Market participants at the Asian Development Bank (ADB) annual meeting in May broadly agreed that Asia was hit by a perfect storm in 2015. The region had to contend with expectations of a US Federal Reserve interest rate hike, the surprise devaluation of the renminbi, fear of China’s economic slowdown leading to a hard landing, and the drop in oil and commodity prices.
While this mix led to severe currency depreciation against the US dollar and capital outflows in some Asian economies – the first in almost three decades – excessive pessimism was unjustified and a recovery is already underway, said market participants.