Robert J. Horrocks, PhD
Director of Research
Matthews International Capital Management, LLC

Asian stock markets are caught in the headlock of conventional wisdom. They have been moving in lockstep with the U.S. consumer for so long that it has become conventional wisdom that they must always do so. Only on two occasions over the past 20 years have the two parted company. During the Asian financial crisis, Asian markets plunged while the U.S. consumer went on a buying spree. The second time that Asian markets moved in a different direction from U.S. consumer sentiment was just briefly in late 2007 at the height of the “decoupling” argument. The U.S. consumer was clearly deteriorating as Asian markets headed for all-time highs. As we now know, the U.S. economy was crumbling rather rapidly. “Decoupling,” at least as its advocates painted it, was an illusion.