Bloomberg.
Signs of a stronger US economy may prompt the Federal Reserve to begin paring its US$85 billion in monthly bond purchases as soon as next month.
"The pendulum is swinging back in favour of the advanced countries," said Mr Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors. "We've entered a tougher, more difficult period" for Asia, he added.
But Mr Richard Jerram, chief economist at Bank of Singapore, said the market declines reflected overly ambitious expectations rather than fundamental weakness in the economies.
"There's a good structural story based on the underlying domestic demand," said Mr Jerram, who has analysed Asian economies for two decades. "What you see at the moment is reaction from expectations being unrealistically positive, to now becoming more realistic."
The slowdown in economies such as Indonesia and Thailand is part of a "very, very global" weakness, World Bank chief economist Kaushik Basu told reporters in New Delhi on Monday.
The US recovery "was so slow that even the slightest pick-up is looking like a pick up," he said.
"I don't think the Asian situation is any worse. In fact, if anything, Asia is probably better off than the rest of the world."
That may not help markets in Asia as money continues to flow back to Europe and the US, said Mr Oliver.
"Asia will still be a stronger part of the world than the US or Europe, but, compared to people's expectations, Asia is likely to come in a little bit lower than expected," he said.