Stock markets are overreacting to the worldwide economic slowdown and should be more concerned about mounting financial risks in Asia, argues a new report from the U.S. Conference Board.

While the U.S. and other economies are heading for a slowdown, a recession is not in the cards, the research organization maintains. “Far more worrying are financial risks that are growing outside the U.S. and outside traditional equity and bond markets – especially in Asia,” warns Gail Fosler, executive vice president and chief economist of The Conference Board.

“There is a substantial and growing excess of savings that is misallocated globally and giving rise to huge waves of liquidity that may misprice risk in the short term and create credit and/or market crises,” says Fosler. “Global trade imbalances are heavily influenced by financial motivations which arise in part because of the inability of emerging markets to allocate domestic savings efficiently.”

Businesses and governments in many Asian countries need to hold precautionary savings in foreign currencies, like the dollar and the euro, the report notes. This gives them a natural hedge since these currencies are increasingly required for trade and low-cost financing.

“The present course seems to dictate that these imbalances will continue to expand and, at best, begin to be shared between the U.S. and Europe,” Fosler adds.