Tighter global liquidity and Asia: not all gloom and doom
Some markets will benefit from strong fundamentals, proactive monetary policies, and ample buffers to resist outflows. In these cases, it is likely that investors may have gotten ahead of themselves, and current valuations are not justified. However, some economies remain under pressure. Above all, the relative sustainability of the real external position remains the most significant consideration. This is a concern in cases where buffers are inadequate to cover external exposure. Lastly, countries that do not possess flexible exchange rate regimes may struggle to smooth currency fluctuations, as the reach of monetary policy is limited by the degree of dollarization of the economy.