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Asian Exports Slowing Down Putting a Damper on Growth

Reuters reports that the slump in Asian exports has emerging markets investors concerned about the longer-term growth prospects of the Asian markets.

It’s a trade that has worked well over the past couple of years. As the eurozone showed signs of distress, international investors went to countries like China, Japan, and even South Korea for opportunity. They found it. Asia, especially China was growing swiftly and in 2013, after Prime Minister Shinzo Abe announced monetary stimulus plans, Japan became the most crowded long trade on the planet.

Recent data is showing that these markets are slowing. Lower commodity prices and shrinking demand from the United States, China, and Europe has leading economic indicators in southeast Asian country looking a little dreary.

Add to that currency wars that are creating 2 percent swings along with a yen that has strengthened, and it’s easy to see why investors are nervous.

“For countries like Indonesia, and to a certain extent Malaysia, you’ve had this perfect storm of weak external demand, weak commodity prices, and strong domestic demand,” said Robert Prior-Wandesforde, director of Asian Economic Research at Credit Suisse in Singapore, to Reuters.

On Saturday, China reported its lowest export growth in nearly a year in May. China’s export demand is expected to weaken as the country shifts towards a more sustainable growth trajectory.

“It’s going to be the new reality for Asia. Exports will not be as exciting as they used to be,” said Euben Paracuelles, Southeast Asia economist at Nomura in Singapore.

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