Asia-Pacific's economic picture looks broadly positive after Q3, says S&P Global Ratings

Asia-Pacific's economic picture  looks broadly positive after the third quarter, said S&P Global Ratings in a  report today, titled "Major Asia-Pacific Economies Show Stronger Growth; Risks  Are Mostly Geopolitical."

Among the largest economies, China and Japan show better-than-expected growth momentum, although they have differing risk profiles. China's growth was better than expected at 6.9 percent in the first half of the year--comfortably above the 6.5 percent official target. Its credit metrics have improved, reflecting a public investment boost and higher producer prices, but credit quality is still strained.

Central banks in Asia-Pacific have therefore mostly kept policy rates on hold, and seem cautious to follow the Fed higher. The strengthening of regional currencies against the U.S. dollar on geopolitical concerns have tightened monetary and financial conditions, generating further headwinds against potential policy rate rises.

The likelihood of a macro surprise from China is low, given the preference for stability around the Party Congress in mid-October, and Japan's growth path looks pretty solid for now. Geopolitical risks are another matter. A flare-up over North Korea represents the most active risk in the region, although we still regard this as a very low probability event.

"Markets have taken the escalating rhetoric in stride with minimal effects on asset prices and activity. However, the situation with North Korea remains fluid, to say the least," said Paul Gruenwald, Asia-Pacific chief economist at S&P Global Ratings.

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