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- The Asian Development Bank cut its forecasts for 2009 GDP growth for many countries in the region. It now expects China to grow by 9.5% in 2009 rather than the 9.8% it projected in April and for India by to grow 7%, instead of its earlier 8.5% estimate. Expectations of lower demand for exports and of more limited and more costly access to global capital markets lay behind the bank's downgrades.
- In Japan, Yasuo Fukuda resigned unexpectedly as Prime Minister at the beginning of the month and Taro Aso was sworn in as his successor on 24 September. He arrived as Japanese business sentiment, according to the central bank's Tankan survey, was in serious retreat on the back of rapidly falling production. Japanese industrial production shrank by 3.5% in August to be almost 7% lower than a year ago.
- Elsewhere in the region, Chinese consumer price inflation dropped from 6.3% in July to 4.9% in August with food prices noticeably rising less than in the previous month. Meanwhile Australia’s central bank cut its target interest rate by 0.25% to 7%.
- The likelihood of a deepening global economic slowdown weighed heavily on Asian stock markets in September and, from mid-month, they were subject to contagion from the rapidly deteriorating western financial crisis. Asia Pacific ex Japan equity markets fell 12.5%, compared to a FTSE All-World Index fall of around 10.5% in local currency terms. Among the worst performing sectors were banks, mining, oil and gas and industrial metals.
- The Chinese equity market fell most steeply, it lost 21.5%, with its basic materials and industrials sectors both down over 30%. The Japanese market fell almost 13%. Financials held up best due to their perceived relative financial stability but still lost more than 5%. Elsewhere, India's market fell by over 12%, while Australia's gave up over 10%. The best performing market in the region was Pakistan which was barely down. Korea's market also lost less than 1%.
- Returns on shorter-dated Japanese government bonds were flat and marginally negative on longer maturities over the month, as the economy's relative safe-haven status attracted significant inflows. Meanwhile, Australian government bonds were strongly positive across all maturities, as the country's economy teetered on the brink of recession.
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