The 1997 financial crisis is coming to the Asia-Pacific region? It is unlikely that individual countries will spread to the region.
February 11 14:08:32, 2024
US debt interest rates are rising, commodity prices are weak, global liquidity is tightening, and these factors have triggered the looting of the emerging market currency crisis, while emerging market countries such as Turkey and Argentina have taken the lead in the huge turmoil in stocks, bonds and foreign exchange markets. This raises investors' concerns about whether the “cutting panic†will happen again. The data showed that the MSCI Emerging Markets Currency Index fell 1.3% last week, which is the biggest one-week drop in the index since 2016, which is interpreted by the market as a currency in emerging markets or facing a stronger depreciation. In addition to the increasing capital outflow pressure and rapid currency depreciation in countries such as Argentina, Brazil and Turkey, Asian currencies have also depreciated to a certain extent. Among them, the Indian rupee exchange rate against the US dollar has fallen by more than 6% since the beginning of this year. Paul Krugman, the Nobel laureate in economics, even wrote: "Is the Asian financial crisis similar to 1997 going out again? There are some changes in emerging markets, at least a little old-fashioned financial crisis." 21st Century Economy According to a comprehensive interview with reporters, respondents generally believe that although the current negative factors affecting the currency and the macro economy are similar to the “cutting panic†in 2013, the money market environment of emerging market countries in the Asia-Pacific region has changed. It can reduce the pressure of being attacked to a certain extent, but the double-deficit countries with fiscal and current accounts are deficits may face a greater impact in the US dollar rate hike cycle. After Argentina and Turkey, emerging market countries in the Asia-Pacific region such as Indonesia and India will face challenges in the short term. Some of the scenarios before 1997 are re-emerging. Krugman's more negative views are based on the high external debt of emerging markets and the current account and fiscal deficits. He pointed out that the recent "free fall" decline in Turkey's exchange rate is impressive. People may be able to foresee a crisis similar to the 1997-1998 Asian financial turmoil: the fall of emerging market currencies has caused corporate debt to collapse and put pressure on the economy. , leading to further currency depreciation. But Krugman also cautioned that there is no clear indication that a crisis will emerge, but if it continues, terrible things are on the way. Krugman is not alarmist. As the US dollar has rebounded since mid-April 2018, emerging economies have exerted a certain degree of pressure on foreign exchange markets and stock markets, and most emerging economies have fallen. Wind data shows that since April 16, stock market stock indexes in countries such as Malaysia and Indonesia have fallen by more than 6%. In the past few years, low-cost dollars have created a loose monetary environment, and emerging market countries have continued to borrow, especially US dollar debt. According to data from the International Finance Association (IIF) in April, global debt, including all sectors, increased by $25 trillion in the five-year period from 2012 to 2017, and debt from emerging market countries increased from $42 trillion to 63. One trillion US dollars, accounting for 84% of the global increase, most of which are US dollar debt. At the moment, investors’ worries about whether “shrinking panic†will happen again are also growing. According to IIF data, in the past one and a half months, about $8 billion of funds have fled the bond and stock markets of developing countries. Tai Hui, chief strategist for the Asia-Pacific market at JP Morgan Chase, said in a response to a 21st Century Business Herald reporter that after 18 months of weakness, the dollar is rebounding, and rising US interest rates have attracted more capital into dollar assets. At the same time, the emerging market currency index fell by 6% between mid-January and early May. This has damaged the developed market currencies such as the euro, the yen and the pound, as well as the emerging markets. If capital flees, India is hard to succumb to Santitar Sathirathai, head of research in emerging economies in Credit Suisse Asia, who told 21st Century Business Herald that in the past year or so, India’s bond market and stock market have had large inflows of capital, which means If it is affected by changes in the financial market, the possibility of a reversal of the Indian economy is also very high. "India is a country that will face a crisis if capital flight occurs." In Sathirathai's view, India's current account balance has continued to deteriorate in the midst of a certain buffer space in most countries in the Asia-Pacific region to cope with capital flight. In February 2018, the Indian government announced its budget for the fiscal year 2018-2019. Its deficit target is about 62,400 rupees, accounting for 3.3% of GDP, higher than the previous target of 3.2%. It also makes the Indian government want to control the fiscal deficit. The desire to have a GDP ratio of less than 3% was postponed again. In addition, World Bank data shows that India’s external debt, including