BofA: Asia FX Showing Less Sensitivity To China Matters

Bank of America have updated their China reflation principal component analysis to include shifts in high yield credit, alongside equities, FX, CGB yields & iron ore. They note that “the sharp drop in this reflation metric has translated to less Asia FX depreciation and local debt underperformance than previously observed, although with notable cross-country disparity - IDR has been stronger than expected while THB notably weaker. This can be attributed to non-China factors such as ample USD liquidity and strong regional trade positions, neither of which is likely to sustain through 2022.”