The new Asian economies of Thailand, China, South Korea, Indonesia, Singapore, Malaysia, and others developed in a unique economic environment – distinct from that of Japan. These “Asian Tigers” are often referred to by the acronym AXJ: Asia Excluding Japan.


Asian ex-Japan (AXJ) currencies, especially ASEAN currencies have performed well overall in the last few years bolstered by increased calls for Asian adjustment to help reduce global imbalances, broad USD weakness and higher policymaker comfort with local currency appreciation. There are near-term risks however stemming from the waves of bad news from the credit markets.

Overall, we should see AXJ currencies continue to outperform into 2010 after the major currencies have peaked.

Morgan Stanley's view:

In response to the de-rating of global growth announced on October 6 by our Global Economics Team, we are revising down, further, our outlook for most AXJ currencies. Global financial conditions have deteriorated so substantially in recent weeks that material damage has been inflicted on the global economy. We were already on alert regarding the downside risks facing AXJ currencies in May (see DEFCON-3 on Some Emerging Market Currencies, May 15, 2008). Now the alert level is higher: AXJ currencies remain very vulnerable in the coming months, as Asia is the ‘highest-beta’ part of the global economy.


Property markets have seen a meaningful rebound from the bottom across the Asia ex-Japan (AXJ) region, particularly in the financial centers of Hong Kong, Singapore, Seoul, Shanghai, Bangkok and Mumbai. From what we can surmise, property prices have risen by 10-40%. Hong Kong and Singapore, which are linked more closely to global financial markets, have seen the sharpest rebound. Despite the recent rebound in property prices, there is not a nationwide property price bubble in China, in our view (see China Economics: Property Sector Recovery Is for Real, May 15, 2009). In India, although property prices are yet to stabilize, anecdotal evidence suggests that property prices have started rising back from the bottom in many pockets after having corrected by 20-30%. Korea's property markets are facing different issues inside and outside Seoul. Due to the limited supply of land within Seoul, the property market there is more demand-driven, which is a function of liquidity conditions and sentiment.


  • AXJ’s exports contracted 9% YoY in November from a growth of 20%+ in the prior two quarters. December is likely to be much worse.
  • Asian crisis bottom was around -14%.
  • Support from countries other than US, EU and AXJ itself seems to have vanished as the global slowdown spread more and more.
  • This implies that industrial production growth is likely to collapse to zero growth as well.