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Asia: The uncertain epidemiology of eurozone contagion

The precise impact on Asian markets of the eurozone’s troubles is as yet a matter for debate. Although Asian banks have relatively small exposures to Europe, macroeconomic effects are a cause for worry.

Wondering if one party sneezing will cause another to catch a cold has been among the most common metaphorical questions of the past few years. If Lehman sneezes, does Wall Street catch a cold? If the US property market sneezes will the stock market catch a cold? If Greece sneezes, might Europe catch a cold? You get the picture. The answer to all of these has turned out to be a resounding yes. But what of Asia?

With Europe enduring something approaching full-blown flu, is it inevitable that Asia will start coughing and spluttering? This has been the question concerning capital markets professionals in the east as they track the financial tornado in the eurozone and wonder if they might yet be sucked into it.

So far, anecdotal evidence suggests that they need not be too worried, at least as far as local capital market activity is concerned. The debt capital markets across Asia have been active even as Spain and Greece grab the headlines. M&A activity, while nothing to get over-excited about, has been quite healthy, and secondary equity markets in Asia remain fairly active even if IPOs are a seemingly difficult proposition everywhere except Malaysia.

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