Financial conditions marginally improved between 1 June and 31 August in emerging East Asia on sound economic fundamentals and regional monetary tightening cycles approaching their end.1 Most regional central banks kept their interest rate hikes on hold amid easing inflation, while some central banks started to lower rates to boost economic growth. Most emerging East Asian economies witnessed narrowing risk premiums, gains in equity markets, and net foreign inflows in their bond markets. During the review period between 1 June and 31 August, regional markets excluding the People’s Republic of China (PRC), where domestic financial markets weakened on a dimmed economic outlook, posted a market-weighted average gain of 1.4% in equity markets and a gross-domestic￾product-weighted decline of 1.2 basis points in risk premiums, as captured by credit default swap spreads. Regional bond markets posted net foreign inflows of USD18.5 billion from April to July, partly supported by weakening inflation across the region. A dimmed economic outlook has softened investment sentiment in the PRC. Weighed down by this, regional equity markets posted net portfolio outflows of USD7.2 billion during the review period, largely driven by USD12.3 billion of net outflows from the PRC in August.