Asia's emerging markets are leveraged to global growth and are very much open to shifts of the global economy, particularly to the United States and Europe, and "a sharp slowdown in the United States could cause ripple effects on all the region's suppliers", Robert Subbaraman, the chief economist at the Lehman Brothers told reporters.

Hong Kong, Singapore, and Taiwan are the most heavily exposed to a US slowdown among ten Asian countries studied, and China's trade balance with the United States and the Euro zone continues to outstrip that with Asia, Subbaraman said.

On Korea, Lehman has a "fairly cautious outlook", as the won has strengthened almost to the level seen prior to the 1997 financial crisis, and the substantially stronger won will continue to put pressure on the profit margins for local manufacturers.

Lehman's currency forecast for the won this year is 930 won per US dollar.

"Korea will have started feeling the pinch for competition for structural reasons: an excessively regulated service industry; overly protected small-and-medium sized enterprises; and inflexible labour market," Subbaraman said.

"It urgently needs to boost productivity and capital expenditure, given the labour force could stop growing in about a decade," he added.

However, the Lehman economist predicted that a modest slowdown in the US is likely, and Asian countries have ample room for a fiscal response to cut taxes and increase federal spending should the region be hit by a harder-than-expected US slowdown, he said.

The region is also seeing the emergence of a new internal growth engine, gradually rotating away from the export markets to domestic consumption and investment, Subbaraman said.