HONG KONG: Asset prices in the region, particularly in Hong Kong and the mainland, will be well supported through the end of the year as the current ultra-easy monetary environment globally isn't likely to be reversed in the foreseeable future, DBS said.

"Asset prices will continue to be supported. Any correction will be limited as long as monetary-easing policies implemented by central banks around the world won't be reversed," said Chris Leung, a senior economist at the bank.

It is a market consensus that the sharp rallies in global asset prices in recent months are not supported by economic fundamentals but by "hot money" created by global quantitative easing.

The DBS economist believes that the current ultra-easy monetary environment will unlikely change anytime soon, particularly in the US, Europe, Japan and China's mainland.

"Interest rates will remain at very low levels in the US, Europe and Japan in the foreseeable future," he said, citing the poor economic performance.

Economic fundamentals in the US are still very weak, particularly in the labor market, he noted.

The US jobless rate climbed to 9.5 percent in May, the highest in more than 26 years. The rate is widely expected to hit a double-digit level soon.

"With the labor market remaining soft, wage-driven inflation is not a short-term risk in the US," Leung said.

"We won't see sufficient conditions that warrant a rate-hike move by the US Federal Reserve in the foreseeable future."

Meanwhile, China will also likely continue to rely heavily on bank loans to fuel its economic growth, he said.

Economic growth in the mainland re-accelerated in the second quarter after the government's 4 trillion-yuan stimulus package significantly boosted investment and consumption.

Economic growth slowed to 6.1 percent in the first quarter, the weakest pace in almost a decade.

The central government hopes to sustain an 8 percent annual GDP growth to create enough jobs and maintain social stability.

Investment will likely continue to be the key driver for the country's economic growth as exports will likely remain weak due to sluggish demand from the US, Europe and Japan - China's main export markets, Leung explained.

Domestic consumption alone is still not strong enough to drive the mainland's economic growth even though domestic demand has been growing robustly, he said.

Domestic consumption currently accounts for only 35 percent of the mainland economic output, he noted.

(HK Edition 07/08/2009 page4)