Momentum

Upside surprises from China’s manufacturing and services PMI data reaffirm that the economy is on track to stage a strong cyclical recovery in 2023. We expect China will deliver a speedy growth acceleration from 2.2% y-o-y in Q1 to 7.4% in Q2, 5.5% in Q3 and 6.9% in Q4, lifting full-year GDP growth back to 5.6% in 2023 from 3.0% in 2022. We expect China can overachieve the conservative 2023 GDP growth target of “around 5%” set at the annual National People’s Congress in March.

In contrast to the growth downturn in developed economies, which is exacerbated by the tightening credit conditions caused by the banking sector turmoil in the U.S. and Europe, Asia stands out as the only region that is expected to deliver growth acceleration to 4.7% in 2023 from 3.5% last year. Alongside China’s recovery, India’s service sector boom is reflected by the surge of its services PMI to 59.4 at a 12-year high in February, adding momentum to Asia’s resilient growth in these uncertain times. The recent market turmoil triggered by Silicon Valley Bank (SVB) and related banking events have added to the market uncertainty. We believe a systemic banking crisis should be averted but the market volatility may persist. We see the Asian markets as relative safe havens in the volatile markets.