EMAX moves into high-level consolidation after rapid growth, with upward risk still present in Asia

Overview

This report tracks Asia and Emerging Market Asia macro data, PMI, technology exports, tariff changes, and key economic policy signals. The core view is that after EMAX posted growth near 6% for four consecutive quarters, from 2Q it is likely to revert to trend-like growth, not a clear slowdown; in fact, growth forecasts for Singapore and Thailand have been revised up, and upside risks also remain in other Asian economies.

Core views

First, Asian growth momentum is shifting from overheating to consolidation, consistent with June PMI as well as the pullback in Korea and Indonesia and the improvement in Thailand. Second, the technology cycle remains the strongest regional theme. Although Korea and Taiwan technology industrial production have cooled from unsustainably high levels, nominal technology exports are still growing rapidly due to price effects, pushing regional technology company profits to new highs. Third, China PMI indicates moderate demand recovery rather than a broad recovery, with policy support likely to become more visible but still relatively targeted. Fourth, tariff repricing may bring most Asian economies back to levels near previous IEEPA pressure, with trade uncertainty still the region’s principal external risk.

Analysis framework

The report uses a high-frequency macro data tracking framework, combining PMI, industrial production, technology exports, trade, inflation, fiscal policy, central bank policy, and tariff scenarios to horizontally compare near-term growth paths and risk direction across major Asian economies.

Methodology notes

• Macro Data TrackingPMI and industrial production co-movement view

  Use PMI, industrial production, and export data to gauge shifts in economic momentum.

  The report interprets the June PMI pullback as consolidation at elevated levels and uses differences in PMI for Korea, Indonesia, and Thailand to explain the 2Q growth divergence across economies.

• Trade and Price EffectsTechnology export price-effect analysis

  Differentiate between quantity momentum and price contribution in technology exports.

  The report argues that while technology industrial production has cooled, nominal technology exports remain strong, possibly reflecting improved trade conditions from rising prices of technology goods.

• Policy Scenario AnalysisTariff-path scenario analysis

  Compare tariff paths related to Section 122, Section 301, and IEEPA.

  The report suggests that the first round of Section 301 investigations may push most Asian economies’ tariffs close to pre-expiry levels of Section 122, while subsequent investigations could bring tariffs near IEEPA levels.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Asian macro risk assets

  Driven jointly by regional growth consolidation and the technology cycle

  Strengths

  Growth remains at high levels, supported by technology exports and fiscal space.

  Weaknesses

  Domestic demand recovery is uneven, and PMI and industrial production have cooled in some countries.

  Comparison

  Thailand and Singapore growth outlooks have been revised up, while Indonesia has weakened relatively and Korea has pulled back from unusually strong Q1 growth.

  Risks

  Rising tariffs, weaker external demand, and insufficient policy support.

• Technology export chain

  Highly correlated with AI demand, technology prices, and regional corporate earnings

  Strengths

  Nominal exports remain strong, with price effects improving trade terms and lifting technology company profits.

  Weaknesses

  Korea and Taiwan technology industrial production have cooled from unsustainably high levels.

  Comparison

  South Korea’s monthly nominal exports surpassed US$100bn for the first time, indicating that technology export resilience remains strong.

  Risks

  Product-cycle disruptions, price pullback, and global technology demand slowdown.

• China macro assets

  Influenced by PMI recovery, fiscal execution, and property drag together

  Strengths

  Production is still expanding, marginal improvement in domestic orders, and lower energy and input costs benefit margins.

  Weaknesses

  Employment, inventories, order backlog, consumption, private investment, and real estate remain weak.

  Comparison

  The report characterizes China as moderate and stable rather than a decisive inflection point.

  Risks

  2Q slowdown exceeding expectations, weaker export orders, and insufficient downstream pricing power.

• Yen and JGB

  Affected by fiscal concerns, inflation expectations, and BoJ policy expectations

  Strengths

  Tankan suggests strong growth momentum and rising inflation expectations.

  Weaknesses

  Political pressure may limit BoJ rate hikes, and fiscal concerns weigh on the yen.

  Comparison

  The report simultaneously notes a weak yen and rising JGB yields.

  Risks

  Repricing of fiscal risk, inflation expectation de-anchoring, and policy communication volatility.

Key data

• Recent EMAX growth paceClose to 6% over the past four quartersThe report expects growth to ease from 2Q onward toward a pace closer to trend, while upside risk remains clearly visible.
• South Korea nominal monthly exportsFirst exceeded US$100bnMainly driven by strong technology exports and price effects.
• South Korea 2Q GDP forecast risk2.0% q/q, saarIndustrial production and PMI data suggest relatively balanced risks.
• China 2026 real GDP forecast4.7%The regional outlook table shows China's real GDP growth for 2024, 2025, and 2026 as 4.9%, 5.0%, and 4.7%, respectively.
• Emerging Asia 2026 real GDP forecast4.9%The regional outlook table shows emerging Asia's real GDP growth for 2024, 2025, and 2026 as 5.0%, 5.2%, and 4.9%, respectively.
• Emerging Asia 2026 current account balanceUS$1284.0bn, about 3.9% of GDPThe regional current account table shows that the external surplus remains large.

Impact & implications

For investment and macro allocation, Asia’s growth has not shifted from strength to contraction, but has transitioned from overheating to consolidation at high levels. Technology exports and AI-related demand continue to support Korea, Taiwan, and parts of the export chain; China needs stronger end-demand to form a durable recovery; Japanese fiscal concerns and political constraints on further BoJ tightening may continue to affect the yen and JGB yields; tariff uncertainty could suppress risk appetite in trade-sensitive economies.

Risks

• The U.S. tariff path remains uncertain, and subsequent Section 301 investigations could push tariffs back toward IEEPA stress levels.
• China’s demand recovery remains narrow and cannot fully offset weak consumption, fragile private investment, and property drag.
• Technology industrial production has cooled from exceptionally high levels; if price effects reverse, exports and profits may come under pressure.
• India’s June rainfall deficit reached 40%, and El Nino remains a key risk.
• Following Indonesia’s first trade deficit since 2020, its foreign exchange reserve data should be monitored closely.

What to watch

• China foreign exchange reserves, CPI, and credit data, plus policy signals after the late-July Politburo meeting.
• Hong Kong PMI, Taiwan CPI, and trade data, to monitor external demand and price pressure in Greater China.
• Japan May wages and real consumption, to assess whether income growth can support domestic demand.
• Whether the RBNZ raises rates by 25bp as expected, and changes in Australia’s credit and housing data.
• Whether June CPI in the Philippines and Thailand remains below market expectations.
• Indonesia’s foreign exchange reserves and trade balance, to assess whether external pressure is broadening.