Staff Reporter
According to a recent report by Morgan Stanley, Asia’s economic recovery is facing new hurdles as rising trade tensions and uncertainty in policies threaten corporate investment and growth.
The investment bank warns that tariffs, deflation risks in China, and a cautious monetary stance in Japan could undermine business confidence, potentially slowing down the region’s recovery.
Findings, drawn from discussions with investors in the US, Singapore, and Hong Kong, reveal increasing worries about constraints on capital expenditure (CAPEX) and a slowdown in global trade.
While some investors remain hopeful about growth prospects in China and India, many are concerned that the uncertainty surrounding trade policies may have a more significant economic impact than the trade war of 2018-2019.
Trade tensions are at the forefront of investor worries, as newly imposed US tariffs on China, along with critical industries like steel, aluminum, semiconductors, and automobiles, are expected to put additional pressure on economic conditions.
Analysts at Morgan Stanley warn that just the uncertainty surrounding these tariffs can slow capital investments, as businesses may hesitate to allocate resources in such an unpredictable policy landscape.
“Unless tariffs are addressed quickly, the uncertainty itself will negatively impact the business cycle,” the report notes.
Investors in Singapore and Hong Kong maintain a moderately optimistic outlook compared to their US peers, particularly regarding the long-term growth potential of China and India.
However, as major global trade and financial hubs, both economies are highly susceptible to changes in trade policy and economic volatility.
With more tariff actions likely on the way, Singapore and Hong Kong may experience increased market fluctuations, which could affect business confidence and capital flows.
Despite the broader uncertainty, sectors like technology, infrastructure, and financial services remain key areas of interest for investors seeking selective opportunities.
