Declines in growth are moderating for most Asia Pacific countries with month-on-month rebounds experienced in Korea and Singapore. Citi analysts are seeing tentative bottoming signs in recent data releases, however the bleak outlook for G3 countries (US, Europe, Japan), and the uncertainty of recovery, suggest it is too early to call the bottom.

While additional fiscal stimulus measures are being undertaken in Korea and Malaysia, rate cuts are now slowing with China, Taiwan and Malaysia and only India is pursuing limited Quantitative Easing.

Citi analysts expect to see gradual appreciation in some Asian currencies in the coming months though negative economic data could resurface in Asia, prompting depreciation pressures. This could be counter-balanced by more aggressive monetary/quantitative and fiscal easing in the US, which would weigh on the dollar. Citi analysts remain bearish on the Singapore dollar and Malaysia ringgit, but are more positive on the Indonesia rupiah and India rupee.

Equity markets have risen sharply in the past two weeks in anticipation of a recovery, however Citi analysts are sceptical that this marks the end of the downturn. Certain valuation measures such as the price to book value, have yet to reach the lows seen in the 1975 or 1982 recessions.

Against this backdrop, Citi analysts continue to favour sectors that display strong cashflow and dividend yields. Hence, they remain positive on Banks, Telecoms and Tech sectors, preferring companies with large market capitalisation, and with a preference for North Asia to China, India and Southeast Asia.