the central government’s foreign debt, state state government and corporate full-bore foreign debts, totaled approximately US$1.4 trillion, of which 85% were US dollar bonds, according to the Bank of India’s February announcement. According to the data, India’s foreign exchange reserves are 419.76 billion US dollars. According to the latest international capital flow report of the US Treasury, India currently holds US$152.9 billion in US debt. Hong Changfu, co-head of investment banking and capital markets at Credit Suisse Asia Pacific, said in an exclusive interview with 21st Century Business Herald that the currencies of emerging market countries will be tested in the near future, especially the relatively high debt, relatively small foreign currency income or foreign currency expenditure. Larger country. Hong Changfu pointed out that in view of recent changes, Credit Suisse has made some adjustments to the currency forecasts of emerging market countries in the Asia-Pacific region. For example, Malaysia’s forecast has changed from a positive outlook to a general after the election, while Indonesia and the Philippines are relatively weak. The country's economic outlook will also be bearish, but overall it is still optimistic about the Asia-Pacific market. It is unlikely that the crisis will spread throughout the Asia-Pacific region. In the opinion of respondents, the damage to the US dollar interest rate increase will be very few countries, and there is no possibility of spreading to the region. Hong Changfu believes that the emerging market countries in the Asia-Pacific region have experienced an increase in preventive capacity after several storms and turmoil in the past. This factor needs to be considered in the investment strategy. According to the Bank for International Settlements (BIS) and IIF data, in the past 10 years, the proportion of foreign exchange debt in non-financial sectors in emerging markets has declined. At the end of 2009, it was 17.9%, and in May 2013 it was 17.6%. The level is about 15.6%. On the other hand, large fluctuations in emerging markets in May have become the norm. Credit Suisse cited MSCI data showing that in the past 20 years, foreign exchange earnings in emerging markets have been the worst performers in the year, regardless of the median or average, which is a typical “stupid monthlyâ€. . Huang Jun, chief Chinese analyst of Jiasheng Group, also responded to the 21st Century Business Herald reporter. Although emerging markets in the Asia-Pacific region also have certain problems and risks, the risks are generally controllable. Huang Jun said that the recent fluctuations in emerging markets are the interaction between internal and external factors. The external factors are mainly the appreciation of the US dollar and the rise in the yield of the US debt. The internal cause is mainly due to its debt problem, especially the expiration of short-term external debt, which makes the model of “borrowing new debts and repaying old debts†unsustainable. According to Huang Jun, the US dollar index has risen from a low of 89.22 in mid-April 2018 to a maximum of 94.06, with a maximum increase of 5.4%. Since 2018, the Indian rupee has depreciated by about 6%. The depreciation of the Indian rupee has been equivalent to the appreciation of the US dollar index, and there has been no vicious trend of oversold. In the Asian market, India is an important importer of crude oil. Huang Jun pointed out that if the rise in oil prices triggers inflation, it will inevitably affect India's current expansion of fiscal policy and currency reform. Huang Jun also said that although the debt problem in emerging markets will not break out immediately, it is time to plan ahead. He pointed out that the need to be vigilant is that the US dollar has only increased by 5% since mid-April, and some emerging economies have been unable to parry. If the Fed raises interest rates in the future, the dollar will form a long-term upward trend. How emerging economies avoid shocks is a problem they need to face, such as the need to increase domestic economic reforms. Tai Hui pointed out that higher interest rates may continue to push the dollar to continue to rebound in the short term, but long-term fundamental factors indicate that the US dollar will decline in the next 1-2 years. The US current account and fiscal deficit also indicate that the US dollar should weaken. . Compared with 2013, the financial situation of many countries including India and Indonesia has improved. Tai Hui pointed out that countries with huge current account deficits or domestic political problems and soaring inflation are exceptions, but if we look at other In emerging markets, their currencies will not depreciate sharply because of the strong dollar. Therefore the risk will not spread. For emerging markets, fundamental and structural factors remain fairly reasonable. Tai Hui said investors should be prepared for a world with tight liquidity and greater uncertainty, but we are still far from recreating the 2013 “Taper Tantrum†scenario. “Investors should not lose confidence in emerging markets, but take a proactive approach to finding returns and managing risks. After all, the International Monetary Fund (IMF) predicts that emerging market growth will reach its highest level in five years in 2018, and It will be further accelerated in 2019," Tai Hui said.