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LivestreamMenuA boost in capital expenditure, booming trade and a rise in producer price index inflation have helped to drive a bank credit growth surge in Asia ex-China to its strongest in 18 years, according to Morgan Stanley. “Asia is entering its strongest industrial cycle since the 2000s. This is underpinned by a sustained, multi‑year rise in capex across AI and AI-related digital infrastructure spending, energy, defense and industrial supply chains,” Morgan Stanley said. Producer price inflation has also pushed up demand for working capital, the bank said, noting that Asia ex-China non-commodity PPI has risen to a 3.5-year high of 4.3%. “With the pickup in real activity and inflation lifting Asia ex-China’s nominal industrial production growth, the price pressures are in turn increasing working capital loan demand across the supply chain and for end users,” it said in a note Tuesday. Demand for consumer credit is also picking up. “We are beginning to see an uplift in overall job creation, which is beginning to boost consumption and consumer credit demand,” Morgan Stanley said. While household loan growth in Asia remains in the historical range, it has moved higher as retail sales growth in Asia ex-China has improved in recent months. Bank credit still remains the most significant source of macro funding by far in Asia, given that the corporate bond and private credit markets “are not mature yet,” according to Morgan Stanley.
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