Rate hikes,

Much of the emerging Asia policy track will depend on vaccination progress — with many economies suffering from a dearth of supply — and on how quickly some of the region’s economies can damp a recent surges in cases. Meanwhile, their economies are generally better positioned than elsewhere in the emergingmarket world, with hearty foreign reserves and thriving goods trade as two buffers that will give central bankers some room to consider normalizing rates.

Analysts are generally reluctant to pin their bets on any one economy as the first hiker in emerging Asia, given the multitude of uncertainties and the generally low-inflation atmosphere. It’s difficult to see Asian central banks being “gung-ho” about raising rates unless they’re battling rapid capital outflows, said Selena Ling, head of Treasury research and strategy at OverseaChinese Banking Corp. in Singapore.

Like the Federal Reserve, “an inflation overshoot will be largely perceived as temporary and by itself should not trigger a recalibration” in this region, Ling said. “At this juncture, with the virus mutations and resurgent COVID cases, most would hesitate to be ahead of the curve.”

For bond investors, “it might not be an end of world though,” said Kiyong Seong, an Asia rates strategist at Societe Generale in Hong Kong. “It is quite doubtful if emerging markets central banks will be able to hike their policy rate substantially in this cycle,” he said. “If the market is pricing in a reasonable degree of tightening, bond investors will weather well.” —