Bad news from South Korea, Singapore and China this week failed to rattle investors' confidence in the region, despite fears that Europe's economic contagion is spreading rapidly to the East.
China's economy expanded at its slowest pace in more than three years as the weakness of Western export markets started to bite, official data showed yesterday.
The world's second-largest economy grew 7.6 percent in the second quarter year-on-year, the weakest since 6.6 percent during the depths of the global financial crisis in early 2009.
South Korea meanwhile lowered its 2012 economic growth outlook to three percent, citing a global slowdown and the euro zone debt crisis, a day after the central bank unexpectedly cut its key interest rate.
And in Singapore, a trade-reliant bellwether of Asia's economic prospects, officials said the economy contracted by a surprisingly large 1.1 percent in the second quarter from the previous three-month period.
But despite the barrage of negative news, Asian markets rallied yesterday as investors concluded that things could have been a lot worse.
"Chinese GDP data came in broadly in-line with official consensus numbers, but well ahead of the feared doomsday whisper numbers that had been circulating of something sub-7.0 percent," said Cameron Peacock at IG Markets in Australia.
Much of the confidence hinged on the stable inflation outlook and the scope regional policymakers have to fire up stimulus measures to boost flagging domestic demand, analysts said.
The Bank of Korea's rate move on Thursday followed cuts last week by the European Central Bank and China's central bank. Brazil on Wednesday cut its rate to a record low.
China took the rare step of slashing interest rates for the second time in a month. That came after three cuts since December in banks' reserve requirements, or the amount of money they must keep on hand.
Such cuts are meant to free up funds for lending and provide impetus to economic activity.
"As inflation is falling fast, it provides sufficient room for further easing. Following the recent two rate cuts, Beijing still has plenty of policy room to step up monetary easing," HSBC wrote in a research note yesterday.
"We believe further easing measures will fully filter through to generate a modest growth recovery of 8.5 percent year-on-year in the coming quarters."
Analysts are also predicting looser monetary policy in South Korea, where Capital Economics said the BoK's earlier inflation fears had "seemed misguided". Inflation was 2.2 percent in June, amid falling global oil prices.
But Hanyang University economics professor Ha Joon-Kyung said consumption would stay soft despite a lower interest rate, because of uncertainties about the economic outlook and the euro zone crisis.
"Consumption is expected to remain weak, along with lower circulation of money, as households will exploit a lower key interest rate to reduce debts instead of spending," he said.
In Singapore, IG Markets head of premium client management Jason Hughes said the city state's "consumer culture" was undaunted but its export-focused economy was vulnerable to additional weakness in demand from Europe and the US.
"So I think GDP and growth in Singapore will remain under pressure," he said.
HSBC Co-Head of Asian Economic Research Frederic Neumann said Asia was "under pressure" from falling global demand, explaining the sharp slowdown in growth after a strong first quarter.
Even after the expected stimulus measures, he said the "global backdrop may be too fragile for growth to snap back to its original speed".
But easier bank lending should "at least prove enough to cushion another blow delivered by the West".
"Asian financial systems remain sound. All that's coming is another trade shock, and one that is likely to be much shallower than in 2008 as trade financing remains available," he wrote in a research note.
"All we need is stimulus, and the region will quickly fire up again."