Overall, while the real sector in the major Asian EMEs has held up relatively well, it needs to be recognised that the financial crisis in the US has deepened significantly over the past couple of months and there are signs of its spreading to the mature economies in Europe.
The deepening and widening of the financial crisis is already getting reflecting in elevated volatility in the financial markets of key EMEs and widening of spreads of the EME assets. Although a large amount of liquidity has been injected by the central banks of the major advanced economies, short-term market rates remain well above policy rates.