Data could cast bigger shadow on emerging markets

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Emerging market local currency bonds are a volatile asset class but some advisors regard them as a part of a well-diversified fixed income allocation.

Economic growth data from India and the Philippines, as well as trade data from Thailand, are expected to be in focus this week as investors assess the outlook for Asia's battered emerging markets.

Emerging markets in general have taken a beating in recent weeks amid expectations of an unwinding of U.S. monetary stimulus and analysts say there is growing focus on economic data as investors try to assess which markets to move back into and which to stay away from.

(Read more: Emerging markets: Dissecting the good from the bad)

"The direction in emerging markets currencies is clear," said Khoon Goh, senior currency strategist at ANZ bank told CNBC Asia's "Squawk Box." "We did see a pause on Friday, but the Fed is still poised to unwind stimulus so the pressure on emerging markets will remain."

India releases gross domestic product (GDP) data for the April-to-June quarter on Friday, while second-quarter GDP data from the Philippines are out on Thursday and Thailand releases its customs-based trade numbers later on Monday.

India's economy grew 4.8 percent in the January-March quarter from a year earlier and economists say it probably slowed in the second quarter.

"Q2 GDP for India is poised for a further deceleration, deeper into sub-par regions. This risks intensifying the rupee, stocks and bond market sell-off," Vishnu Varathan, market economist at Mizuho Corporate Bank said in a note.

"To a lesser extent, the slowdown in Philippines' Q2 GDP will cast a pall on emerging Asia prospects, consequently weighing on Asia asset markets," he added.

The U.S. also releases its second reading of second-quarter GDP this week and the number is expected to be in focus amid speculation over whether the Federal Reserve could start to scale back its asset-purchase program from September.

(Read more: Time to start worry about September – yikes!)

An advanced reading of second-quarter GDP released at the end of July put U.S. economic growth at a 1.7 percent annual pace.

Focus could turn to China towards the end of the week, with the official purchasing managers' index (PMI) on the manufacturing due out at the weekend.

The flash HSBC PMI released last week hit a four-month high of 50.1 in August, raising hopes that a slowdown in the world's second biggest economy may be showing signs of stabilization.

(Read more: China s 'stallion' amid emerging market turmoil)

Japan meanwhile releases a raft of data on Friday, including latest inflation and household spending data which could provide the latest insight into the outlook for Japan's economy.

Economists polled by Reuters forecast Japan's core consumer price index (CPI) rose 0.6 percent in July from a year earlier, compared with a 0.4 percent rise a month earlier. Household spending is expected rise 0.3 percent in July from a year earlier, versus a 0.4 percent fall in June.

"In Japan, key consumer spending, labor market and industrial production data to be released Friday will be watched closely for signs Abenomics is working after a recent run of mixed data," Shane Oliver, chief economist and head of investment strategy at AMP Capital in Sydney, said in a note.

"Inflation data is expected to show ongoing evidence that deflation is fading," he said.

— By CNBC.Com's Dhara Ranasinghe; follow her on Twitter @DharaCNBC