As Europe’s troubles continue, it’s Asian stocks that lag behind

ASIA is enjoying a soft landing. So why is the Asian fund manager’s Mai Tai more sour than sweet this summer?

The inflation dragon singed China stocks in 2010 when the market fell 15 per cent and again in 2011 when stocks tanked 20 per cent. That beast has been tamed as CPI, above six per cent a year ago, is below two per cent. Unfortunately, the monster morphed into something just as unpredictable and unfriendly.

Last December, China stocks were tipped to soar 30 per cent this year. Looser policy freed capital reserves and lowered interest rates, but the equity market hasn’t responded. The Shanghai Composite is down more than three per cent this year, lagging European and US indices.

Demand is proving the elusive element for China, whether in shaky export markets or at home. And fears of white elephant construction projects on the mainland haven’t gone away, limiting authorities’ options on stimulus.

Liquidity is drying up and markets will be parched until a central bank turns on the taps. Hopes are riding on Ben Bernanke when he takes to the mountainous terrain of Jackson Hole at the end of the month.

Karen Tso is an anchor for Squawkbox Europe on CNBC.