Credit rating firm Standard & Poor's (S&P's) said yesterday that Asia-Pacific equity markets are in the process of bottoming out.

"The crisis will bottom out next year and the second-half will see a rebound in the equity markets," said Lorraine Tan, director of research at S&P's, adding "the recovery will be mild."

The benchmark Hang Seng Index (HSI), which has seen over half of its market value disappear so far this year, recorded strong rallies this week.

Meanwhile, S&P's has revised its forecast on Hong Kong's 2009 GDP growth to between 0.7 percent and 1.2 percent, and predicted the city will record 3.5 percent to 4 percent growth this year, which is slightly higher than the SAR government forecast.

The city's consumer price inflation will be about 4.5 percent to 5 percent this year and 1.5 percent to 2 percent in 2009, according to S&P's.

The credit rating firm indicated that it had to revise its forecast frequently in the last two months amid the volatile market.

"The intensity of negative economic news has increased so much that a forecast has now become almost obsolete before it is published."

The firm said in a research report that ongoing market dislocation will significantly impact Asia-Pacific in 2009 but factors such as intra-regional trade and favorable policymaking will help the region "navigate the global storm".

"The strong domestic demand in China and India and the supportive government policies are the growth engines which will enable the economies to experience positive, albeit slowing, recovery," said Subir Gokarn, Asia-Pacific chief economist of S&P's.

"On the negative side, the state of global capital markets, which impacts capital flows and induces great volatility in equity and currency markets in the region, may limit the ability of financial systems to fully transmit the stimulus," it said.

"Our current view is that the tussle between the two will persist into the first-half of 2009, which implies that the slowdown will continue until then."

(HK Edition 11/27/2008 page2)