Southeast Asian markets: A new focus for Asia?

The dazzle from Asia’s equity markets’ performance has dimmed somewhat but with a total return from the MSCI Asia ex-Japan of 23.6% in local-currency terms, the region still outperformed most major equity indices by a comfortable margin in 2006.

But 2007 will be a more challenging year for the region. Chief among these challenges are likely to be the effects of the gradual draining of liquidity as interest rates rise. China has already initiated efforts to curb its economy’s runaway growth rate, India has started increasing interest rates and the Bank of Japan, notwithstanding an economy still flirting with deflation, is already sounding hawkish.